NMIMS University 2006 Advanced Diploma in Business Administration Managerial Accounting - Question Paper

NARSEE MONJEE INSTITUTE OF MANAGEMENT & HIGHER STUDIES

(DEEMED UNIVERSITY)

Department of Distance Learning

 

COURSE : ADBM TOTAL MARKS: 50

SUBJECT : Managerial Accounting DURATION : hours

 

Note:

1.    Question no 1 is compulsory and carries 20 marks.

2.    Attempt any two from the remaining four questions

3.    All questions carry equal marks i.e. 15 marks each

4.    Give working notes wherever required to support your answers

 

1.    The following data were extracted form the published accounts of two companies, M/S Peerless Ltd and M/S Perfect Ltd in an industry

 

Particulars	Peerless Ltd	Perfect Ltd
Sales	Rs 32,00,000	Rs 30,00,000
Net profit after tax	1,23,000	1,58,000
Equity capital (Rs 10 per share fully paid)	10,00,000	8,00,000
General reserves	2,32,000	6,42,000
Long term debt	8,00,000	5,60,000
Creditors	3,82,000	5,49,000
Bank credit (short-term)	60,000	2,00,000
Fixed assets	15,99,000	15,90,000
Inventories	3,31,000	8,09,000
Other current assets	5,44,000	5,42,000

 

Prepare a statement of comparative ratios showing liquidity, profitability, activity and financial position of two companies.

 

2.    Multiplex Ltd is considering the purchase of a delivery van, and is evaluating the following two choices:

a.    The company can buy a used van for Rs 20,000 and after 4 years sell the same for Rs 2,500 (net of taxes), and replace it with another used van which is expected to cost Rs 30,000 and has 6 years life with no terminating value

b.    The company can buy a new van for Rs 40,000. The projected life of the van is 10 years and has an expected salvage value (net of taxes) of Rs 5000 at the end of 10 years

The services provided by the vans under both choices are the same. As of the cost of capital at 10 percent, which choice is preferable?

 

Note: Present value of Re 1/- at the end of 4 years is 0.683 and at the end of 10 years is 0.386.

 

 

 

 

 

 

3.    From the following projections of ABC Ltd for the next year, you are required to work out the working capital (WC) required by the company.

 

Annual sales	Rs 14,40,000
Cost of production including depreciation, Rs 1,20,000	12,00,000
Raw material purchases	7,05,000
Monthly expenses	30,000
Anticipated opening stock of raw materials	0
Anticipated closing stock of raw materials	1,25,000
Inventory norms:
Raw material (month)	2
Work-in-progress	15
Finished goods (month)	1

 

The firm enjoys a credit of 15 days on its purchases, and allows 1 moths credit on its supplies. The company has received an advance of Rs 15,000 on sales orders. You may assume that production is carried on evenly throughout the year, and the minimum cash balance desired to be maintained is Rs 10,000.

 

 

4.    Your factory buys and uses a component for production at Rs 10 per piece. The annual requirement is 2000 numbers. Carrying cost of inventory is 10 per cent per annum, and ordering cost is Rs 40 per order. The purchase manager argues that as the ordering cost is very high, it is advantageous to place a single order for the entire annual requirement. He also says that if we order 2000 at a time, we can get a 3 per cent discount from the supplier. Evaluate this proposal and make your recommendations.

 

 

5.    Write short note on any five of the following (5x3=15 Marks)

a.    Sources of long term finance

b.    Working capital cycle or operating cycle

c.    Time value of money

d.    Perpetual inventory system

e.    Return on capital employed

f.     Management of cash

g.    Cash flow statement

 

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