University of Mumbai 2007 B.A Economics Management Accounting - A/c 3 - Question Paper

Management Accounting
March 2007
Time: three HoursMarks: 100
NB:
ques. No. one is compulsory and carries 20 marks.
Attempt any 5 questions, every carrying 16 marks from remaining ques..
Working notes should form part of your ans.
Proper presentation and neatness is essential.
Q.1 Amruta Enterprises (having Installed capacity of 2, 00,000 units p.a.) produced 1,00,000 units in the financial year2006-2007. The cost - structure in 2006 - 2007 was as under: 20
(a) Raw Materials 40%
(b) Wages 15%
(c) Factory Overheads 10%
(d) Administrative and Selling Overheads 15%
Total cost 80%

20%
(e) Profit 100

The selling price, which was Rs. 500 per unit in 2006-2007, is estimated to be fixed as at Rs. 600 per unit forthe year 2007-2008; and production and sale expected to increase by 40,000 units. It is, further, anticipated that raw materials cost per unit would increase by 10% due to price rise, whereas wage rate per unit would reduce by 20% due to automation, 56% of all the overheads are fixed and balance are variable.

As a Management Accountant you are needed to prepare:-
(a) Cost statement for the year 2007-2008 and
(b) Statement showing estimated working capital needed for the year 2007-2008 after considering the subsequent additional information:
(a) Raw materials stock equivalent to 2 and half month’s consumption would be stored.
(b) Production time is 1 month. Raw materials are introduced at the beginning of the process, whereas wages and factory overheads accrue evenly during the production period.
(c) 2 months stock of finished goods (valued at factory cost) would be carried in stock.
(d) 20% of raw materials would be imported from China and advance payment of 2 months would be made there against. 15% of indigenous raw materials requirement would be procured locally against immediate cash payment. Suppliers of balance of indigenous raw materials, allow a credit of 1 month.
(e) 50% of customers would enjoy a credit of 1 month, whereas balance 50% of customers would accept a bill of exchange payable after 3 months. These bills of exchange are immediately hypothecated with the bank against which overdraft facility would be available equal to 70% of amount of bills of exchange.
(f) Time - lag in payment of wages would be 1 month and for all overheads, it would be half month.
(g) The company would carry cash balance of Rs. 40,000 in its currency chest. Debtors are to be estimated at selling price.
(h) The activities are spread evenly throughout the year. Degree of completion of work-in-progress is 50%.
Q 2. The Mismanagement Ltd. always obtains that it is hard pressed for funds. In spite of borrowing funds at a high rate from Banks, they are not able to make payments to suppliers in time. The financial position of the company as reflected from the Balance Sheet for the last 2 years is as under: 16

Earning:   Approval pending.