MANAGEMENT PROGRAMME

MS-4 : AGGOUNTINGAND FINANCE FOR .MANAGERS
Time : 3 hours Maximum Morks : 700 , (Weightage 70W

Note ' :::;';'ff:.
, 1.. (a) Explain the

carry fiue questions'Att questions

Business Entity concept, Accrual

concept and Consistencyconcept of Accounting. (b)

What

do you understand by capitalisation of

,earnings ? How is the value of a firm ascertained with the help of its earnings ? Explain with an example.

MS-4

P.T.O.

Dr.95.000 34.000 18.2 .000 66.000 12.10.000 8.000 30.00.000 25.000 2. 8.000 60.000 12.00.000 45.000 1.000 3.000 40.2006) Bank Balance MS-4 . The following is the Trial Balance of Mr.000 15.50.000 15. Rs.7 .000 75.000 1.45.00.000 34.00.50.000 15.000 28-2-2006) Sales Salaries Postage & Telephones Printing and Station ery Miscellaneous expenses Creditors Investments Discount received Debtors Bad Debts Provision for Bad Debts Building Machi nery Furniture Commission on Sales Interest on Investments Insurance (year upto 31 . Capital Drawings Opening Stock Purchases Freight on Purchases Wages (11 months upto Cr.000 24.40.000 23. Keshav Kant on 31't March 2006.00.000 5.000 1.000 3.45.

000 and create . 45. Freight paid on the nrachinery was Rs. ? r. ? (a) What is Production Budget ? What factors are taken into consideration while preparing a Production Budget ? Why are separate budgets prepared for each of the elementsof production costs ? Explain.a Provision for Doubtful Debts at lVo of Debtors. (b) What is a Rolling Budget ? Why is it prepared ? Explain the procedureof its preparation.What will be the effect of small change in Sales on Net Income.000 purchased on 1.Freighton Purchases. ' ClosingStock Rs. Distinguish between Operating Leverage and Financial Leverage. Machinery worth Rs. (vi) Depreciate Building by 2o/op.000. 5.Adiustmenfs : (i) tii) ': . (iii) Commissionis payableat 2Voon Sales. (iv) Investmentswere sold at l0o/o profit but the entire sale proceedshave been taken as Sales. 10. .J 4. MS-4 P. (v) write off Bad Debts Rs. Refurn on Equity and Eamings Per Share if both these leveragesare considerable Explain.a.25. 3. 2.a Prepare Trading and Profit and Loss A/c for the year ending 31tt March 2006 and a BalanceSheet as on that date .O. and Machinery and Fumiture @ I0o/op.000 which is included in the .T.2005 was shown as purchases.10.

which is less than the total cost of current production. The cost break-down is given below : Direct material Direct labour Variable expenses Fixed overhead Rs. An Engineering Company has received an export order for its sole product that would require the use of half of the factory's total capacity.. 15. which is estimated at 4 lakh units per annum. 6 per unit. (b) Remove the capacity constraint by installing balancing equipment and also by working overtime to meet both domestic and export demand. the export offer is Rs. This will increase fixed overheads by Rs. As against the current price -of Rs. 2'50 per unit 1'00 per unit 0'50 per unit 1'00 per unit Total 5'00 per unit -r-t l-he company has the following options : (a) Accept the export order and cut back domestic sales as necessary.000 for the year. MS-4 . 4'70 per unit. The factory is currently operating at 600/olevel to meet the demand of its domestic customers.5 . The condition of the export order is that it has ': to be accepted in full acceptance of a part is not allowed.000 annually and additional cost for overtime work will amount to Rs. 40.

The company's payout is 72a/o. 42. payrng a conversioncharge @ Rs.000 per month for checkingthe quality of the prodtrct 6nd controlling operations at the manufacturingunit 6l Refusethe order. You are required to prepare a statement of costs and profits under each of the options and glye your recommendation to the company giving the reasons for the same. .It has 1. 3. 2 Wr unit and appointing a supervisor at a salary of Rs. and Return on Equity MS-4 P.T. Book value Wr share is Rs.000 equity shares of Rs.O. 10 each and no preference shares. Aditya Company's equity shares are being traded in the market at Rs. 54 per share with a price-eamingratio of 9.00.(c) Appoint a sub-contraitor to manutacfure the additional requirement and meet the domestic and export requirements in full by supplying raw materials. You are required to calculate : (i) (ii) (iii) (iv) Earnings Per Share Net Income Dividend Yield. 6.

8.7. Comment on the following statements : (a) The greater the variability of cash flows. (b) As there is no explicit cost of retained earnings. Write short notes on the following : (a) (b) (c) (d) Performance Budget Amortisation of Intangible Assets Accounting Standards Funds from Business Operations MS_4 10. these funds are free of cost.000 . Investment and Financing decisions are inter-dependent. (c) Divideod. (d) Profitability Index is more relevant in the evaluation and ranking of projects than Internal Rate of Return. the higher should be the minimum cash balance.

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