Q1Cost Accounting - Break-even Analysis and Inventory Manageme
25 marks very hard
Answer the following:
(a) The following figures are available from the records of ABC Company as at 31st March:
Sales (2015 in lakhs): 200, (2016 in lakhs): 250
Profit (2015 in lakhs): 30, (2016 in lakhs): 60
Calculate:
(i) The P/V ratio and total fixed expenses.
(ii) The break-even level of sales.
(iii) Sales required to earn a profit of ₹ 70 lakhs.
(b) Supreme Limited is a manufacturer of energy saving bulbs. To manufacture the finished product one unit of component 'LED' is required. Annual requirement of component 'LED' is 72,000 units, the cost is ₹ 500 per unit. Other relevant details for the year 2015-2016 are:
Cost of placing an order: ₹ 2,250
Carrying cost of inventory: 12% per annum
Lead time: Maximum 20 days, Minimum 8 days, Average 14 days
Emergency purchase: 5 days
Consumption: Maximum 400 units per day, Minimum 300 units per day, Average 300 units per day
You are required to calculate:
(i) Re-order quantity
(ii) Re-ordering level
(iii) Minimum stock level
(iv) Maximum stock level
(v) Danger level
Q3Cost of Capital, Financial Leverage, EPS
8 marks hard
ABC Company's equity shares is quoted in the market at ₹ 25 per share (Market price). The company pays a dividend of ₹ 2 per share and the investor's market expects a growth rate of 6% per year. You are required to: (i) Calculate the company's cost of equity capital. (ii) Calculate the company's cost of debt capital in 8% per annum, calculate the indicated market price per share. (iii) If the company issues 10% debentures of face value of ₹ 100 each and realizes ₹ 96 per debenture while the debentures are redeemable after 12 years at a premium of 12%, what will be the cost of debenture? Assume Tax Rate is 50%. (d) The following information is related to VZ Company Ltd. for the year ended 31st March, 2016: Equity share capital of ₹ 10 each ₹ 50 lakhs; 12% Bonds of ₹ 1,000 each ₹ 37 lakhs; Sales ₹ 84 lakhs; Fixed cost (including interest) ₹ 6.96 lakhs; Financial leverage 1.49; Profit-volume Ratio 27.55%; Income Tax Applicable 40%. You are required to calculate: (i) Operating Leverage; (ii) Combined leverage; and (iii) Earnings per share. Show calculations upto two decimal points.
Q4CVP Analysis, Break-even, Margin of Safety, Financial Ratios
8 marks hard
(a) A company has introduced a new product and marketed 20,000 units. Variable cost of the product is ₹ 20 per unit and fixed overheads are ₹ 1,20,000. You are required to: (i) Calculate selling price per unit to earn a profit of 10% on sales value, BEP and Margin of Safety. (ii) If the selling price is reduced by the company by 10%, demand is expected to increase by 5000 units, then what will be the impact on Profit, BEP and Margin of Safety? (iii) Calculate Margin of Safety if profit is ₹ 64,000. (b) The following figures and ratios pertain to ARO Company Limited for the year ending 31st March, 2016: Annual Sales (credit) ₹ 50,00,000; Gross Profit Ratio 25%; Fixed assets turnover ratio (based on cost of goods sold) 1.5; Stock turnover ratio (based on cost of goods sold) 6; Quick ratio 1:1; Current ratio 1:0; Debtors collection period 45 days; Reserves and surplus to Share Capital 0.60:1; Capital gearing ratio 0.5; Fixed Assets to net worth 1.2:1.
Q4Cost accounting, pricing, profit calculation
8 marks hard
Royal transport company has been given a 50 kilometre long route to haul boulders. The cost of each km is ₹ 7,30,000. The buses will make 3 round trips per day carrying on an average 75 percent passengers of their seating capacity. The seating capacity of each bus is 48 passengers. The buses will run on an average 25 days in a month. The other information is as below:
| Item | Cost |
|------|------|
| Garage Rent | ₹ 6,000 per month |
| Annual Repairs & Maintenance | ₹ 24,000 each bus |
| Salary of drivers | ₹ 4,000 each per month |
| Wages of 6 conductors | ₹ 1,000 each per month |
| Wages of 6 cleaners | ₹ 1,000 each per month |
| Manager's salary | ₹ 10,000 per month |
| Road Tax, Permit fee, etc. | ₹ 6,000 for a quarter |
| Office expenses | ₹ 2,500 per month |
| Cost of diesel per litre | ₹ 66 |
| Kilometres run per litre for each bus | 6 kilometres |
| Annual Depreciation | 50% of cost |
| Annual Insurance | 4% of cost |
| Engine oils & lubricants (for 1000 kilometres) | ₹ 2,000 |
You are required to calculate the bus fare to be charged from each passenger per kilometre (upto four decimal points), if the company wants to earn profit of 35 percent on taking (filled receipts from passengers).
Q5Balance Sheet Preparation
8 marks hard
You are required to prepare the Balance Sheet as at 31st December 2016 based on the above information. Assume 360 days in a year.
Q5Cash budgeting, working capital management
8 marks hard
Following information relates to ABC company for the year 2016:
(i) Projected sales:
| Month | August | September | October | November | December |
|-------|--------|-----------|---------|----------|----------|
| Sale | 35 | 40 | 40 | 45 | 46 |
(in lakhs)
(ii) Gross profit margin will be 20% on sale.
(iii) 40% of projected cash sale will be in the cash sale. Out of credit sale of each month, 50% will be collected in the next month and the balance will be collected during the second month following the month of sale.
(iv) Creditors will be paid in the first month following credit purchase. Creditors for only.
(v) Wages and salaries will be paid on the first day of the next month. The amount will be ₹ 3 lakhs each month.
(vi) Interim dividend of ₹ 2 lakhs will be paid in December 2016.
(vii) Machinery costing ₹ 10 lakhs will be purchased in September 2016. Repayment by instalment of ₹ 50,000 p.m. will start from October 2016.
(viii) Administrative expenses of ₹ 1,00,000 per month will be paid in the month of their incurrence.
(ix) Assume no minimum cash balance is required. Opening cash balance as on 01-10-2016 is estimated at ₹ 10 lakhs.
You are required to prepare the monthly cash budget for the 3 month period (October 2016 to December 2016).
Q5Cost Accounting Fundamentals
16 marks very hard
Answer the following questions:
Q6Standard Costing and Variance Analysis
8 marks hard
The following information is available from the cost records of a Company for the month of July, 2016: Material purchased: 22000 pieces @ ₹90,000; Material consumed: 21000 pieces; Actual wages paid for: 5150 hours @ ₹25,750; Fixed Factory overhead incurred: ₹46,000; Fixed Factory overhead budgeted: ₹42,000; Units produced: 1900. Standard rates and prices: Direct material: ₹4.50 per piece (Standard input: 10 pieces per unit); Direct labour rate: ₹6 per hour (Standard requirement: 2.5 hours per unit); Overheads: ₹5 per labour hour. Calculate the following variances: (i) Material price variance (ii) Material usage variance (iii) Labour rate variance (iv) Labour efficiency variance (v) Fixed overhead expenditure variance (vi) Fixed overhead efficiency variance (vii) Fixed overhead capacity variance
Q7Cost Accounting, Job Costing, Methods of Costing, Treasury D
16 marks very hard
Answer any four of the following:
Q10Cost of Capital and Capital Structure
8 marks hard
Following is the capital structure of RBT Limited as on 31st March 2016: Equity Shares (₹10 each): Book Value ₹50,00,000, Market Value ₹1,05,00,000; Retained earnings: ₹13,00,000; 11% Preference shares (₹100 each): Book Value ₹7,00,000, Market Value ₹9,00,000; 14% Debentures (₹100 each): Book Value ₹30,00,000, Market Value ₹36,00,000. Market price of equity shares is ₹40 per share and a dividend of ₹4 per share would be declared. The dividend per share is expected to grow at 8% every year. Income tax rate applicable to the company is 40% and shareholder's personal income tax rate is 30%. Calculate: (i) Cost of capital for each source of capital (ii) Weighted average cost of capital on the basis of book value weights (iii) Weighted average cost of capital on the basis of market value weights