FIRST ASSIGNMENT
Course Code:MS-04
Course Title:Accounting and Finance for Managers
Assignment Code:04/TMA-1/SEM-II/2003
Coverage:Blocks 1, 2 and 3
Note: Please attempt all questions and send them to the Coordinator of the study centre you are attached with.
Q. 1.What kinds of decisions executives or managers have to make about their companies and their activities? How do these differ from decisions which investors, regulatory agencies and others make about those same companies? Is the same kind of information needed by groups from within and outside the company? If so, what is that information ? If not, what are the essential differences?
Q. 2.The following balances were extracted from the books of Bhushan Co Ltd. for the year ended 31st Dec 2002.
Rs.
Share Capital : 5,000 Equity Shares of Rs. 100 each5,00,000
6 per cent Debentures secured on the mortgage of fixed assets1,00,000
Provision for taxation for the assessment year 2001-02;2002-031,00,000
Sundry Creditors 52,000
Discount on issue of debentures 4,000
Profit and Loss A/c (Credit Balance) 10,000
Gross Profit5,00,000
Dividend received on investments (Gross Rs. 10,000) 7,000
Salaries and wages1,00,000
Directors fees 4,000
Interest on debentures 5,000
Income-tax deducted on the interest on debentures 1,500
Audit fees (including Rs. 1,000 for tax representation) 5,000
Miscellaneous trade expenses1,10,000
Advance against construction of building 50,000
Buildings (Cost Rs. 4,00,000)3,00,000
Furniture (Cost Rs. 10,000) 5,000
Motor Vehicles 30,000
Equity shares of other companies (Market value Rs. 2,20,000)2,00,000
5,000 10 per cent Preference shares of Rs. 10 each of
other companies (Rs. 6 paid up) 30,000
Stock-in-trade at cost2,00,000
Sundry Debtors unsecured considered good1,40,000
Cash and bank balances 57,500
Preliminary expenses 30,000
You are required to prepare the Profit and Loss Account for the year ended 31st Dec 2003 and the Balance Sheet as on that date after taking into account the following items:
Additional Information
1)Provide depreciation at 10% on the original cost of all fixed assets.
2)Motor vehicle account represents two old vehicles standing in the books at Rs. 5000 each
(original cost Rs. 15,000 each) and a new vehicle purchased on 1 January 2003 for Rs. 20,000. One of the old vehicles was sold for Rs. 4,000 and the amount was credited to sales account.
3)The company has the contract for the construction of a building at Rs. 1,50,000 which is still incomplete.
4)Provide Rs. 1,00,000 towards taxation liability for the current year.
5)Sundry creditors include Rs. 2,000 which had already been paid.
6)The method of valuation of closing stock has been changed and this resulted in reduction in the value of the closing stock to Rs. 1,90,000. This has not been adjusted.
7)Closing stock also includes goods worth Rs. 20,000, which cannot be marketed.
8)Dividend is proposed for the year at 20 per cent.
9)Debtors outstanding for more than six months : Rs. 40,000.
10)Cash balance includes a cheque for Rs. 10,000 returned by the bankers for want of balance in the account.
Q. 3.Vivek company manufactures bags that are sold to retailers at Rs.10 per bag. Cost particulars are given below:
Variable costs:per unit
Direct materials Rs.2.50
Direct labour 1.50
Variable manufacturing overhead 1.00
Variable selling 1.50
Variable administrative 0.50
Total 7.00
Fixed costs are
Manufacturing overhead Rs.4,00,000
Selling 3,00,000
Administrative 2,00,000
Total 9,00,000
This years sales were 3,50,000 units. The company desired to earn a net income of Rs.6000 before taxes. The firm is evaluating a marketing program designed to help achieve the firms desired net income. The program would increase fixed costs by Rs.1,45,000 and variable cost by Rs.0.25 per unit.
You are required to:
(a)Calculate the break even point in units and Rs. Sales.
(b)Prepare a detailed cost-volume-profit-chart, carefully labeled, based on the current situation.
(c)Compute the margin of safety ratio for the current year.
(d)Ignoring the marketing program, compute the sales level that will satisfy Vivek’s net income requirement.
(e)Compute the break-even point with the marketing program.
(f)If the marketing program is implemented and sales are precisely enough to achieve the firm’s minimum net income requirement, what is the margin of safety ratio.
SECOND ASSIGNMENT
Course Code:MS-04
Course Title:Accounting and Finance for Managers
Assignment Code:04/TMA-2/SEM-II/2003
Coverage:Blocks 4 and 5
Note: Please attempt all questions and send them to the Coordinator of the study centre you are attached with.
Q. 1.The following data applies to R.L. Kiran & Co:
(Rs. in lakhs)
Cash and marketable securities 100.00
Fixed assets 283.50
Sales1,000.00
Net Income 50.00
Quick ratio 2.00
Current ratio 3.00
Days sales outstanding 40 days
Return on equity 12%
Kiran has no preferred stock – only common equity; current liabilities and long-term debt.
a)Find Kiran’s i) accounts receivable ii) current liabilities iii) current assets iv) total assets v) return on assets (RAO) vi) common equity and vii) long-term debt.
b)If Kiran could reduce its Days sales outstanding (DSO) from 40 days to 30 days while holding other things constant, how much cash would it generate? If this cash were used to buy back common stock (at book value), thus reducing the amount of common equity, how would this affect
i) the return on equity (ROE) ii) the return on assets (ROA) and iii) the total debt /total assets ratio?
Q. 2.Gattu Corporation makes a driveway sealing compound that it sells in 5gallon cans for Rs.50 Per can. Company’s sales personnel have estimated annual sales of 3,600 units divided among the quarters as follows:
First quarter1,000 units
Second quarter1,100 units
Third quarter 800 units
Fourth quarter 700 units
Operating capacity of the manufacturing facilities is 900 units per quarter. Production of more than 900 units requires additional costs. Production cost is Rs.30 per unit and there would be a 20 percent increase in cost for units in excess of 900 per quarter. The production manager is evaluated on the cost of production, whereas the sales manager is evaluated on the basis of sales revenue. The sales manager claims that if he had only 900 units to sell in each of the first two quarters, the unsatisfied customers would switch to new products and sales in each of the last two quarters would be 50 units less than estimated.
You are required to prepare sales and production budgets to determine how production should be scheduled and to resolve the conflict between the sales and production managers.
Q. 3.As a finance manager what is your role in matters of dividend policy, what will be the alternatives and factors that you may consider before finalising your views on dividend policy?
THIRD ASSIGNMENT
Course Code:MS-04
Course Title:Accounting and Finance for Managers
Assignment Code:04/TMA-3/SEM-II/2003
Coverage:All Blocks
Note: Please attempt all questions and send them to the Coordinator of the study centre you are attached with.
Q. 1.You are required to calculate overhead variances when:
(a)Standard overhead rate per hour is used.
(b)Standard overhead rate per unit is used.
The following data is provided:
BudgetActual
Production in units12,50011,000
Man Hours 6,250 5,750
Overhead costs:
Fixed12,50013,000
Variable50,00045,000
Q. 2. a)XYZ Ltd has a debt of Rs.45,00,000 at 9 % and equity of Rs.55,00,000. This firm has sales of Rs.75,00,000. Variable cost of Rs.42,00,000 and Fixed cost of Rs.6,00,000.
(i)What is the firms ROI?
(ii)Does it have favourable financial leverage?
(iii)If the firm belongs to an industry whose asset turnover is 3, does it have a high or low asset leverage?
(iv)What are the Operating, Financial and Combined leverages of the firm?
(v)If the sales drop to Rs.50,00,000 what will be the new EBIT?
b)You are a financial analyst for Susan Electronics Company. The director of capital budgeting has asked you to analyse two proposed capital investments Project P & Q. Each Project has a cost of Rs. 10,000 and the cost of the capital for each project is 12%. The projects expected net cash flows are as follows:
Expected Net Cash Flows
YearProject PProject Q
0 (Rs.10,000) (Rs.10,000)
1 6,500 3,500
2 3,000 3,500
3 3,000 3,500
4 1,000 3,500
i)Calculate each projects payback period, net present value (NPV) internal rate of return (IRR)
ii)Which project or projects should be accepted if they are independent?
iii)Which project should be accepted if they are mutually exclusive?
iv)How might a change in the cost of capital produce a conflict between the NPV and IRR rankings of these two projects. Would this conflict exist if k were 5% (Hint plot the NPV profits)
Q. 3.Select any organisation of your own choice and examine how the organisation is managing its working capital. Discuss with the officials about how they plan to improve it further, then prepare a detailed Report.
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