December 2014 Examination FM 11 / eFM 11 Financial & Management Accounting

DECEMBER 2014 EXAMINATION
FM 11 / eFM 11
FINANCIAL & MANAGEMENT ACCOUNTING
Time: Three Hours

Marks: 100
Maximum
Note:
1.
2.
3.
4.
The paper is divided in three sections: SECTION-A, SECTION-B and

SECTION-C.
There are seven questions in SECTION-A. Students are required
to attempt ANY FOUR.
SECTION-B has 5 questions, attempt ANY THREE.
All the questions of SECTION-C (Case Study) are compulsory.
SECTION-A (10 Marks each)

(a)
Management Accounting is an extension of Financial Accounting. Explain.
(b)
Explain in what respect is Management Accounting different from Cost
Accounting.
2.
Explain the process of setting up of responsibility centres. What are different types of
responsibility centres?
3.
Explain the concept of Labour mix variance & what are the reasons for Labour mix
variance?
4.
Explain the treatment of Fixed Factory Overhead cost under Variable Costing &
Absorption Costing. Also
state how Income statement would be presented under
Absorption Costing?
1.
5.
The following data is given:

Product A
Product B
Direct Material
Rs.24
Rs.14
Direct Labour @ Rs.3 per hour
Rs.6
Rs.9
Variable overhead @ Rs.4 per

hour
Rs.8
Rs.12
Selling price
Rs.100
Rs.110
Standard time
2 hrs
3 hrs
State which product you would recommend to manufacture when:

i)
Labour time is the key factor
ii)
Sales value is the key factor
6.
(a)
What is the significance of preparing Funds Flow Statement?
AIMA/December 2014/FM 11
Page 1/4
(b)
During the year 2013, Soni Ltd. earned a profit of Rs.18,570 after adjusting
the following:
Salaries
Rs.8,500
Depreciation written off
Rs.15,300
Profit on sale of fixed assets
Rs.14,000
Discount on debentures written off
Rs.20,000
Loss on sale of investments
Rs.2,000
Preliminary expenses written off
Rs.8,000
Proposed Dividend
Rs.50,000
Transfer to debenture redemption Fund
Rs.20,000
Dividend received
Rs.4,500
Calculate Funds from Operations.
7.
Explain what is meant by Break Even Analysis. Also explain the various uses of this
technique in managerial decision making.
8.
(a)
decision in
(b)
9.
What
are
the
SECTION-B (15 Marks each)

factors to be considered while taking a make or buy
management accounting?
From the following information prepare a Comparative Balance Sheet:
31st March
31st March
2013
2014
Equity
Share
Capital
Debentures
Sundry Creditors
Bank Overdraft
4,00,000
2,00,000
2,55,000
7,000
6,00,000
3,25,000
1,17,000
10,000
Total Liabilities
8,62,000
10,52,00
0
Plant & Machinery

Land & Building
Investment
Sundry Debtors
Cash in hand
1,00,000
3,60,000
2,70,000
1,00,000
32,000
2,00,000
5,40,000
1,70,000
88,000
54,000
Total Assets
8,62,000
10,52,00
0
Balance Sheet for 2012 & 2013 of ABX Ltd, are presented below:
Balance Sheets as on 31st Dec 2012 & 2013
Liabilities
2012
2013
(Rs.)
(Rs.)
Equity Share Capital
Preference Shares
General reserve
Profit
&
Loss
Account
3,00,00
0
1,50,00
0
40,000
4,00,00
0
1,00,00
0
70,000
Asset
s
Goodwill
Land
Building
Plant
Debtors
&
2012
(Rs.)
2013
(Rs.)
1,15,00
0
2,00,00
0
80,000
1,60,00
90,000
1,70,00
0
2,00,00
0
2,00,00
Page 2/4
Proposed Dividend
Creditors
Bills payable
Provision
for
taxation
30,000
42,000
55,000
20,000
40,000
48,000
50,000
83,000
16,000
50,000
6,77,00
0
8,17,00
0
Stock
Bills
receivable
Cash in hand
Cash at bank
0
77,000
20,000
15,000
10,000
0
1,09,00
0
30,000
10,000
8,000
6,77,00
0
8,17,00
0
Additional information:
(a)
Depreciation of Rs.20,000 on land & building & Rs.10,000 on plant has been
charged in 2013
(b)
Interim dividend of Rs.20,000 has been paid in 2013
(c)
Income tax Rs.35,000 has been paid during 2013.
Prepare Cash Flow Statement
10.
The variable cost structure of a product manufactured by a company during the
current
year is
as
under:
Rs. Per unit
Material
120
Labour
30
Overheads
12
The Selling price per unit is Rs.270 & the fixed cost & sales during the current year
are Rs.14 lakh
&
Rs.40.50 lakh respectively.
During the forthcoming year, the direct workers will be entitled to a wage increase of
10% from
the
beginning of the year & the material cost, variable overheads & fixed
costs are expected to increase
by 7.5%, 5% & 3% respectively.
The following are required to be computed:
(a) New sale price of the forthcoming year if the current P/V ratio is to be maintained.
(b) Number of units that would require to be sold during the forthcoming year, so as to
yield the same amount of profit in the current year, assuming that selling price per
unit will not be increased.
11.
A gang of workers normally consists of 30 men, 15 women & 10 boys. They are paid
at standard rates per
hour,
as
Man-Rs.0.80,
Woman-Rs.0.60,
Boy-Rs.0.40,
respectively.
In a normal working week of 40 hours, the gang is expected to produce 2,000 units of
output.
During the week ended 31st Dec, the gang consisted of 40 men, 10 women & 5 boys.
The actual wages
paid were @ Rs.0.70, Rs.0.65 & Rs.0.30, respectively. 1,600 units were
produced. Four
hours were lost
due to abnormal idle time.
Calculate
(i) Labour cost variance
(ii) Wage rate variance
(iii) Labour efficiency variance
(iv) Idle time variance
(v) Labour mix variance
(vi) Labour revised efficiency variance
Page 3/4
12.
Write short notes (Any Three)

(a) Incremental Analysis
(b) Utility of PV Ratio
(c) Performance budgeting
(d) Basis of setting standards in Standard Costing
SECTION-C (15 Marks)

Case Study (Compulsory)
The following data relates to Bookshop Ltd.
The financial manager has made the following forecasts for the upcoming year:
Month
Sales
(Rs.)
Material
s (Rs.)
Wage
s
(Rs.)
Overhea
ds (Rs.)
Jan
14,00
0
9,600
3,000
1,700
Feb
15,00
0
9,000
3,000
1,900
March
16,00
0
9,200
3,200
2,000
April
17,00
0
10,000
3,600
2,200
May
18,00
0
10,400
4,000
2,300
Other data:
a. Sales = 10% sales are on Cash and rest credit sales.
b. 50% of the credit sales are collected in next month & the balance in the month
following.
c. There is a time lag in the payment of materials, wages & overheads of 2 months,
month & month respectively.
d. Cash & bank balance on 1st March 2015 is expected to be Rs.6,000.
e. Plant & Machinery will be installed in Jan 2015 at a cost of Rs.96,000. The monthly
installment of Rs.2,000 is payable from March 2015 onwards.
f. Dividend @ 5% on Preference share capital of Rs.2,00,000 will be paid on 1 st May.
g. Advance to be received for sale of vehicles Rs.9,000 in May.
h. Dividends from investments amounting to Rs.1,000 are expected to be received in
May.
i. Income tax (advance) to be paid in May is Rs.2,000
13.
Case Question:
You are required to prepare a Cash Budget for the months of March, April & May 2015
Page 4/4
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DECEMBER 2014 EXAMINATION

Time: Three Hours

The paper is divided in three sections: SECTION-A, SECTION-B and

SECTION-A (10 Marks each)

The following data is given:

Direct Labour @ Rs.3 per hour

Variable overhead @ Rs.4 per

State which product you would recommend to manufacture when:

What is the significance of preparing Funds Flow Statement?

SECTION-B (15 Marks each)

Plant & Machinery

Write short notes (Any Three)

SECTION-C (15 Marks)

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