EXAMINATION PAPER

FACULTY : BUSINESS AND ACCOUNTANCY

COURSE : MASTER OF BUSINESS ADMINISTRATION (MBA)

YEAR/SEMESTER : I YEAR / SEMESTER I

MODULE TITLE : BUSINESS ACCOUNTING & FINANCE

CODE : ACC 501

DATE : 22-AUGUST, 2017, TUESDAY

TIME ALLOWED : 3 HOURS

START : 01:00 PM FINISH : 4:00 PM

Instruction to candidates

1. This question paper has THREE (3) Section

2. Answer ALL questions in Section A, MCQ.

3. Answer 5 questions in Section B, MSAQ.

4. Answer 2 questions in Section C, MEQ.

5. No scripts or answer sheets are to be taken out of the Examination Hall.

6. For Section A, answer in the OMR form provided.

Do not open this question paper until instructed

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 SECTION A
Multiple Choice Questions (30*1=30)

1. The Prime objective of Management accounting is to:

a. Provide reliable data for the determination of selling price
b. Record the business transactions systematically
c. Prepare financial statement
d. Help in the interpretation of financial information

2. Overhead cost is the total of:

a. All indirect costs
b. Indirect and direct cost
c. All direct costs
d. All of above

3. Prime cost is the total of :

a. All direct costs
b. All cost of production
c. All factory overhead
d. Only selling cost

4. Which of the following is not included in investing activities?

a. Collection form customer
b. Net income
c. Paid to supplier
d. All of the above

5. The difference between total assets and total shareholder’s equity is

_____________.
a. total debt
b. current liabilities
c. long term debt
d. total capital employed

6. The primary purpose of the liquidity ratios is to determine:

a. How much working capital is tied up in inventory
b. How well a firm is able to pay off short-term obligations
c. The relative level of short-term debt
d. More than one of the above

7. Which of the following is not a key ratio in the prediction of bankruptcy of

a firm?
a. Quick ratio
b. Current ratio
c. Debt to equity
d. Earnings per share

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8. _____________ measures the ability of a firm to earn an adequate return
on assets and capital.
a. Liquidity ratio
b. Leverage ratio
c. Turnover ratio
d. Profitability ratio

9. Direct expenses are also called________________.

a. chargeable expenses
b. sundry expenses
c. major expenses
d. overhead expenses

10. Direct material is____________.

a. fixed cost
b. variable cost
c. semi fixed cost
d. semi variable cost

11. On a statement of retained earnings, how are net income and dividends
treated?
a. Net income is added, and dividends are deducted.
b. Both net income and dividends are added.
c. Both net income and dividends are deducted.
d. Net income is deducted, and dividends are added.

12. Revenues are reported on which of the following financial statements?

a. Balance sheet only
b. Income statement only
c. Both the balance sheet and the income statement
d. Neither the balance sheet nor the income statement.

13. An amount readily convertible to a known amount of cash with a maturity

to the investor of three months or less is called_______________.
a. coin currency
b. cash equivalent
c. cash and bank
d. checks

14. Activities concerned with the acquisition and disposal of long term assets is
related to:
a. investing activities
b. financing activities
c. operating activities
d. None of above

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15. Activities concerned with the raising and repaying of funds in the form of
debt and equity is related to:
a. financial activities
b. investing activities
c. operating activities
d. All of above

16. Variable costing is acceptable for:

a. financial statement purposes
b. profit tax purposes
c. internal use by management
d. profit tax purposes and for internal use by management

17. Kind of costs that has been occurred in past are classified as:
a. unrecorded costs
b. recorded costs
c. sunk costs
d. bunked costs

18. Factors that are largely considered in making or buying decisions are called:
a. Quality of suppliers
b. Dependability of suppliers
c. Both a and b
d. None of the above

19. Profit for the objective of calculating a ratio may be taken as:
a. Profit before tax but after interest
b. Profit before interest and tax
c. Profit after interest and tax
d. Profit after tax but before interest

20. Difference exists between total revenues that can be earned from two
different alternatives is classified as:
a. Independent revenue
b. Incremental revenue
c. Differential revenue
d. Dependent revenue

21. Which of the following is not the main objective of an accounting?

a. Systematic recording of transactions
b. Ascertaining profit or loss
c. Ascertainment of financial position
d. Solving tax disputes with tax authorities

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22. Decisions made by team of individuals or single person whether to
outsource products or in-source are classified as:
a. Demand or supply decisions
b. Make or buy decisions
c. Relevant or irrelevant decision
d. Idle or busy decisions

23. The statement that shows the cause of change in the financial position of
an organization is known as:
a. Balance sheet
b. Funds flow statement
c. Statement of financial position
d. None of the above

24. The liquidity ratios include the ratios like:

a. Current ratios
b. Acid-test ratios
c. Both a and b
d. None of the above

25. Fixed costs have tendency to:

a. change proportionately with the volume of output
b. remain constant up to a particular level of output
c. change disproportionately with the volume of output
d. remain constant at all levels of output

26. What is the value of debt equity ratio if the value of share capital is
Rs.320,000, reserve & surplus is 100,000, 10% debenture is Rs.100,000 and
preliminary expenses is Rs.20,000?
a. 24%
b. 26%
c. 25%
d. 28%

27. Different in cost per unit of repair is Rs.0.5 between 10,000 units and
15,000 units. If total cost for 10,000 units is Rs.14, 000, what is the cost of
15,000 units?
a. Rs.15,500
b. Rs.16,000
c. Rs.16,500
d. Rs.16,800

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28. The value of opening and closing debtors is Rs.40, 000 and Rs.60, 000
respectively. If total sales is Rs.600, 000 out of which 20% is cash sales,
what is the value of Debtors Turnover Ratio?
a. 9.8 times
b. 10 times
c. 9.6 times
d. 9.7 times

29. A company produced 100 units of item ‘X’. The standard labour hour for
each unit was 8 hours @ Rs.10 per hour. The actual labour hours used for
production was 780 hours at a cost of Rs.8,190. What is the value of labour
rate variance?
a. Rs.390 Favourable
b. Rs.398 Favourable
c. Rs.398 Unfavourable
d. Rs.390 Unfavourable

30. A company wants to earn after tax profit of Rs.37, 500, what is the value of
sales units, if the selling price per unit is Rs.20, variable cost per unit is
Rs.15, fixed cost is Rs.50, 000 and tax rate is 25%?
a. 19,000 units
b. 20,000 units
c. 21,000 units
d. 17,000 units

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 SECTION B
Short Answers Questions
Answer any five (5) questions out of seven (7) questions (5*6=30)

1. The Cash Flow Statement of a financial institution is provided to you. You are
required to briefly comment on Operating, Investing and Financing activities.
Previous year This year
A. Cash from Operating Activities (Rs.) 255000 300000
1. Cash Receipt 505000 680000
1.1. Interest & Commission Income 202000 150000
1.2. Non-Operating Income 203000 330000
1.3. Other Income 100000 200000
2. Cash Payment 250000 380000
2.1. Interest Expenses 90000 100000
2.2. Office & Staff Expenses 80000 130000
2.3. Non-Operating Expenses 30000 90000
2.4. Other Expenses 50000 60000
B. Cash from Investing Activities (Rs.) 900000 (2000000)
1. Changes in Investment 400000 (200000)
2. Changes in Loan & Advance (170000) (1150000)
3. Changes in Fixed Assets 600000 (800000)
4. Changes in Other Assets 70000 150000
C. Cash from Financing Activities (Rs.) (450000) 1800000
1.Changes in Borrowing (1050000) (700000)
2.Changes in Deposits 400000 2000000
3.Changes in Other Liabilities 200000 500000
D. Net Cash 705000 100000
E. Opening Cash Balance (Rs.) 100000 805000
F. Closing Cash Balance 805000 905000

2. National Panasonic Manufactures and sells four types of products under the
brand name of Panasonic player, Panasonic multimedia, Panasonic computer
and Panasonic camera. The sales-mix in value comprises
1 2 2 1
33 %, 41 %, 16 % and 8 % for products respectively. The total budgeted
3 3 3 3
sales (100%) are Rs. 60,000 million. Operating costs are:

Variable costs for the products:

Panasonic Player : 60% of the selling price
Panasonic Multimedia: 68% of the selling price
Panasonic Computer: 80% of the selling price
Panasonic Camera : 40% of the selling price
Fixed costs : Rs. 14,700 million per month

Required: Calculate BEP for the products on an over-all basis for the month.

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3. “Management accounting utilizes vital accounting information provided by
financial accounting for management, planning and control”. How would you
justify this statement?

4. A company is selling its product at the rate of Rs. 165 per unit. The variable
cost per unit of product is Rs. 105 and the total fixed costs are Rs. 675,000.
Required:
a. Breakeven point in units. (3)
b. Breakeven point in units if selling price per unit is increased by Rs. 15.
(3)

5. The details of overhead cost of a manufacturing company and other

information have been provided:
Output in Units 10,000 20,000
Indirect Materials 10,000 20,000
Indirect Labour 20,000 40,000
Supervision 20,000 30,000
Heat Light and Power 10,000 15,000
Maintenance Cost 10,000 15,000
Depreciation Cost 30,000 30,000
100,000 150,000
Additional information:
Normal Capacity 10,000 DLH,
DLH Required for 1 units of Output 0.50 DLH,
Actual Output 19,000 units
Actual Hours Worked 9,000 DLH.
Actual Overhead Cost Paid Rs, 1, 42,000,

Required:
a. Budgeted Overhead Cost for 20,000 units. (3)
b. Overhead cost Three Variances (3)

6. “A variable cost is a cost that varies per unit of product, whereas a fixed cost is
constant per unit of product.” Do you agree? Explain with examples drawn
from the industry of your choice.

7. Watson & Co provides the following information

Sales Rs. 16, 00,000 Shareholders’ equityRs. 600,000
6% long-term loan Rs. 400,000 Cost of goods sold Rs. 800,000
Operating expenses Rs. 560,000 Total assets Rs. 12, 00,000

Required:
a. Gross profit ratio (1.5)
b. Net profit ratio (1.5)
c. Return on shareholder's equity (1.5)
d. Return on assets (1.5)

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 SECTION C
Long Answer Questions
Attempt any two (2) questions out of three (3) questions. (2*20=40)

1. Answer the following questions:

a. “Cash flow statement is useful internally to management and externally to

investors and Creditors”. Discuss. (10)

b. Definethe term “Cost allocation” and “Cost apportionment” and bring out
the distinction between the two with examples. (10)

2. The data relating to income statement of a company have been provided below.
Normal capacity 25,000 units
Production unit’s 28,000 units
Sales unit’s 30,000 units
Ending inventory units 3,000 units
Selling price per unit Rs. 30
Variable manufacturing overhead per unit Rs. 20
Fixed manufacturing overhead Rs. 100,000
Variable selling overhead per unit Rs. 2
Fixed administrative overhead Rs. 50,000

Required:
a. Income Statement under Variable costing and Absorption costing method.
(7+7)
b. Comment on your results of part (a) and state the assumptions of each
costing method. (3+3)

3. A manufacturing company is in the process of preparing the master budget.

The actual sales of the last two months and the estimated sales of the coming
four months are as under:
Months Sales units
Falgun (actual) 9,000
Chaitra (actual) 11,000
Baishak (budgeted) 8,000
Jestha (budgeted) 10,000
Ashad (budgeted) 12,000
Shrawan (budgeted) 10,000

The policy of the company is to have an ending inventory of finished goods to

replenish 30% of expected sales orders in the next month. Each unit of finished
product needs 5 units of raw material. The cost per unit of raw material is Rs 5.
It is planned that the ending inventory of raw material at the end of each month
should be maintained at a level equal to half the consumption for the next
month.

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 Wages and other manufacturing expenses are Rs 10 per unit and the operating
expenses are 10% of gross sales. All expenditures are paid for at the time when
they are due.

Of the sales 20% is for cash. 50% of the credit sales are collected in one month
and the balance on two month of sales. There are no bad debt losses. 40% of
purchases are made on a cash basis and credit purchases are paid after one
month. The minimum cash balance to be maintained throughout the period is
Rs 50,000 and for the deficit cash balance there is an arrangement with the
bank for a short-term loan. The selling price per unit is Rs 50. The balance
sheet of the company as on 31st Chaitra, last year is as under:

Liabilities Amount Liabilities Amount

(Rs) (Rs)
Creditors 144,750 Inventory:
10% debentures 150,000 Finished goods (2,400 units) 84,000
Shareholders’ equity 766,750 Raw material (21,500 units) 107,500
Sundry debtors 620,000
Cash 50,000
Plant and machinery 200,000
1,061,500 1,061,500

Required:

The following budgets for the three months ending on Ashad:

a. Production budget. [2.5]
b. Material purchase budget. [2.5]
c. Cash budget. [5]
d. Budgeted income statement. [5]
e. Budgeted balance sheet. [5]

****BEST OF LUCK****

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