Fundamentals of Accounting

Suggested Answer
Attempt all questions. Working notes should form part of the answer.
1. The following are the balances at the end of the Year 2014 (January to December
2014) abstracted from the books of Mr. Niranjan.
Amount Rs.
Niranjan's Capital 30,000
Niranjan's Drawings 5,000
Furniture and Fittings 2,600
Bank Overdraft 4,200
Creditors 13,300
Business Premises 20,000
Stock on January 01, 2014 22,000
Debtors 18,600
Rent from Tenants 1,000
Purchases 1,10,000
Sales 1,50,000
Sales Returns 2,000
Discounts- Debit 1,600
Discounts- Credit 2,000
Taxes and Insurance 2,000
General Expenses 4,000
Salaries 9,000
Commission- Debit 2,200
Carriage on Purchases 1,800
Provision for Bad and Doubtful Debts 600
Bad Debts written off 800

Stock on hand on December 31, 2014 was estimated at Rs. 20,000. Rent, Rs. 300, is
still due from the tenant. Salaries, Rs. 750, are as yet unpaid. Write off Bad Debts
Rs. 600, and depreciate Business Premises by Rs. 300 and Furniture and Fittings by
Rs. 266. Make a provision of 5% on Debtors for Bad and Doubtful Debts and a
provision of 2% for Discounts. Carry forward Rs. 700 for unexpired insurance. The
manager is entitled to a commission of 10% on profits remaining after charging the
commission. Difference, if any, in trial balance is to be treated as Suspense Account
in Balance Sheet.
Prepare:
Trading and Profit and Loss Account for the Year-January to December 2014, and
Balance Sheet as on December 31, 2014. (10+5=15)
Answer:
Trading and Profit and Loss Account
of Niranjan
for the year ended December 31, 2014
Amount Amount
Rs. Rs.
Particular Rs. Particular Rs.

To Opening Stock 22,000 By sales 1,50,000

To Purchases 1,10,000 Less Sales returns (2,000)

To Carriage 1,800 1,48,000

To Gross Profit c/d 34,200 By Closing Stock 20,000

1,68,000 1,68,000

By Gross Profit
To Salaries expenses b/d 34,200

Paid 9,000 By Rent

Add Due 750 Received 1,000

9,750 Add Due 300 1,300

To General Expenses 4,000

By Discounts
To Commission 2,200 Received 2,000

To Discounts 1,600
To Depreciation

Business Premises 300

Furniture and Fittings 266

566
To Provision for Bad and
Doubtful debts

Required (WN 2) 900

Add Bad debts 1,400

2,300
Less Existing
provision (600) 1,700

To Provision for Discounts

(WN 2 ) 342
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To Taxes and Insurance

Paid 2,000

Less Prepaid (700)

1,300
To Commission to Manager
(WN 3) 1,458

To Net Profit 14,584

37,500 37,500

Balance Sheet
of Niranjan
as at December 31, 2014
Amount Amount
Liabilities Assets
Rs. Rs.
Rs. Rs.
Capital Account Fixed Assets:
Balance on Jan 01,
2014 30,000 Business Premises

Add: Net Profit 14,584 Opening value 20,000

Less:
44,584 Depreciation (300) 19,700
Less: Drawings (5,000) 39,584
Furniture and
Fixtures

Opening value 2,600

Less:
Bank Overdraft 4,200 Depreciation (266) 2,334

Creditors 13,300

Salary Payable 750 Current Assets:

Sundry Debtors
Commission Payable (WN 3) 1,458 (WN 2) 18,000
Less Provision
for Bad and
Doubtful Debts (900)

Suspense 500 17,100

Less Provision
for Discounts (WN
2) (342) 16,758

Stock 20,000
3
 Amount due from
Tenant 300

Prepaid Insurance 700

59,792 59,792

Working Note 1:
As the question does not give regular trial balance, it is better to first prepare a regular trial balance to
locate any difference that there may be.

Trial Balance of Niranjan as at December 31, 2014

Debit Credit
Particulars Amount Amount
Rs. Rs.
Niranjan's Capital 30,000.00
Niranjan's Drawings 5,000.00
Furniture and Fittings 2,600.00
Bank Overdraft 4,200.00
Creditors 13,300.00
Business Premises 20,000.00
Stock on January 01, 2014 22,000.00
Debtors 18,600.00
Rent from Tenants 1,000.00
Purchases 1,10,000.00
Sales 1,50,000.00
Sales Returns
2,000.00
Discounts- Debit 1,600.00
Discounts- Credit 2,000.00
Taxes and Insurance 2,000.00
General Expenses 4,000.00
Salaries 9,000.00
Commission- Debit 2,200.00
Carriage on Purchases 1,800.00
Provision for Bad and Doubtful Debts 600.00
Bad Debts written off 800.00
Suspense Account (Difference in trial balance) 500.00
2,01,600.00 2,01,600.00

The total of the credit side is Rs. 2,01,100, whereas it is Rs. 2,01,600 for the debit side. Hence, Rs. 500
has been credited to the Suspense Account .

WN 2: Debtors, Bad Debts and Provision for Debtors

(i) Existing Debtors 18,600
(ii)Less: Additional Bad debts written off (600)
(iii) Debtors after Bad Debts written off 18,000

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 (iv) Less: Required Provision for Bad Debts (5% of (iii)) (900)
(v) Debtors after Provision for Bad Debts 17,100
(vi) Less: Required Provision for Discount on Debtors (2%of (v)) 342

WN 3: Commission to Manager
Profit after deduction all expenses expect the Commission to Manager
16,042
(37500-21458)
Manager's commission (16042*10/110) 1,458

2.
a) The B Brick Company holds a lease of land to produce bricks for a period of ten
years, commencing from 1st January, 2004. According to lease, the company is to
pay Rs. 250 per thousand units of bricks with a minimum rent of Rs. 250,000 per
year. Shortworking can, however, be recovered out of the royalty in excess of the
minimum rent of next two years only. For the year of strike the minimum rent is to
be reduced to 60%. The output in number of bricks in thousand for the 6 years is as
under. 2004 – 400, 2005 – 800, 2006 – 1,200, 2007 – 1,600, 2008 – 2000, and 2009
– 1,000 (Strike). 10
b) Amir & Basu are partners in a firm with a capital of Rs 200,000 Rs. 100,000
respectively. They admit Chandra into partnership on 1st Baisakh 2071 on the
condition that:
i) he brings Rs. 100,000 as capital and
ii) that Amir guarantees that Chandra’s share of profit shall be Rs. 30,000 after
charging interest on loans given by partners to the firm @10% p.a.
Amir’s loan amount to Rs. 30,000 and Basu’s loan to Rs. 20,000. During the year
2071, profit amounted to Rs. 80,000 before charging interest on partners’ capital
accounts.
You are required to prepare and the profit and loss account and partners’ Capital
account at the end of the year. 10
Answer:
a)
Analysis of Royalties Payable

Year Outpu Actual Minimu Surplus Shortworking Amount

t no. of Royalties @ m Rent Suffered Recouped Written C/F Payable
bricks Rs. 250 per off
in ‘000 thousand
2004 400 100,000 250,000 - 150,000 - - 150,000 250,000
2005 800 200,000 250,000 - 50,000 - - 200,000 250,000
2006 1,200 300,000 250,000 50,000 - 50,000 100,000 50,000 250,000
2007 1,600 400,000 250,000 150,000 - 50,000 - - 350,000
2008 2,000 500,000 250,000 250,000 - - - - 500,000
2009 1,000 250,000 150,000 - - - - - 250,000
(Strike)

5
 In the books of B Bricks Company
Royalties Account
Dr.
Cr.
Date Particulars Rs. Date Particulars Rs.
2004 To, Landlord A/c 100,000 2004 By, Profit and Loss A/c 100,000
2005 To, Landlord A/c 200,000 2005 By, Profit and Loss A/c 200,000
2006 To, Landlord A/c 300,000 2006 By, Profit and Loss A/c 300,000
2007 To, Landlord A/c 400,000 2007 By, Profit and Loss A/c 400,000
2008 To, Landlord A/c 500,000 2008 By, Profit and Loss A/c 500,000
2009 To, Landlord A/c 250,000 2009 By, Profit and Loss A/c 250,000
Note: It assumed that the Company does not prepare a Manufacturing A/c or a Trading A/c.
It prepars only Profit and Loss A/c. Therefore, all actual royalties are transferred to Profit
and Loss Account.
Shortworking Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
2004 To, Landlord A/c 150,000 2004 By, Balance c/d 150,000
2005 To, Balance b/d 150,000 2005 By, Balance c/d 200,000
To, Landlord A/c 50,000
200,000 200,000
2006 To, Balance b/d 200,000 2006 By, Landlord A/c 50,000
By, Profit and Loss A/c 100,000
By, Balance c/d 50,000
200,000 200,000
2007 To, Balance b/d 50,000 2007 By, Landlord A/c 50,000

Landlord Account
Dr. Cr.
Date Particulars Rs. Date Particulars Rs.
2004 To, Bank A/c 250,000 2004 By, Royalties A/c 100,000
By, Shortworking A/c 150,000
250,000 250,000
2005 To, Bank A/c 250,000 2005 By, Royalties A/c 200,000
By, Shortworking A/c 50,000
250,000 250,000
2006 To, Bank A/c 250,000 2006 By, Royalties A/c 300,000
To, Shortworking A/c 50,000
300,000 300,000
2007 To, Bank A/c 350,000 2007 By, Royalties A/c 400,000
To, Shortworking A/c 50,000
400,000 400,000
2008 To, Bank A/c 500,000 2008 By, Royalties A/c 500,000
2009 To, Bank A/c 250,000 2009 By, Royalties A/c 250,000

6
b)

Profit & Loss A/C

Particulars Debit Particulars Credit (Rs.)
(Rs.)
To Partners’ Capital a/c: By balance b/d 80,000
Amir 3,000
Basu 2,000 5,000
To Partners’ Capital a/c:
Amir 25,000
Basu 25,000
Chandra 25,000 75,000
Total 80,000 Total 80,000

Amir’s Capital A/C

Particulars Debit Particulars Credit (Rs.)
(Rs.)
To Chandra’s Capital a/c: 5,000 By balance b/d 200,000
By Profit & Loss a/c 3,000
To balance c/d 2,23,000 By Profit & Loss a/c 25,000

Total 2,28,000 Total 2,28,000

Basu’s Capital A/C

Particulars Debit Particulars Credit (Rs.)
(Rs.)
To balance c/d 1,27,000 By balance b/d 100,000
By Profit & Loss a/c 2,000
By Profit & Loss a/c 25,000
Total 1,27,000 Total 1,27,000

Chandra’s Capital A/C

Particulars Debit Particulars Credit (Rs.)
(Rs.)
To balance c/d 1,30,000 By balance b/d 1,00,000
By Profit & Loss a/c 25,000
By Amir’s Capital a/c 5,000
Total 1,30,000 Total 1,30,000
Working Note:
The allocation of profit of Rs. 80,000 charging interest on partners’ loan shall be as follows:
i) Rs.
Profit before charging interest on partners’ loan 80,000
Less: Interest on partners loan:
Amir’s loan of Rs. 30,000@ 10 % 3,000
Basu’s loan of Rs. 20,000@ 10% 2,000 5,000
Profit after charging interest on partners’ loan 75,000
ii) 1/3rd share of each partner comes to Rs. 25,000
iii) Chandra’s share of profit shall have to be increased by Rs. 5,000 so as to become Rs. 30,000.
Consequently Amir’s share of profit shall correspondingly decline by Rs. 5,000 so as to become
Rs. 20,000 only.
7
3.
a) X Ltd. purchased a machine for Rs. 60,000 on 1 January 2011. Depreciation is provided @ 10%
p.a. using diminishing balance method. Prepare the machinery account for the year 2013 if this
machine was destroyed by fire on 1 July 2013 and its setup was sold for Rs. 600, and the
insurance company paid Rs. 28,000 only. 5
b) Differentiate between: (2×5=10)
i) Joint Venture and Partnership
ii) Consignment and Sale
Answer:
a)

Machine Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
1/1/2013 To Balance c/d 48,600 1/7/2013 By Depreciation A/c 2,430
By Bank A/c (Scrap) 600
By Bank A/c (Claim) 28,000
By P & L A/c (Loss) 17,570

48,600 48,600
Working Note
Calculation of book value as on 1/7/2013 Amount (Rs`)
(a) Original cost as on 1/1/2011 60,000
(b) Less: Depreciation for 2011 6,000
(c) Book value as on 1/1/2012 54,000
(d) Less: Depreciation for 2012 5,400
(e) Book value as on 1/1/2013 48,600
b)
i) A Joint Venture can be termed as a contractual arrangement between two companies, which aims
to undertake a specific task. Whereas partnership involves an agreement between two parties
wherein they agree to share the profits as well as take the burden of loss incurred.

In partnership, the persons involved are co-owners of a business venture, aimed at making profit.
But in joint venture, it is not just profit that binds the parties together. Joint ventures can be
formed for specific purposes. For example, companies may join together and fund for the
development of a particular thing that could be of use to their respective business. Normally the
companies engage in joint ventures, as sometimes it could be quite expensive for undertaking
certain ventures like research and development individually.
While partnership can last for many years till the parties involved have no differences, companies
involve in a joint venture for only a limited period till their goal has been achieved. In a joint
venture, the members have come together for some specific purpose, while in a partnership the
members have joined together for only business. Further, partnership is governed by Partnership
Act where as there is no specific act which governs Joint venture.

8
ii) Differences between Consignment and Sale are as follows:

Consignment Sale
Ownership of the goods rests with the The ownership of the goods transfers with
consignor till the time they are sold by the transfer of goods from the seller to the
the consignee, no matter the goods are buyer.
transferred to the consignee.
The consignee can return the unsold goods Goods sold are the property of the buyer
to the consignor. and can be returned only if the seller
agrees.
Consignor bears the loss of goods held with It is the buyer who will bear the loss if any,
the consignee. after the delivery of goods.
The relationship between the consignor The relationship between the seller and the
and the consignee is that of a principal and buyer is that of a creditor and a debtor.
agent.
Expenses done by the consignee to receive Expenses incurred by the buyer are to be
the goods and to keep it safely is borne by borne by the buyer itself after the delivery
the consignor. of goods.

9
 Mercantile Laws
Suggested Answer
Attempt all questions.
1. Answer the following questions:
a) State the features of partnership business? 5

b) What are the rights of partners of a firm? Discuss. 5

Answer:
a) Main features of partnership business can be identified as follows.
 Utmost good faith: Each partner is entitled to bind other partners and the firm by his acts
related to the business of the firm. Due to this reason, every partner has a duty to observe good
faith free from harming intention to anyone in business dealings. Therefore, all partners are
bound to disclose information known to them with and present true account to others.
 Association of two or more persons: In England, t he English Partnership Act, 1890 has fixed
the maximum number of partners 20 in general sector. Besides, no maximum number has fixed
in special sector such as legal profession, accountant etc. At least two persons are needed for
partnership in Nepal but the maximum number of partners is not fixed by the Nepalese Act. A
company is a separate person so that it can enter into partnership on the basis of its separate
personality subject to memorandum and articles of association and the company law provisions.
 Agreement: Partnership is of voluntary or contractual nature. It arises from an agreement.
Implied agreement is created in the course of dealing or conduct of the Parties. It may be made
for a fixed period or for the execution of a particular adventure (Business) or temporary or
based on will of partners giving power to the partner to withdraw from partnership at any time.
 Business: It is essential that there must exist a business. Any trade, occupation or profession is
called business. The Partnership is formatted only for the purpose of business with the
possibility of carrying on a single adventure or a single undertaking or numerous transactions.
For partnership, business must be carried on continuously.
 Joint ownership: Two or more persons invest their capital in partnership firm with an object to
carry on partnership. However, the capital invested by each partner may be more or less but the
ownership of the firm is joint.
 Sharing of profit and loss: Profit means net profit, which should be the object of partnership
firm. In agreed ratio, it is shared and distributed to the partners. If any person claiming
partnership has been deprived of getting profit, he is not called a partner. On the other hand, the
person sharing profit is not automatically called partner merely on the ground of sharing profit.

10
 It means all the essential characteristics must be present to create partnership along with profit
sharing. The sharing of profit also signifies sharing of loss.
 Unlimited liability: Unlike in a sole proprietorship, in partnership, liability of the partners is
unlimited. Therefore, if loss is more than the capital, in the first instance, all the partners have to
pay from their personal property in profit sharing ratio. But in case, any co-partner is unable to
pay such loss, all other co-partners have to pay it jointly.
 No Separate legal entity: In the eye of law, the partners and the firm have not separate legal
entity. It is not regarded as a legal entity. It means there is no distinction between the partners
and the firm. Thus, Partnership, being purely a personal association, has no separate legal
personality.
 Non-transferable shares: No Partner is entitled to sell or transfer his share to an outsider
freely. For this, he has to obtain consent of all partners. Hence, the shares of partner are not
openly traded in stock market.
 Joint Management: The management of the firm is run and controlled by all partners or by any
co–partner on behalf of all partners in accordance with the partnership deed. If there is
restriction clause in the deed, this authority rests with each partner.

b) In accordance with the provisions of the Act, the rights and duties of the partners of a firm may
be determined by the contract or an agreement between the partners and such contract may be
express or implied. Similarly, the rights are created and amended by the partners among
themselves by making the agreement.

If the agreement is silent, the provisions made by the law are applied for the rights which are
cited hereunder.

 Take part in the business: Irrespective of the capital investment, every partner has an inherent
right to take part in operation of the business. Anyone who has no willingness to participate in
the management but he has a right to involve in the management.
 Access to books of accounts: Every partner has a right to have access and inspect and copy any
books of the firm.
 Right to share the profits: Irrespective of the amount of capital contribution, every partner has
a right to share profits unless otherwise specified, earned by the firm.
 Right to interest on capital: The partnership deed may include the provisions of interest
payable. Such interest shall be payable only out of profits earned by the firm. Similarly, the
interest in investment other than the capital is payable to the partner who provides amount in the
form of loan, out of the assets of the firm as per the agreed rate.
Where the partner makes any payment or advances beyond the amount of capital he has to agree
to subscribe for the purpose of business then he is entitled to interest thereon at the rate agreed
upon among the partners.

11
  Right to participation: Every partner has a right to be consulted and heard before any matter is
decided. According to the agreement between the partners, the general matters are decided
through simple majority.
 Right to indemnity: Every partner has a right to claim indemnity from the firm in respect of
payments made or liabilities incurred by him in the course of business and for the benefit of
business.
 Right to retire: The provision of retirement is based on the terms and conditions of the
agreement executed among the partners. Where the partnership business is carried on for a
certain period of time then after completion of such period or task all the partners will retire.
However, if the time period has not been fixed then any partner may retire on the will of the
partner as per agreement.
 Right to bind the firm and other partner: In partnership there is an implied agency and a
partner treated as an agent of other partners and the firm. Therefore, the acts of one partner bind
the other partners and the partnership firm and he is not solely liable for his acts.
 Other rights: Other rights of the partner include the right to use the property of partnership
right to represent on behalf of the firm, right to stop admission of new partner etc.
2. Answer the following questions:
a) State the difference between Common Carrier and Private carrier. 5
b) 'All contracts are agreement but all agreements are not contract' discuss "the statement
explaining with the essential elements of a valid contract. 5
c) State the Rights and Duties of a Principal in relation to the Contract of Agency. 5
Answer:
a) Differences between Common Carrier and Private Carrier can be explained in the following
words:

 Common carrier has no right to reject to carry the goods but private carrier posses this rights.
 Common Carrier has no right to chose to carry the goods but Private Carrier has right to chose
to carry the goods.
 Rights, duties and liabilities of the Common Carriers are managed by the Carrier Act or Law
relating to Carriage but rights, duties and liabilities of Private Carriers are managed by the
Contract Act.
 Common Carrier does regular business but Private Carrier is one who does not do regular
business as a carrier but occasionally carry goods for money.
 Common Carrier undertakes to carry the goods or persons without any discrimination but
carriage of the goods is depended on the desire of Private Carrier.
 Common carrier carries the goods through a fixed or customary route but the private carrier
may carry the goods through such a route which he pleases so.

b) No doubt, all agreements are not contracts. A contract is a legally binding agreement. To be a
legally binding contract, an agreement should fulfill certain conditions. These conditions which
are also called the essential elements of a valid contract. These essential elements demarcate
between the agreement and contract. All agreements are contract if considering the essential
elements makes them. Only those contracts can create the legal obligation but mere agreement
cannot create such obligation. The obligation must not be only moral but legal also. So, it is said
that all contracts are agreements but all agreements are not contracts.

12
To be a valid contract an agreement should fulfill the following essential conditions:
 Offer and acceptance :
This is a basic element of a contract. There must be an offer and must be an acceptance over
the offer and, this offer and acceptance both should be lawful. The test of lawfulness of the
offer and acceptance is based on the contract law as well as other prevailing laws of the
country.
 Intention to create legal relations:
To be a valid contract, there must be an intention between the parties to create a legal
relationship between them. This is another important element of valid contract. Where a
promise has made in friendly, family or social matters, these are not enforceable as there is
no intention to create legal relation in these promises or contract.
 Capacity of parties:
The parties of an agreement must have the contractual capacity. Contract made by the
incompetent parties cannot be enforced by a court of law. The age factor or situation and
status of mind or qualification and disqualification of a person determine the capacity of the
parties.
 Free consent.
This is another important essential element of a valid contract. There must be a genuine
consent without misrepresentation, undue influence, coercion, and fraud. The free consent
lacks the free meeting of the mind among the parties. The contract concluded without free
consent is voidable.
 Lawful object and consideration:
For the formation of a valid contract it is also necessary that the parties to an agreement must
agree for a lawful object. Every agreement of which the object is unlawful is void and not
enforceable by law. Similarly, there must be the presence of a lawful consideration.
Consideration is a value, under which, both parties of contract gives something to other and
both parties gets something from other. It is, therefore, something for something. Unlawful
consideration cannot fulfill the essential element of a contract.
 Certainty of terms :
The terms of the agreement must be definite and certain. It is difficult to enforce the contract
by court having the uncertain or vague terms.
 Possibility of performance :
This is another important essential element of a valid contract. The agreement being a valid
contract must be capable of being performed. A promise of contract to do an impossible thing
cannot be enforced.

13
  Legal formalities :
An agreement to be a valid contract must follow the certain legal formalities prescribed by
law of contract. An agreement can be concluded either expressly or impliedly. Some
agreement, which requires only the written forms at that time the contract, should fulfill the
formality.
 Not expressly declared void:
The agreement must not have been expressly declared to be void under the Act.
These all elements have equal importance to conclude a valid contract. If any one of them is
absent, the agreement does not become a contract. An agreement, which fulfils all the
essential elements, is enforceable by law and is called a contract. So, it is said that every
contract is an agreement but all agreements are not contracts.
c) As a general rule the Rights and Duties of Principal in relation to the contract of Agency are as
follows: [2.5+2.5]

1. Rights of Principal
 He can enforce the various duties of an Agent, in the case the agent fails,
 He can recover compensation for any breach of duty by the Agent,
 He can forfeit agent's remunerations where the Agent is guilty of misconduct in the business of
Agency,
 Principal is entitled to any extra profit that the Agent has made out of his agency. This includes
the illegal gratification, if any.
 Principal is entitled to receive all sums that the Agent has received on his (principal's) account
even though the transactions, entered into, by the Agent, on behalf of the principal were void or
illegal,
2. Duties of Principal
 It is the duty of the Principal to pay the agreed remuneration to the Agent after the Agent has
completed the job, he had undertaken to do,
 The Principal is bound to indemnify him against the consequences of all lawful acts done by
such Agent in exercise of the authority conferred upon him.
 Principal is liable to compensate the Agent for the injuries sustained by the Agent due to the
Principal's neglect or want of skill.
 Principal should not prevent the Agent from earning from his remuneration; otherwise he
should be liable to pay damages to Agent.
 Principal should not hold the agent personally liable for his acts done in the course of the
business of agency unless the agent himself our as per the law incurs personal liability.

14
 Fundamentals of Economics
Suggested

Attempt all questions.

1. Long Answer Questions: (2×5=10)
a) Explain the law of variable proportion.
b) Illustrate the total outlay methods to measure price elasticity of demand.
Answer
a) The law of variable proportion explains the relationship between the variable input and the output in
short run. In short period, there can be a change in variable factors but always other factors remain
constant. In the process of changing variable factors, there will change in the production too. This law
is also known as “Law of diminishing return”. The classical economists opine that this law can be
applied only in agriculture. Quite the reverse, the modern economists think that this law holds not only
in agriculture but also in industry and production sector as well.
According to this law, if some variable factors are increased, while keeping other fixed factor
constant, the marginal and average product increases for some time and will decrease after a certain
point. Marginal product becomes negative if we go on increasing the variable input. The total
production goes on increasing but it increases at a diminishing rate.
Various economists have stated the law of variable proportion or diminishing returns in different
manner.
G.Stigler defines it as “An increment of one input are added; the inputs of other productive services
being held constant, beyond a certain points the resulting increments of product will decrease, i.e. The
marginal product will diminish”.
P.A. Samuelson defines it as “An increase in some inputs relative to other fixed inputs will, in a
given state of technology, cause output to increase; but after a point the extra output resulting from the
same additions of extra inputs will become less and less.”
Marshall discusses the law of diminishing returns in relation to agriculture. He defines the law as
follows “ An increase in the capital and labour applied in the cultivation of land causes in general a less
than proportionate increase in the amount of product raised unless it happens to coincide with an
improvement in the arts of agriculture”.
This law is based on the following assumptions:
1. Technology is assumed to be given & constant
2. It is related to a specified period of time.
3. The factors of production are divisible into viable units
4. There must be some inputs, which is kept fixed.
5. All the units of labour are homogenous

15
 The law of variable proportion can be explained with the help of the following hypothetical table:
No. Of variable TP AP MP
input
1 10 10 10
2 22 11 12
3 37 12.3 15
4 55 13.7 18
5 70 14 15
6 80 13.3 10
7 85 12.1 5
8 85 10.6 0
9 75 8.3 -10

We can explain the production when one input is variable factor. Here other factors of production are
assumed as constant. We find in the table that at first the number of variable input is increased 1 to 2,
marginal as well as the average product of the input increases. But this stage of increasing proportion of
input does not remain long lasting. In the table in a fixed amount of land, let’s say 5 Ropani, only the
number of labour is increased. In this table upto the 5 units of labour it is 1st stage from 6 to 8 number
of labour it is 2nd stage and from 9 units of labour it is 3rd stage of production.
First stage is the stage of increasing return. In this stage, TP and AP increases rapidly. MP becomes
maximum in 4th units of labour and after that it begins to decrease. In this stage, MP increases in a
faster rate than AP. In this stage AP becomes maximum. In this stage the total product goes on
increasing and it increases in an increasing rate.
The second stage is called stage of diminishing return. This stage starts after the point where AP
becomes maximum and ends at the point where MP becomes zero. In this stage, both AP and MP go on
decreasing. TP goes on increasing upto the maximum point and becomes maximum. But it increases in
a diminishing rate.
Third stage starts from the point where MP becomes zero. In this stage, MP becomes negative if we
apply more variable inputs. Though AP goes on decreasing, it will not be zero. TP begins to decrease in
this stage. This stage is known as stage of negative return.
We can explained this law with the help of the following diagram

Output

In the diagram, TP goes on increasing upto a point and after that point it starts declining. AP and
MP also rise first and then decline. MP curve starts declining earlier than the AP curve.

16
 b) This method is first propounded by Prof. Alfred Marshall. Here there will be compare of total
expenditure made by consumer after and before change in price of commodity to find the elasticity.
Total Outlay = Price * Quantity Demanded. According to this method there are 3 types of price
elasticity.
1. Elastic demand (EP > 1): If the expenditure made by the consumer and price of the product has
inverse relationship i.e. the fall of price of commodity, increases total expenditure and vice- versa.
2. Inelastic demand (Ep < 1): If the expenditure made by the consumer and price of the product has
positive relationship i.e. the fall of price of commodity, decreases total expenditure and vice versa
then it is known as EP <1.
3. Unitary Elastic demand( Ep= 1): If the total expenditure made by consumers remains constant due
to any change in price of any product, it is called elasticity of demand equal to one.

Elasticity Ep< 1 Ep= 1 Ep> 1

Price Quantity Total Quantity Total Quantity Total
Demand Expenditure Demand Expenditure Demand Expenditure
10 10 100 10 100 10 100
20 8 160 5 100 4 80
30 7 210 3.3 100 2 60
Note: TE= P˟Q

Drawback: This method only classifies elasticity either elastic, inelastic or unitary and fails
to measure the exact value of elasticity.
2. Short Answer Questions (Any Five): (5×3=15)
a) Conceptualize cardinal and ordinal utility approach.
b) Explain Average and Marginal Revenues under perfect competition market.
c) Illustrate the any five problems of Nepalese Agricultural sector.
d) Describe the production function.
e) Write down the characteristics of Land.
f) Explain the importance of Cottage and Small Scale Industries (CSSI) in Nepal.
Answer
a) Cardinal and ordinal utility analysis are basic approaches to measure satisfaction level derived from the
consumption of commodity in quantitative terms. These methods explain consumer behaviors in the
17
 micro economics. Firstly, cardinal approach is called marginal utility or Marshall utility analysis. In
this method, cardinal number such as 1, 2, 3, 4... are used to express utility of a commodity for ex: the
first unit of the commodity has utility equal to 10, the second unit 8 and so on the cardinal number
might not be twice as big as the 1st number. Secondly, the ordinal approach is called indifferences curve
analysis. In this approach the ranking number including 1st 2nd 3rd and 4th ordinal numbers are used
for expressing satisfaction derived from the consumer commodity at qualitative terms. The ordinal
numbers 1st ,2nd ,3rd and 4th could be 10, 15, 35, 50 and 20, 40, 50 and 60. It is a subjective phenomenon
that can be expressed in rank. On the base of rank list, consumers show their behavior.
At present, Hicks and Allen have supported the ordinal approach and replaced the cardinal approach by
the indifferences curves analysis.
b) Perfect competition is one of the market types in microeconomics. In the market there are large
numbers of firms which can freely enter and exit compete each other perfectly because of closed
substitutable commodities produced. There is price mechanism. The consumers are rationales. The
primary assumption of perfect competition is that there should be a large number of firms, each of which
produces only a small fraction of the total output of the commodity, the result being that no firm can influence
the market price of the commodity by expanding its output.
Similarly, the commodity produced by the entire firm is homogenous so that the purchases have no motive
for preferring the product of one firm to another. Therefore, if a firm raised its price, its sale would fall to zero.
Thus, under perfect competition, the price is determined by the industry and each firm has to accept the price
determined by the industry. At this, each firm can sell any amount of the product that it wishes to sell. No firm
can sell at the price above the market price fixed by the industry, if it does so, its sales would collapse to zero.
Nor will any firm like to sell at a price below the market price.
Hence, under perfect competition, there can only be one price ruling the market. We can illustrate the
average and marginal revenue curves under perfect competition by taking an imaginary revenue schedule for
sugar of a perfect competition firm.
In prefect competition the price of the commodity will be the same in all over the market. If a seller
increases the price of the commodity he has to give up his consumer. Similarly if he decreases the price
then he has to give up his profit. So seller neither increases the price nor decreases the price. In this
case, the AR and MR will coincide with each other. That means the AR and MR will be the same. We
can further explain it with the help of the following table.
Demand and Revenue Schedule of a Firm
Price (Rs) Quantity Total Revenue Average Revenue Marginal Revenue
sold (Rs) (Rs) (Rs)
120 1 120 120 120
120 2 240 120 120
120 3 360 120 120
120 4 480 120 120
120 5 600 120 120
120 6 720 120 120

As the above Revenue Schedule shows, the firm has accepted the price of Rs. 120 per quintal determined by
the industry. The demand curve of the firm in perfect elastic, since the firm can sell a larger or a smaller quantity
at this price of Rs. 120 per quintal.

18
 Y Y
Revenue Revenue
TR

Price
AR/MR

O X o x

The above schedule has been expressed by the alongside diagram. In the diagram, DD curve is the
average as well as marginal curve of the firm. Under perfect competition, the average revenue curve
will coincide with the marginal revenue curve. In the upper portion of the diagram, TR is the total
revenue curve which goes on increasing with every increase in output.
QTY QTY
c) Agriculture is the main backbone of Nepalese economy. This sector creates 67% employment
opportunities in rural areas, food security and 38% GDP contribution. Till its development,
Nepalese Economy could not get more than 5% economic growth rate and address poverty and
inequality. In the path of agricultural development, there are the following problems as below.

1. Lack of agricultural credit:

About 45 percent of the Nepalese people live in below the poverty line in rural areas. They could not
use the better seeds, manure, modern implements and other basic requirements to increase the
agricultural productivity. The ADB/N, cooperative credit societies, rural banks and other indigenous
financing agencies have not so far been able to meet the rural demand. The process of lending the
credit is also very tiresome and time consuming, so most of the farmers haven't access to agricultural
credit. The illiterate farmers find the credit formalities difficult. They use informal credit from money
lenders at higher interest rate; therefore availability of agricultural credit is still crucial issue.
Institutional credit is not sufficient, because only 21% of institutional credit is facilitated.

2. Lack of marketing facilities:

Agricultural development needs organized marketing system for maintaining agro input and getting
benefits from agro outputs. In Nepal it is not well developed dominance of middlemen makes artificial
problems in the market. The farmer cannot get real benefits through commercialization of agriculture.

3. Lack of adequate irrigation facility:

Irrigation is a basic input of agro production. In the absence of year round irrigation facility, agriculture
sector of Nepal is highly dependent on monsoon fed irrigation Monsoon fed irrigation is not control
variable when it is good, production will be good. Reversely, production will be bad. To maintain
consistency in agro production and productivity, irrigation is highly needed. Only 24 percent of the
irrigable land has year round irrigation facilities. The improved manure cannot be effective without
sufficient irrigation. .
19
4. Traditional Technology:.
Nepalese Agriculture is still subsistence nature based preventive traditional technology, although
simultaneous commercialization can be observed. Labour based technology is not capable to improve
productivity and efficiency in agriculture. Department of Agriculture provides the extension services to
the farmers through the technicians such as J.T or JTA, however they are concentrated in urban areas
only. As a result the agricultural productivity is very low this is also a big problem.

5. Lack of Appropriate Agriculture Policy

Even though Nepal is agriculture country, the policies related to agriculture sector are not co-linear
with the actual situation of the economy. Therefore, to develop agriculture sector , appropriate
agriculture policy should be made.

d) Production function establishes a functional relationship between inputs (as independent

variables) and output (as dependent variable). Production function is also defined as a flow of
inputs resulting in a flow of output over some specified period of time. In other words, it
describes a purely technological relationship between input and output. Based on time, the
production function is of two types. They are:
a. Short run production function
Short run production function refers to the functional relationship between the units of
variable factors and the output for a year. In short run production function, we study the
effect of change in the quantity of one variable input on the output, by keeping all other
inputs constant. Algebraically, it is written as:
Q = f(Nvf)
where
Q = Output
f = Function
Nvf = Quantity of variable factors
= Constant capacity of fixed inputs
It is also called single variable production function or production function with one
variable input.
b. Long run (or Multi-variable) production function:
Long run production function refers to the functional relationship between the quantities
of all inputs and output for more than four years. In long run production function, we
study the effect on output with the variation of all inputs, say, land, labour, capital and
entrepreneur. Therefore, it is also termed ‘multi-variable production function’.
Algebraically, it is expressed as:
Q = f(W, L, K, M, T)
where, Q = Output, f = function, W = Land, L = Labour,
K = Capital, M = Management, T = Technology
Long run production function also be depicted as production function with two
variable inputs, i.e., Q = f(L, K)where , Q = output, f = function, L = labour, K = capital.

e) Land is a natural resource gifted at free of cost by the nature. In economics, it is considered as passive
input production function. In politics, it is considered as national wealth to lease the people for
productive activity against lease amount. Geographically, land resources are of various by its physical
characteristics and by productive activities. Land is scarce resources in the world. Its main
characteristics of land are explained below:

20
 1. Land is a free gift of nature. It is given to us free of cost by nature.
2. Land is limited in supply. We cannot increase the supply of it. The supply of other factors of
production can be increased to a greater or lesser extent, but it is impossible to increase the supply
of land.
3. Land is not perishable. In other words, it has original and indestructible qualities. Land cannot be
destroyed because it is given by nature. Modern science can only change its character but cannot
destroy it.
4. Land is immobile. It cannot be transported from one place to another. However, the products of
land are mobile.
5. Land are heterogeneous in nature, i.e. all lands are not equally fertile. Some are more fertile than
others. So land differs in fertility.
6. Land is a passive factor of production because it cannot produce anything by itself. Man has to do
some effort to produce something out of it.
f) Cottage and small scale Industries (CSSI) is supplementary economic activities not only in rural but
also in urban areas. It is traditionally and culturally relate. Besides the CSSI has directly and indirectly
contributed Nepalese economy as below:
1. Employment Opportunities. A majority of rural people are either unemployed or disguised
unemployed. The seasonal nature of agriculture gives them spare time of 3 to 5 months. During this
period they can engage themselves in cottage industries, which can yield them additional incomes.
They may be able to get enough food, education and health facilities etc. Thus, CSSI provide
employment to farmers in rural areas during off reasons and absorb excess manpower from the
farming sector.
2. Use of Local Resources. Stone, wood, bamboo, grass, raw wool, leather, etc. are the raw materials
which CSSI use. These materials are produced in rural areas. CSSI ensure proper use of locally
available raw materials. They also employ local skills such as weaving blankets and rugs
(Tamangs, Gurungs, Sherpas etc.). Some people specialize in wood works, others, say, in metal
works. Traditional and local skills would go waste in the absence of these industries.
3. Subsidiary Source of Income. The rural people are very poor and they have to go even without
the most essential needs of daily life. They are hardly able to maintain themselves at subsistence
level. The development of CSSI provides them some relief in this situation. Thus CSSI are also a
supplementary source of income to the rural poor.
4. Less Requirement of Capital. CSSI require small amounts of capital whereas medium and large-
scale industries require huge amounts (for the purchase of machinery and equipment. The products
of cottage industries can be sold in small markets. Hence, the importance of cottage industries is
big in a developing country such as Nepal. The farmers can start cottage industries like poultry
farming, diary, fisheries, piggeries etc. on a modest investment.
5. Consumer Supplies. CSSI are able to provide consumer goods at short notice. These industries
can produce varieties of goods and help the consumers to satisfy their wants as well as taste.
6. Export Promotion. CSSI- produced by goods have an export value. Carpets, rugs, jackets, metal
goods, etc. produced by CSSI can be exported. The export can earn foreign exchange.
Development of CSSI can help to reduce import.
7. Promotion of Handicrafts. Nepalese arts and crafts had glory in the past. For some obvious
reasons the tradition of crafts and cottage industries declined. If the production of artistic goods
could be revitalized, Nepal would be able to earn much foreign exchange. Foreigners are attracted
by Nepalese indigenous art products. Thus, cottage industries help to promote the production of
handicrafts in the country

21
 Fundamentals of Management
Suggested
Attempt all questions.
1. Answer the following questions:(2×5=10)
a) Contributions of scientific management.
b) Importance of human resources management.
Answers:
a) The main areas of contributions include labour-management relations, increased output,
improved quality, lowering costs, questioning old habits, experimentation, clear tasks and goals
for workers, feedback from the job, mutual help and support, stress reduction and careful
selection, and training and development of people. Some of these contributions made by
Taylor’s scientific management approach are as follows:
 Separation of planning function from its execution. One of the focuses of scientific
management was on separating planning functions of a manager from its execution. If
planning and implementing functions are carried out by the same manager, there will be
no control over the performed activities. There should be clear division of responsibility
between the management and workers.
 Manager to plan in advance to the work. Scientific thinkers of management believed
that every manager has to work with a plan in advance. Working without pre-planning
creates chaos.
 Manager to select and train the workers. Work efficiency depends on fitting worker
with jobs. Therefore, managers have to stress on scientific selection and training and
development methods of the workers. New employees should be trained to develop their
efficiency so as to fit them in their jobs.
 Time and motion study. Scientific technique for the study of time and motion started to
increase workers’ welfare. This will help to analyse fatigue, and check accident at the
shopfloor.
 Differential wage plan. Taylor was in opinion that money works as a strong motivating
factor in the job. He argued that worker who works more should be paid more wages
compared to those whose who work less. Only then, workers put more efforts in the
work, and productivity will rise. This is what we call Taylor’s “economic man”
assumption.
 Standardization of tools and equipment. Taylor introduced scheme of standardisation
in respect to tools and equipments. He argued that standardisation of tools and
equipments increases efficiency of the workers.
b) The importance of human resource management has been increasing due to changing nature of
work force, technology, complexity and competition. People are the source of competitive
advantage. HRM puts emphasis on management of energies and competencies of employees. It
attracts and selects right quality of people. It gives attention to their development. It ensures
their effective utilization through motivation and performance management. It retains them
through attractive compensation system and welfare schemes.
HRM helps organizations to cope with problems. Trained and competent people tend to be
ready for problem solving. Proper management of human resources helps organizations to
achieve their goals efficiently and effectively. It provides congenial work environment. Healthy
labour relations are the key to organizational success and HRM ensures harmonious labour-
management relations.

22
 2. Answer the following in brief (Any Five):
(5×3=15)
a) Components of business environment
b) Job enlargement and enrichment
c) Management by exception
d) Importance of planning
e) Bureaucracy theory
f) Esteem verses self-actualization need
Answer
a) The components of business environment can be classified into two broad categories: internal
environment and external environment.
Internal Environment: Employees, structure, corporate culture shareholders and unions are
the forces that shape the internal environment. Without cooperation of employees, organizations
cannot attain their expected goals. Structure is the overall framework for organizational roles, rules
and relations. Corporate culture is an assumption that members of an organization share in common
by their beliefs and values. Shareholders being the owners of business have a direct interest in the
performance of organization. Labour unions represent the feeling of their members to management.
External Environment: The external environment can be classified into two interrelated sub-
categories: general environment and task environment. The general environment is composed of a
set of forces that are outside the organization's operating system and beyond the control. These are
economic environment, socio cultural environment, political environment, legal environment and
technological environment. The task environment involves factors in the immediate competitive
situation of a particular organization like customers, suppliers, competitors, special interest groups,
financial institutions and media.
b) Job enlargement is a method to overcome the disadvantages of work specialization. Job
enlargement adds the number of tasks in an activity. For example, before this, the employee only
needed to handle burger packaging but when the scope of work is widened, the said employee now
no longer only performs packing activities but also performs other activities such as putting in the
sauce and labeling the burgers. Many employees say that they are stressed due to job enlargement.
Whereas some employees feel that job enlargement gives them opportunities to develop other skills.
Job enrichment is an increase in the number of tasks in the activities and gives the employees authority
and control in making decisions related to their work. Psychologists including Frederick Herzberg
state that as employees only handle a few tasks, they are quickly bored. Simple and easy activities
are not what they are looking for. Other psychologists such as Herzberg, Maslow and Alderfer
believe that what is required by employees from their work activities is work achievement that
comes as a result of doing a job successfully and the recognition of success that comes with the use
of the skills and potential that they have. Job enrichment tries to manage dissatisfaction issues by
adding depth to the work.

c) Management by exception is one the principle of management. This principle says two things. First,
Managers should not overload themselves with routine and repetitive types of work. They should be
selective and keep time available for exceptional or critical issues, which need their attention.
Second, the manager should make big decisions first. Being overload with petty decisions may
mean neglect of more important ones, or what has been called 'postponing decision until they
become unnecessary'. In short, management by exception means selectivity in work and priority in
decisions.

d)
Planning provides future direction. Planning provides certain directions for our managers and other
organizational members to achieve goals. Such directions are helpful to integrate activities of
various departments, people and schedule for the future operations.

23
 Reduce uncertainty. Planning helps to reduce future uncertainty. Business environment always
changes. Managers with the help of preplanning can decide on course of action to be taken under
certain environmental conditions so that uncertainty can be minimized.
 Less overlapping and wasteful activities. Planning helps to minimize overlapping and wasteful
activities. When activities are planned in a coordinated way, there is no chance of overlapping of
activities between different departments. Similarly, when coordination is maintained wastage
activities will be controlled.
 Planning as a controlling tool. Planning works as a tool for controlling time and other resources.
Managers develop goals, standard of performance and allocate responsibility to achieve the given
goals. The work of controlling facilitates to implement plan properly and to achieve organisational
goals ultimately.
 Increase organisational performance. Planning is done to increase organisational performance. A
number of researches in the past claim the relations between planning and organisational
performance. An organisation engaged in planning activities makes higher profits, earns higher
return on investment, maintains good relations between and across the work units and satisfies
employees’ needs.
e) Max Weber propounded the bureaucracy theory of management. This theory stresses strictly
defined hierarchy, clearly defined rules and lines of authority. It was regarded as the most efficient
model to manage complex organizations. Scalar chain from top to bottom is followed. Management
by rules is practiced. System of procedures is laid down to deal with work situations. Social
distance between superior and subordinate is kept to ensure impartiality. Job specialization is
practiced here. Each department looks after a specific function. Division of labour based on
functional specialization is followed by bureaucracy theory. Decision-making is rational based on
clear-cut objectives, rules, procedures and authority.
There are some limitations of bureaucracy theory. It cannot change with the dynamic changes in the
environment. It is rigid so lacks innovation and flexibility. Routine matters take a lot of time of top
managers. Role conflicts occur due to outdated systems of authority and control.

f) Esteem needs. Once social needs are satisfied, the esteem needs become predominant. Esteem
needs include the needs for self-respect, respect of others and ego or status. Self-respect is the
internal recognition, whereas respect of others is the external recognition. Self-respect can be
provided by the manager by offering a nice office, job title and similar pay arrangements. On the
other hand, people may be motivated by giving them challenging and meaningful jobs. These are
the special sources of motivation to work.

Self-actualisation needs. This is the final and the highest level of needs that arise after the completion
of the other four needs in Maslow’s hierarchy of needs. The self-actualisation needs include
achieving the potential within oneself, maximum self-development, creativity and self-expression.
The fulfillment of such needs depends on how a manager provides opportunities for his
subordinates to participate in decision making, learn new things on the job and in the organisation.
In other words, in this stage employees seek challenging work assignments that allow for creativity.
There should be opportunities for personal growth and advancement.

24
 Commercial Mathematics and Statistics
Suggested Answer
Attempt all questions.
1. (4×4=16)
a) Jacob purchased a motorcycle valued Rs. 3,00,000. He paid 40% cash at the time of
purchase and agreed to pay the balance with interest at 12% p.a compounded
monthly in 2 years. If the first installment is paid after1 month from the date of
purchase, find the amount of each installment.
b) Find the median of the following frequency distribution:
X 5 7 9 12 14 17 19 21
f 6 5 3 6 5 3 2 4
c) The prices of shares X and Y are given below, state which share is more stable in
value.
X: 55 54 52 53 56 58 52 50 51 49
Y: 108 107 105 105 106 107 104 103 104 101
d) The budget inquiry of the middle class families in Kathmandu city is given below.
Expenditure Price in 2010 (Rs.) Price in 2014 (Rs.) Weight
Food 7500 10500 45
Clothing 2550 3500 15
Reconstruction
4000 5000 20
Fuel 1000 1250 5
Miscellaneous 1800 2000 15

What change of the cost of living figure in 2014 have taken place as compared to
2010?
Answer:
a)
Remaining money to pay = Cost price – Down payment
or, Remaining money to pay= 3,00,000 – 40% of 3,00,000
= 3,00,000–1,20,000
= 1,80,000
We can say that,
Remaining money to pay = Present value of annuity

So,
P 
i 

1 1 i
m
mn



  180000
m

Or,
P 
0.12 

1  1  0.12
12
122



  180000
12

Or,
P
0.01

1  1  0.01  180000
 24

25
 or, [ ] = 1,80,000

or, [ ] = 1,80,000

or, P= 8,473
Hence, each monthly instalment is of Rs. 8,473
b)
X 5 7 9 12 14 17 19 21
f 6 5 3 6 5 3 2 4
c.f. 6 11 14 20 25 28 30 34

N 1 34  1
th  th  17.5th
Here N = 34 and 2 item 2 item.

Since, c.f. is just greater than 17.5 is 20 and the corresponding value is 12.

Therefore, Median = 12.

c) The share which has less coefficient of variation (C.V.) is more stable.

Here, X
 X  530  53, Y  Y  1050  105
n 10 n 10
Share X Share Y
X  X  Y  Y 
2 2
X X  X  X  53 Y Y  Y  Y  105
55 2 4 108 3 9
54 1 1 107 2 4
52 -1 1 105 0 0
53 0 0 105 0 0
56 3 9 106 1 1
58 5 25 107 2 4
52 -1 1 104 -1 1
50 -3 9 103 -2 4
51 -2 4 104 -1 1
49 -4 16 101 -4 16
X Y
  X  X  =0  X  X   Y  Y  =0  Y  Y 
2 2
=530 =70 =1050 =40

1 70
 X 
n
 ( X  X )2 
10
 2.646

1 40
 Y 
n
 (Y  Y ) 2 
10
2

 2.646
C.V. of X series  X 100  100  4.99
X 53
 2
C.V. of Y series  Y 100  100  1.90
Y 105
Hence C.V. of Y series is less than C.V. of X series so the shares of Y are more stable.

26
 d) Consumer price index for 2014 with 2010 as base

Group 2010 2014 Price relatives Weight (W) PW

Price Price P
P= 1 x100
(P0) (P1) P0
Food 7500 10500 140 45 6300
Clothing 2550 3500 137.25 15 2058.75
Reconstruction 4000 5000 125 20 2500
Fuel 1000 1250 125 5 625
Miscellaneous 1800 2000 111.11 15 1666.66
W 100  PW  13150.41

 ConsumerPr ice indexP01 

 PW
W
13150.41
=
100
= 131.5
Change of cost of living index in 2014 increased as compared with 2010=31.5%
2. (3×3=9)
c) A question paper has two parts P and Q, each containing 10 questions. If a student
needs to choose 8 from part P and 4 from part Q, in how many ways can he do that?
d) If the second and fifth terms of an arithmetic progression are 7 and 19 respectively
find the tenth term.
e) Draw "less than and more than" Ogives from the following data and compute the
value of the median:
Daily 200-300 300-400 400-500 500-600 600-700 700-800 Total
wages
No. of 5 8 15 24 20 6 78
workers

Answer:
a)
Number of ways to choose 8 questions from part P = 10C8
Number of ways to choose 4 questions from part Q = 10C4

Total number of ways

= 10C8 x 10C4
= 10C2 x 10C4
=45 x 210
= 9450

b) Let a and d be the first term and common difference of the A.P.
According to question, ( )
( )

27
 ( ) ( )

( )

( )

c)
i) Less than and more than table of frequencies

Daily wages No. of workers Daily wages No. of workers

Less than 300 5 More than 200 78
Less than 400 13 More than 300 73
Less than 500 28 More than 400 65
Less than 600 52 More than 500 50
Less than 700 72 More than 600 26
Less than 800 78 More than 700 6

90

80

70

60

50
Less than curve
40
More than curve
30

20

10

0
0 100 200 300 400 500 600 700 800 900

Daily wages Median=545 (approximate)

28