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?

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(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

AIMA/December 2014/FM 11

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

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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

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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

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