BBA-SEM 2 1

SR. CHAPTER PG.

NO. NO.
1. BASIC OF ACCOUNTS 2

2. FINAL ACCOUNT OF COMPANY 5

3. RATIO & ANALYSIS 10

4. BREAK EVEN POINT 13

5. BUDGET 22
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UNIT - I
BASIC OF ACCOUNTS.

PROBLEM NO. 1
a) Started business with Rs. 50,000.
b) Purchased furniture for Rs. 1,000 on Credit from Pankaj.
c) Goods purchased for cash Rs. 20,000.
d) Goods sold to Ram Niwas for Rs. 5,000 on credit.
e) Paid salaries to staff Rs. 1,800.
f) Goods worth Rs. 500 returned by Ram Niwas.
g) Rs. 1,000 commission received.

PROBLEM NO. 2
a) Started business with cash Rs. 18,000.
b) Paid rent in advance Rs. 400
c) Purchased goods for cash Rs. 50,000 and on credit Rs. 2,000.
d) Sold goods for cash Rs. 4,000 (Costing Rs. 2,400).
e) Rent paid Rs. 1,000 and rent outstanding Rs. 200.
f) Bought motor-cycle for personal use Rs. 8,000.
g) Purchased equipments for cash Rs. 500.
h) Paid to creditors Rs. 600
i) Depreciation on equipment Rs. 25
j) Business expenses Rs. 400

PROBLEM NO. 3
Journalise the following transactions :-
2005 Rs.
August 1 Shri Rajan invested in business. 20,000
2 Opened as account with the bank of India by depositing cash 10,000
3 Purchased goods for cash 500
4 Purchased machinery for cash 800
5 Cash purchases of goods 300
6 Cash sales. 900
15 Withdraw cash for personal use. 200
16 Purchased good from Preetam& Sons on credit. 600
25 Received cash on account from Ramanand. 350
26 Paid cash to Minakshi Bros. 250
29 Paid rent. 125
30 Received commission. 175
30 M/s Ram & Sons returned goods 100

PROBLEM NO. 4
Journalise the following transactions in the books of Sudhir Kumar :
2005 Rs.
January 1 Sudhir commenced business with cash. 40,000
3 Purchased goods for cash 500
5 Sold goods for cash 300
6 Purchased one motor car for cash 15,000
 BBA-SEM 2 3
9 Sold machinery for cash 9,000
11 Purchased a building on credit from Narendra 20,000
15 Sold furniture on credit to Randhir Kapoor. 9,500
17 Paid cartage 110
22 Received commission 50
27 Cash sales 1,200
29 Cash purchases 600
30 Received on account from Ahmed 350
31 Paid cash to Sunitkumar on account 190

PROBLEM NO. 5
Journalise the following transactions in the book of Mantri.
2005 Rs.
December Received Rs. 10,000 from father-in-law as gift and deposited the same into the
1 account of business.
2 Took loan from Mrs. Shalini. 5,000
3 Paid rent to landlord in advance. 75
4 Received rent from sub-tenants 100
5 Paid for postal stamps. 10
6 Commission due from Gupta. 40
7 Old typewriter of Rs. 1,000 is stolen.
8 Sent M.O. to Radhika Rs. 80, M.O. Commission paid 2
9 Purchased securities worth Rs. 2,000 and paid for brokerage. 60
10 Paid for Mantri’s club bill 600
11 Gave charity 300
12 Sold private scooter and invested in business 2,000
14 Bought equity shares of Bharat Fertilizers. 900
15 Received from Sita one hundred rupee note and gave her change for it.
16 Invested in National Small Saving certificates. 100
17 Paid Rs. 200 for carriage on machinery.
18 Till taking (Cash Sales) 500
19 Paid Income Tax. 200

PROBLEM NO. 6
Journalise The Following Transactions :-
2002 Rs.
January 2 Commenced business with cash 5,00,000
4 Purchased furniture for cash 20,000
4 Cash purchase 29,000
5 Deposited with bank 30,000
6 Bought from Prakash 40,000
6 sold to Nath for cash 28,000
7 Stationery purchased 1,000
7 Bought from Sunil 13,000
7 Sold to Banerjee 16,000
9 Rent for two years paid in advance 24,000
9 Drawings by the proprietor for household expenses 8,000
9 Goods taken out by the proprietor for domestic use 5,000
9 Cash withdrawn from bank 25,000
10 Sold to Mittal on credit 18,000
11 Purchase made, payment through cheque 5,000
14 Cash received from Prakash on account 10,000
14 Cash paid to Sunil after deduction of discount Rs. 1,000 12,000
17 Cash received from Mittal in full settlement of his account 17,000
18 Banerjee becomes insolvent. A dividend of 50 paise in a rupee is received 8,000
18 Purchase of a scooter for cash 30,000
20 Sold goods to Gupta 16,000
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20 Sold to Natin 4,000
24 Electricity bill paid 1,000
24 Cartage paid in cash 100
24 Repairs to scooter, payment not yet made 500
26 Payment of cash for petrol 1,500
26 Purchases of goods for cash 12,000
26 Purchases of office equipments for cash 25,000
27 Repairs bill paid in cash 500
28 Gupta returns goods 1,000
31 Depreciation in furniture 2,000
31 Depreciation on scooter 3,000
31 Salary to clerk outstanding 2,000
31 Adjustment for the month’s rent 1,000
31 Bank charges for the month 100
31 Interest on capital for the month 10,000
31 Salary to be credited to proprietor 5,000
31 Sunil agrees to take some defective goods purchased from him and 400
immediately refunds the money

PROBLEM NO. 7
Prepare Ledger accounts from the following transactions in the books of Imran :-
2005 Rs.
June 1 Started business with cash 45,000
1 Paid into bank 25,000
2 Goods purchased for cash 15,000
3 Purchase of furniture and payment by cheque 5,000
5 Sold goods for cash 8,500
8 Sold goods to Arvind Walia 4,000
10 Goods purchased from Amrit Lal 7,000
12 Goods returned to Amrit Lal 1,000
15 Goods returned by Arvind Walia 200
18 Cash received from Arvind WaliaRs. 3,760 and discount allowed to him 40
21 Withdrew from bank for private use 1,000
21 Withdrew from bank for use in the business 5,000
25 Paid telephone rent for one year 400
28 Cash paid to Amrit Lal in full settlement of his account 5,940
30 Paid for : Stationery 200
Rent 1,000
Salaries to Staff 2,500
 BBA-SEM 2 5

UNIT-II
FINAL ACCOUNT OF COMPANY.

PROBLEM No.1
Atharva Co. Ltd. has an authorised capital of Rs. 5 crores divided into 50,00,000 equity shares of Rs. 10
each. Co. has issued 15,00,000 shares and all the amount on them has been called up.
Following is the trial balance of the Co. as on 31st March 2002:-
Dr. Rs. Cr. Rs.
Stock 93,73,700
Purchases 2,25,00,000
Wages 70,00,000
Discount allowed and Insurance 64,400
Salary and bonus 39,78,000
Rent 1,48,000
General Expenses 15,13,600
Preliminary Expenses 10,16,000
Debtors 37,87,000
Plant & Machinery 1,46,00,000
Furniture 10,71,000
Cash at hand and at Bank 45,38,400
Bad debts 15,500
Calls in arrears 2,30,600
Investments 50,36,200
Inward carting 1,00,000
Freight on sales 50,000
Sales 4,25,00,000
Profit & Loss A/c 4,62,200
Debentures 96,00,000
Creditors 34,52,000
General Reserves 16,26,000
Dividend Equalisation
Fund 2,50,000
Equity Capital 1,50,00,000
Reserve for Doubtful Debts 86,200
Share Premium 20,46,000
7,50,22,400 7,50,22,400
You have to prepare Annual accounts of the Co. for the year ended 31st Mar. 02 and Balance sheet of the Co. as
on that date. Following further information is available:-
(a) Closing stock was valued at Rs. 96,00,000.
(b) Provide depreciation on plant & Machinery @ 10% p.a. and on Furniture @ 5% p.a.
(c) Reserve for Doubtful Debts is to be kept at 2% on Debtors.
(d) Interest on debentures at 14% p.a. is due for the whole year.
(e) Interest on investment Rs.4,02,896 is receivable for the year.
(f) Provide for Dividend @ 18% on paid up capital.
(g) Provide Rs. 10,00,000 for payment tax.
(Ans. : N.P. 39,12,606 B/St 3,84,62,206)
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PROBLEM No. 2
Authorised and subscribed share capital of Chandu Co. Ltd. Nagpur was divided into Equity shares of Rs. 100
each. From the following balance which appear in the books of the company as on 31-3-2002 Prepare:-
a)Trading, Profit and Loss Account; b)Profit and Loss Appropriation Account c) Balance Sheet.
Dr. (Rs.) Cr. (Rs.)
Share Capital --- 8,00,000
Land and Building 3,40,000
Plant and Machinery 6,60,000
Loose tools 40,000
Preliminary Expenses 20,000
Furniture 29,000
Calls in Arrears 6,000
Cash in hand 2,000
5% Govt. Bonds (Tax free) (Face values Rs.40,000) 36,000
Bills receivable 58,000
Goodwill 36,000
Motor Vehicles 40,000
Sundry debtors 83,000
Interim Dividend 18,000
Repairs 3,000
Sundry Creditors --- 1,20,000
Reserve Fund --- 60,000
Profit and Loss Account (1-4-2001) --- 35,400
Purchase and Returns outward 9,60,000 20,000
Sales and Returns inwards 28,000 12,30,000
Advertisement 10,000
Audit fees 4,000
Carriage 15,000
Insurance 20,000
Wages 92,000
Stock(1-4-2001) 1,90,000
General expenses 17,000
6% Debentures of Rs. 1000 each --- 4,00,000
Bank Overdrafts --- 50,000
Debenture interest (Less Tax at 30%) 8,400
27,15,400 27,15,400
You are required to consider the following adjustments:-
(1) Stock as on 31-3-02 is Rs. 1,80,000
(2) Create reserve for bad debts at 5% on sundry debtors.
(3) Provide depreciation - Plant and Machinery at the rate of 5% ; Furniture at the rate of 10% ; Motor Vehicles
at the rate of 20% ; Loose Tools at the rate of 15%.
(4) Prepaid Insurance Rs. 2,000 ;
(5) Reserve fund to be increased by Rs. 10,000
(6) Directors declared on 31-12-01 an interim dividend for six months ending 30 Sept., 01 at the rate of 3%.
(7) Wages outstanding Rs. 3,000.
(8) Interest on Debenture for 6months is outstanding. (Ans. : N.P. 13,950 B/St 14,73,950)

PROBLEM NO. 3
Following is the trial balance of ABC Ltd., as on 31 st March 2003:-
Particulars Dr.Rs. Particulars Cr.Rs.
Land & Building (Cost Rs.30,000) 14,000 Share Capital 20,000
Furniture (Cost 1,500) 800 General Reserve 3,000
Plant & Machinery (Cost 20,000) 10,000 8% Debentures 10,000
Stock(31-3-2003) 12,800 Bank overdraft 150
Salaries 800 Creditors 1,600
Printing & Stationery 120 Share Premium 1,000
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Debtors 7,000 Debenture Redemption Fund 4,000
Investments 600 Gross Profit 10,400
Cash 200 P & L A/C (1-4-2002) 850
Preliminary Expenses 400
Cash at Bank 2,400
Advance Income Tax 800
Debenture interest 400
Director’s Fees 400
Rent, Rates & Insurance 280
TOTAL 51,000
TOTAL 51,000
Prepare final accounts as per company’s account
ADJUSTMENTS:-
(1) Depreciation on land & building 5% on cost, furniture plant & machinery 10% on cost.
(2) Make a provision for R.D.D. Rs.600. (3) Provide Rs.250 for audit fees.
(4) Transfer Rs.400 to general reserve. (5) Dividend at 8% is declared on paid up capital.
(6) Half of the preliminary expanses are to be written off.
(7)Authorised share capital consists of 10,000 equity shares of Rs. 10 each of which 4,000 shares are issued and
subscribed, of which Rs.5 per share is paid. (Ans. : N. P. 3,300 B/St 44,550)

PROBLEM No.8
Amit & Co. Ltd is a company with an authorised capital of Rs.5,00,000 divided into 5,000 equity shares of
Rs.100 each. On 31st March 2003, 2,500 shares were fully called up. The following are the balances extracted from
the ledger of the company as on 31st March 2003.
Particulars Rs. Particulars Rs.
Stock 50,000 Advertisement 3,800
Sales 4,25,000 Bonus to employees 10,500
Purchases 3,00,000 Debtors 38,700
Wages 70,000 Creditors 35,200
Discount Allowed 4,200 Plant & Machinery 80,500
Discount Received 3,150 Furniture 17,100
Insurance (upto 30-6-2003) 6,720 Cash at Bank 1,34,700
Salaries 18,500 Reserve 25,000
Rent 6,000 Loans from Managing Dir. (unsecured) 15,700
General Expenses 8,950 Bad Debts 3,200
Profit and Loss A/c 6,220 Calls in Arrears 5,000
Printing and Stationery 2,400
You are required to prepare Trading and Profit and Loss Account for the year ended 31 st March 2003 and
the Balance Sheet as on that date of the company.
ADJUSTMENTS :-
(1) Closing Stock Rs.91,500.
(2) Depreciation to be charged on plant and machinery and Furniture at 15% and 10% respectively.
(3) Outstanding Liabilities: Wages Rs.5,200, Salary Rs.1,200 and Rent Rs.600.
(4) Dividend 5% on paid up share capital is to be provided.
(5) Contingent liabilities Rs.8,000.
(Ans:-G.P.91,300, N.P.16,275, App.A/C.10,245 & Total of B/S 3,50,395)

PROBLEM No. 9
The Alfa Manufacturing Co. Ltd. was registered with Nominal capital of Rs.6,00,000 in equity shares of
Rs.10 each. The following are the balances extracted from its books on 31st March 2003.
Particulars Rs. Particulars Rs.
Premises 3,00,000 Directors Fees 5,725
Plant and Machinery 3,30,000 Bad Debts 2,110
Interim Dividend paid on 1st Nov.2002 37,500 Debenture Interest 9,000
Stock 1st April 02 71,000 Subscribed and fully called up capital 4,00,000
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Furniture 7,200 6% Debentures 3,00,000
Sundry Debtors 87,000 Profit and Loss A/c (Cr.) 14,500
Goodwill 25,000 Bills Payable 38,000
Cash in hand 750 Sundry Creditors 50,000
Cash at Bank 39,900 Sales 4,15,000
Purchases 1,85,000 General Reserve 25,000
Preliminary Expenses 5,000 Bad Debts Reserve 1.4.02 3,500
Wages 84,865 Calls in Arrears (Dr.) 7,500
General Expenses 16,835 Salaries 14,500
Freight and Carriage 13,115
Prepare Trading and Profit and Loss A/c and Balance Sheet in proper form after making the following
adjustments : Depreciate Plant and Machinery 10%, write off Rs.550 from Preliminary Expenses. Provide half
years debenture interest due, bad debts Reserve at 5% on sundry Debtors stock on 31st March 2003 Rs.95,000.
(Ans :- G.P.1,56,020 N.P.64,450 P&L A/c 41,450 B/S 8,55,950 Suspense A/c.4,000 Assets)

PROBLEM No. 10
From the following Balance of Nag Industries Ltd. prepare final accounts for the year ended 31st March 2003.
Particulars Rs. Particulars Rs.
Building and premises 50,000 Interest paid on Debentures 400
Machinery 30,000 1,000 preference shares 40,000
Loose Tools 6,000 4% Debentures 20,000
Goodwill 15,000 Debtors 10,460
1,000 Ordinary shares 40,000 Creditors 7,120
Bills Receivable 5,380 Bills Payable 2,500
Profit and Loss A/c 2,680 Auditors fees 500
Travelling Expenses 15,120 Bad debts 1,020
Cash in hand 720 Bank overdraft 30,200
Dividend (Preference Share) 1,200 Opening stock 26,000
Patents 21,000 Sales 1,44,680
Purchases 49,300 Wages 50,740
Interest paid 1,640 Directors fees 2,000
ADJUSTMENTS :-
(1) Depreciate Machinery 10%, Loose tools 20%, Buildings and premises 5% and patents 10%.
(2) Closing stock Rs.28,320.
(3) Create Reserve for Doubtful Debts at 5% of Debtors.
(4) Transfer Rs.6,000 to Taxation Reserve.
(5) Dividend declared on ordinary shares at Rs.2 each and on preference shares at Rs.1.20 each.
(Ans : G.P.46,960; N.P.10,557; App.10,037; B/S 1,58,257; Susp. A/cRs.700 on assets side)

PROBLEM No. 11
The Star manufacturing Co. Ltd. has a Nominal capital of Rs.5,00,000 divided into 2,500 ordinary shares of
Rs.100 each and 2,500 6% preference shares of Rs.100 each. The following Trial Balance was extracted from the
books of the company as on 31st March 04.
Particulars Dr.Rs. Particulars Cr.Rs.
Call in Arrears (ordinary) 500 Ordinary share capital 2,50,000
Call in Arrears (Preference) 1,000 6% preference sh. Capital 2,50,000
Stocks(1st April 03) 1,94,710 Sales 10,01,070
Wages 95,600 Bank Loan 6% 75,000
Coal and Coke 21,000 Creditors 51,920
Purchases 7,21,560 Profit and Loss A/c. 24,200
Carriage Outward 7,500 Returns 8,200
Carriage inward 1,510 Transfer Fees 300
Income Tax 17,800
Debtors 1,40,600
Interest on Bank Loan 2,250
Freehold Property Building 1,71,000
Machinery 97,800
Rent, Rates and Insurance 14,210
Director’s fees 12,000
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Office expenses 18,300
Returns 16,400
Preliminary Expenses 10,000
Cash at Bank 1,14,200
Cash in hand 2,750
16,60,690 16,60,690
Prepare Trading and Profit and Loss A/c. for the year ended 31st March 2004 and Balance sheet as on that date
after taking the following matter in consideration.
(1) Write Rs.5,000 off preliminary Expenses.
(2) Write off 10% Depreciation on Machinery.
(3) Provide for a 6 months interest due on the bank loan.
(4) Reserve Rs.7,500 for doubtful debts.
(5) Transfer Rs.14,940 to a Reserve Fund.
(6) Stock on 31st March 2004 was valued at Rs.1,64,000.
(Ans: GP 1,22,490; NP 44,000; P/L App.38,320; B/S 6,95,870)

PROBLEM No. 12
Following balances have been extracted from the books of GLORY Co. Ltd. as on 31st March 04
Dr. Rs. Cr. Rs.
Land 1,74,500 Share capital 40,000 shares Of
Rs.10 each fully called up 4,00,000
Building 3,00,000 General Reserve 1,90,000
Plant 1,60,000 Share Premium 40,000
Furniture 30,000 Bad Debts recovered 3,000
Selling expenses 24,000 6% Debentures 4,00,000
Directors’ fees 4,800 Profit & Loss A/c (1-4-03) 10,000
Administrative expenses 76,000 Sinking fund 81,600
Sinking fund investments 81,600 Sundry Creditors 46,000
Calls in arrears 6,000 Intt. On sinking fund Invt. 11,000
Bad debts 4,000 Liabilities for expenses 8,000
Sundry debtors 2,90,000 Gross Profit 3,04,500
Audit fees 2,000
Bonus to workers 24,000
Income tax paid in advance 16,000
Closing stock(31-3-04) 1,30,000
Cash in hand 11,200
Cash at bank 1,26,000
Debenture interest 24,000
Preliminary expenses 10,000
14,94,100 14,94,100
ADJUSTMENTS:-
(1) Depreciation written off at the rate mentioned below :- Building 2.5%, Plant 20%, furniture 10%.
(2) A final dividend of Rs.2 per share has been proposed by the board of directors.
(3) Preliminary expenses are to be written off completely.
Prepare Profit & loss Account for the year ended 31st March 04 and the balance sheet as on that date.
(N.P. Rs.96,200, B/S Rs.12,76,800)
 BBA-SEM 2 10

UNIT-III
RATIO & ANALYSIS.

PROBLEM No. 1
From the following information obtained from the books of Paramount industries Ltd. For the year ended on
31st Dec 1998. You are required to :
A) Re-arrange the following figures in a form suitable for analysis. B) Calculate :-1)Earning Ratio (Gross Profit &
Net Profit) 2) Stock Turnover Ratio 3) Operating Ratio, 4) Expenses Ratio.
Purchases 5,00,000 NON OPERATING INCOME
Closing stock 1,47,750 Interest on bank deposit 8,075
Return inwards 30,000 Income from lottery 9,925
Sales (after returns) 7,80,000 NON OPERATING EXPENSES
Return outward 16,625 Penalty 6,000
Stock at Commencement 1,14,375 FINANCIAL EXPENSES
OFFICE EXPENSES Cash discount 1,936
Printing & Stationary 3,750 Bad debts 2,689
Salaries 40,500 Interest 5,375
Rent 4,050 SELLING & DISTRIBUTION EXP
Depreciation 13,950 Salaries 22,950
Other charges 24,750 Traveling expenses 3,000
Tax Provision is Rs.40,000 Publicity 7,050
(Ans. : 42.30%, 25.64%, 3.43, 74.36, 11.15%, 1.28%, 4.23%)
PROBLEM No. 2
Following is the trading and profit and loss A/C of Jackson and Co. Pvt. Ltd. for the year ending 30 th June
1998. TRADING & PROFIT & LOSS A/C
To Opening stock 76,250 By Sales 5,00,000
To Purchase 3,15,250 By Closing stock (30.06.94) 98,500
To Carriage & freight 2,000
To Wages 5,000
To Gross profit 2,00,000
5,98,500 5,98,500
To Administrative Expenses 1,01,000 By Gross profit 2,00,000
ToFinancial Expenses :- By Non- operating Income :-
Interest 1200 Intt. on security 1500
Discount 2400 Div. on shares 3750
Bad Debts 3400 7,000 Profit on sale of
Shares 750 6,000
To Selling & distribution expenses 12,000
To Non operating Expenses :
Loss on sale 350
Provision for legal suit 1650 2,000
To Net Profit 84,000
2,06,000 2,06,000
You are required to calculate :
Expenses (administrative, finance, selling & distribution, and non operating expenses) Ratio, Gross profit
ratio, Net operating profit ratio, Stock turnover ratio.
(Ans.: A)20.2%, 1.4% , 2.4%, 0.4%, B) 40% , C) 16% , D) 3.4 times , E) 84%)
 BBA-SEM 2 11
PROBLEM No.3
Alpha Manufacturing Co. has drawn up the following Profit & Loss Account for the year ending
31st March, 1998 :-
To Opening stock 26,000 By Sales 1,60,000
To Purchase 80,000 By Closing Stock 38,000
To Wages 24,000
To Manufacturing Expenses 16,000
To Gross Profit 52,000
1,98,000 1,98,000
To Selling & Distribution Expenses 4,000 By Gross Profit 52,000
To Administrative Expenses 22,000 By Compensation for acquisition of land 4,800
To General Expenses 2,000
To value of Furniture loss in fire 800
To Net Profit 28,000
56,800 56,800
You are required to find out the operating ratio and ratio of operating net profit to net sales.
(Ans. : G.P. 32.5%, O.P. 15%, NP.17.5%, Expenses 17.5%, Operating Ratio 85%, Stock 3.75 times turnover)

PROBLEM No. 4
The following is the Trading and Profit and Loss accounts of V Garments Ltd., for the year ending
31st March 1998.You are required to calculate : Gross Profit Ratio, 2) Administrative Expenses to sale, 3) Selling
Expenses to sales , 4) Net Profit Ratio, 5) Stock turnover Ratio.
To Opening Stock 1,33,000 By Sales 7,48,000
To Purchase 5,70,000 By Closing Stock 1,21,000
To Carriage 14,000
To Gross Profit 1,52,000
8,69,000 8,69,000
To Administrative Expenses 38,000 By Gross Profit 1,52,000
To Selling Expenses 29,000
To Income Tax 35,000
To Non-operative Expenses 15,000
To Net Profit 35,000
1,52,000 1,52,000

PROBLEM No. 5
Following relate to the trading activities of Kale Trading Ltd. for the year ended 31 st March 98.
Sale 9,00,000 OPERATING EXPENSES :
Purchase 5,45,250 Administrative Expenses 1,50,000
Direct Wages 14,750 Financial Expenses 15,000
Closing Stock 1,49,000 Selling & Distribution Exp. 30,000
Opening Stock 99,000 NON-OPERATIVE EXPENSES
Sales Return 50,000 Loss on sale of Investment 4,000
NON-OPERATIVE INCOME :
Interest on debts 3,000
Profit on sales of Shares 6,000
You are required to prepare:
Arrange the above figures in a form suitable for analysis.
Show separately the following ratios:
1) G.P. (40%) 2) N.P. (17.70%) 3) Operating Profit (17.10%) 4) Stock turnover (4.1 times), 5)
Operating ratio (82.89%) 6) Expenses ratios (17.64%, 1.76%, 3.53% / Administrative, Finance, Selling &
Distribution Expenses)
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PROBLEM No. 6
Following is Trading and Profit & Loss Account of Zee Co. Ltd. for the year 31 st March 1998 and
Balance Sheet as on that date:-
TRADING AND PROFIT AND LOSS ACCOUNT
To Opening Stock 32,500 By Sales 7,00,000
To Purchase 5,98,000 By Closing stock 1,18,000
To Gross Profit 1,87,500
8,18,000 8,18,000
To Administrative Expenses 35,300 By Gross Profit 1,87,500
To Selling Expenses 32,200
To Net Profit 1,20,000
1,87,500 1,87,500
BALANCE SHEET
Share Capital 6,00,000 Fixed Assets 8,00,000
Reserve & surplus 4,00,000 CURRENT ASSETS :
CURRENT LIABILITIES : Stock 1,18,000
Other Liabilities 2,00,000 Debtors 69,500
Creditors 50,000 2,50,000 Bank 2,62,500 4,50,000

12,50,000 12,50,000
Compute :- 1) Stock Turnover Ratio, 2) Operating Ratio, 3) Current Ratio, 4) Acid Test Ratio
 BBA-SEM 2 13

UNIT-IV
BREAK EVEN POINT.

MEANING OF BREAK EVEN POINT

Break even point is the level of Sales at which there is no profit no loss. At this level total cost is equal to
total Sales. In other words at this specific level of activity, the turnover just covers the fixed overheads and the
profit is zero.
The typical relationships of this concept are the following :-
1. A change in variable cost per unit will change the P/V ratio and, therefore, the break even point.
2. A change in selling cost per unit also will change both the P/V ratio & the break even point.
3. A change in fixed costs will change the break even point, but not the P/V ratio.
CONTRIBUTION : Contribution is the difference between sales revenue and variable costs. Contribution is the
amount available to meet the fixed cost and to provide the profit. If the contribution is more then the fixed cost, a
profit is made. If the contribution is not adequate to meet the fixed cost, loss is sustained.

MARGIN OF SAFETY : It is the level of Sales above break even point. Where there is a Margin of Safety, there is
profit earned. Therefore, Margin of Safety is equal to MOS = Sales-BEP sales. Contribution earned on Margin of
Safety is always equal to profit.

PROFIT VOLUME RATIO: It is the ratio of Contribution to Sales. If selling price per unit & variable cost per unit
are constant ,it means Contribution per unit also remains constant & hence P/V ratio remains constant. P/V Ratio is
the measure of profitability. It means more the Profit Volume Ratio more is the profit & vice versa. To increase the
P/V Ratio either selling price should be increased or Variable Cost per unit should be decreased.
MARGINAL COST STATEMENT
SALES XXX
Less:- Variable Cost XXX
Contribution XXX
Less:- Fixed Cost XXX
Profit OR Loss XXX

ADVANTAGES OF BREAK EVEN POINT (BEP)

1. It reveals how changes in costs, selling price & volume of Sales influences profit. So, it helps management in
decision making.
2. It serves as a useful aid in forecasting costs & profits.
3. It discloses profit at various level of activity.
4. It helps in the determination of the optimum product mix & the profitability of individual
products.
5. It serves as a useful tool for Cost Control.
LIMITATIONS OF BREAK EVEN POINT (BEP)
1. Fixed costs may vary beyond a certain level of output.
2. Variable cost may not change in the same proportion as the volume of output, if the production is subject to
the law of increasing or decreasing return.
3. The selling price may not remain constant at all levels of activity.
4. In the break even chart the total cost line & sales line are shown as straight lines. But this can be true only if
the assumptions are valid.
PROBLEM No.1
Fixed cost of a company is Rs.25,000p.a.Prime Cost is Rs.5 per unit. Variable Overhead Re.1 per unit,
selling price Rs.10 per unit. Present sales are 10,000 units a year. Calculate B.E.P.
 BBA-SEM 2 14
(Ans. : P/V Ratio 40, B.E.P. 6,250 units)

PROBLEM No.2
From the information given below calculate Margin of Safety.
Cost per unit :-
Cost of Material Rs. 10
Cost of Labour Rs. 5
Cost of Variable overhead Rs. 2
Selling price per unit is Rs.20, Fixed overheads are Rs.900 & unit purchased and sold during the year are 1,000.
(Ans. : P/V ratio 15, B.E.P. 300 units, M.O.S. 14,000)

PROBLEM No.3
Calculate the B.E.P. from the following particulars.
Budgeted output 80,000 units
Fixed Expenses Rs. 4,00,000
Variable cost per unit Rs. 10
Selling cost per unit Rs. 20
If the Selling Price is reduced to Rs.18 per unit. What will be the new B.E.P.
(Ans.: P/V ratio 50,B.E.P. 40,000 units, New P/V Ratio 44.44% New B.E.P. 50,000 units)

PROBLEM No.4
From the following particulars draw a B.E.P.
Rs.
Variable cost per unit 14
Fixed Expenses 1,08,000
Selling price per unit 18
What should be the selling price per unit if the B.E.P. should be brought to 24,000 units.
(Ans. B.E.P. 27,000 units, S.P. for B.E.P. 18.50)
PROBLEM No.5
Find out :1) P/V Ratio 2) B.E.P. 3) Profit when sales is Rs.3,00,000 4) Margin of Safety when sales is Rs.3,00,000
5) Sales required to earn a profit of Rs.50,000 6) Margin of Safety when profit is Rs.50,0007) Additional sales
required to cover an increase in sales managers salary of Rs.4000 p.a.
Position for X Co. for the year 1998 :
Rs.
Sales 2,00,000
LESS Variable cost 1,50,000
CONTRIBUTION 50,000
LESS Fixed cost 35,000
NET PROFIT 15,000
(Ans : 1) 25% 2) Rs.1,40,000 3) Rs.40,000 4) Rs.1,60,000 5) Rs.3,40,000 6) Rs.2,00,000 7) Rs.16,000)

PROBLEM No.6
Following information is available for the year 1998 from the books of M/S Shree Co. Ltd.
Rs.
Selling Price per unit 200
Variable factory expenses per unit 110
Variable selling expenses per unit 15
Factory Expenses (FIXED) 8,00,000
Selling Expenses (FIXED) 1,00,000
Find out :
1) B.E.P. in units 2) P/V ratio 3) No. of units to be sold to earn a profit of Rs.60,000 4) B.E.P. in Rs. If managers
salary is increased by Rs.5000 p.a. 5) Profit or loss on sales of Rs.20,00,000.
(Ans : 1)12,000 units 2)37.5% 3)12800 units 4)2413333.33 5)Rs.150000 Loss.)
PROBLEM No.7
In Jan 1998 the position of Z Co.Ltd was as follows :
Sales 1,20,000
LESS Variable cost 96,000
CONTRIBUTION 24,000
LESS Fixed Cost 16,000
NET PROFIT 8,000
 BBA-SEM 2 15
Calculate : 1) B.E.P.2) P/V Ratio 3) Net profit from sales of Rs.180000 4)Required sales for net profit of Rs.16000
5) B.E.P. if managers salary is increased by Rs.2000 6) Additional sales required to cover an increase of Rs.2000
in managers salary. 7) Margin of safety.
(Ans : 1)80,000 2)20% 3)20,000 4)1,60,000 5)90,000 6)10,000 7)40,000.)
PROBLEM No.8
The following is the planning Budget of Agrawal Co. Ltd.
FIXED VARIABLE TOTAL
Budgeted sales (200000 units @ Rs.25/-) 50,00,000
Budgeted cost :
Direct Material -- 9,00,000
Direct Labour -- 10,00,000
Factory Overhead 7,00,000 3,00,000
Administrative Expenses 6,00,000 1,00,000
Distribution Expenses 5,00,000 3,00,000
18,00,000 26,00,000 44,00,000
Budgeted Profit 6,00,000
Compute the B.E.P. 1) 10% increased effected in fixed cost. 2) 10% increase in variable cost is effected. 3)
10% increase is effected in sales price which will probably reduce units sold by approximately 5%.
(Ans : 1) Rs.41,25,000 2) Rs.42,05,607.5 3) Rs.34,13,793)

PROBLEM No.9
XYZ Co’s Position :- Rs.
Sales(8,000 units) 80,000
LESS:- Variable Cost 64,000
CONTRIBUTION 16,000
LESS:- Fixed cost 24,000
NET LOSS (8,000)
From the above information find out :
1) Sales volume to Break even (B.E.P. in units)
2) Sales volume to earn a net profit of Rs.9000 after 55% of income tax.
3) What price should be charged if the B.E.P. is fixed at 10000 units.
(Ans : 1) 12,000 units 2) 22,000 units 3) Rs.10.40)
PROBLEM No.10
From the following data find out the break even :
Selling Price per unit Rs. 10
Trade Discount 5%
Direct Material cost per unit Rs. 3
Direct Labour cost per unit Rs. 2
Fixed Overheads Rs. 10,000
Variable Overheads 100% on direct Labour cost
If sales are 10& 15 above the Break even volume determine the net profit.
(Ans : B.E.P. 4000 units, 10% & 15% Net profit 1,000 & 1,500)
PROBLEM No. 11
XY Co.Ltd. is going to produce either product X or Product Y each having same demand, sale price and
total cost per unit. The following are the estimated sales and cost for each product for one year :
You are required to calculate : B.E.P.
X PRODUCT (Rs.) Y PRODUCT (Rs.)
Sales 30000 30000
Variable cost 24000 20000
Fixed cost 3000 7000
27000 27000
PROFIT 3000 3000
1) Margin of Safety of each
2) product. 2) State which product is likely to earn greater profit in condition of
a) Heavy demand for the product b) Low demand for the product.
(Ans : 1) 15,000/21,000 2) 15,000/9,000 3) Y Product)
PROBLEM No.12
Nagpur furniture mart places before you the following trading results :
YEAR SALES PROFIT
 BBA-SEM 2 16
Rs. Rs.
1997 20000 1000
1998 18000 400
Find the following :
A) 1) P/V Ratio 2) Fixed cost 3) Variable cost during the two years 4) M.O.S. at a profit of Rs.1,600
B) If P/V Ratio is 60 and marginal cost of product is Rs.20. What will be the selling price.
(Ans. : 1) 30 2) 5,000 3) (1997) 14,000 (1998) 12,600 4) 5,333.33 Rs.50)
PROBLEM No.13
The following figures are presented to you :
YEAR SALES PROFIT/(LOSS)
Rs. Rs.
1997 2,00,000 (10,000)
1998 5,00,000 20,000
Calculate : P/V Ratio 2) B.E.P. 3) Variable cost of each year. 4) Sales to make a profit of Rs.40,000
(Ans. : 1) 10% 2) Rs.3,00,000 3) (1997) 1,80,000 (1998) 4,50,000, 7,00,000)
PROBLEM No.14
From the following information find out :
1) P/V Ratio 2) Fixed cost 3) B.E.P. 4) MOS Rs.3,00,000 5) Profit on the Sales of Rs.1,50,000 & 2,50,000
YEAR SALES COST
Rs. Rs.
1995 2,00,000 1,70,000
1996 3,00,000 2,40,000
(Ans. : 1) 30 2) 30,000 3) 1,00,000 4) 2,00,000 5) 45,000)
PROBLEM No.15
The Furniture making Co. places before you the following trading results :-
YEAR SALES PROFIT
Rs. Rs.
1995 18,000 600
1996 20,000 1,000
Find the following :
1) P/V Ratio 2) Fixed cost 3) Variable cost during the two years 4) M.O.S. at a profit of Rs.1600
(Ans. : 1) 20%, 2) 3,000, 3) 14,400/18,000, 4) 8,000)
PROBLEM No.16
Calculate :
1) The amount of fixed expenses.
2) The Number of units to break even.
3) Number of units to earn a profit of Rs.40,000.
Selling price per unit can be assumed Rs.100. The Co. sold in two successive periods 7,000 units & 9,000
units and has incurred a loss of Rs.10,000 and earned Rs.10,000 as profit respectively.
(Ans. : 1) 80,000 2) 8,000 units 3) 12,000 units)
M No.17
‘A’ CO. budgets a product 10000 units at a variable cost of Rs.20 each. The fixed cost is Rs.40000. Sales price is
fixed to yield a profit of 20 on sales (25 on cost). Find out P/V Ratio, B.E.P & M.O.S.
(Ans.: 1) 33.33%, 2) 1,20,000, 3) 1,80,000)
PROBLEM No.18
VIJAY Co. Sales (16000 units) Rs.3,20,000, Variable cost Rs.15p.u., Fixed cost Rs.60,000.
Compute :- Sales at 40 P/V Ratio, B.E.P., Contribution at Sales of Rs.2,56,000, M.O.S. When sales are
Rs.2,56,000, Sales to earn a profit of Rs.40,000.
(Ans.: 2,00,000, 2,40,000, 62,000, 16,000, 4,00,000)
PROBLEM No.19
The following information is received from the Books of Dilip Company Ltd. :-
Amount in Rs.
Sales (16,000 units) 6,40,000
Less :- Variable Cost 4,80,000
Contribution 1,60,000
Less :- Fixed Cost 1,20,000
Net Profit 40,000
Calculate Profit Volume Ratio and by using the P/V Ratio calculate the following :-
1. Break-Even-Point.
2. Required sale to earn a profit of Rs.90,000.
 BBA-SEM 2 17
3. Profit from the sales of Rs.10,00,000.
4. Amount of Marginal safety on the profit of Rs.90,000.
5. Sales on the P/V Ratio 40%.
(Ans.: 4,80,000, 8,40,000, 1,30,000, 3,60,000, 4,00,000)

PROBLEM No. 20
The following figures relate to Milind Company manufacturing a varied range of products :-
Total Cost Total Sales
Rs. Rs.
Year ending 31st Dec. 1998 19,83,600 22,23,000
Year ending 31st Dec. 1999 21,43,200 24,51,000
Assuming stability in prices, with variable cost carefully controlled to reflect pre-determined relationship
and an unvarying figure for fixed cost, calculate :-
a. Profit Volume Ratio.
b. Fixed Cost.
c. Break- Even- Point.
d. Amount of Margin of Safety for the year 1998 and 1999.
e. Profit from the sales of Rs.30,00,000.
(Ans. : 30%, 4,27,500, 14,25,000, 7,98,000/ 10,26,000, 4,72,500)
PROBLEM NO. 21
Fixed cost per month Rs. 31,500
Variable Cost per unit Rs. 3
Selling price per unit Rs. 7.50
Total sales 8,000 units per month. Calculate 1) P.V.R. ; 2) Break Even Analysis 3) Profit or Loss on Sales
of 6,000 units and 9,000 units.

PROBLEM NO. 22
The present details of Surya Company is as follows :-
Rs.
Selling Price Per Unit 200
Material Per Unit 80
Labour Per Unit 35
Variable Cost Per Unit 25
Fixed Cost 7,20,000
Calculate :-
(1) Profit Volume Ratio :-
(2) Break –Even Point in units.

PROBLEM NO. 23
Chandra & Company’s Sales in two successive years are 1,550 units and 2,100 units and incurred a loss of Rs.
12,250 and earned Rs. 10,850 as profit respectively. The selling price per unit is Rs. 150.
Calculate :-
(1) Break-Even-Point.
(2) Margin of Safety for second year.
(3) Number of units to be sold to earn a profit of Rs. 50,000.
(4) Amount of profit on the sales of Rs. 4,50,000.

PROBLEM NO. 24
Given :- Profit Rs. 3,20,000 (20 % of sales)
P.V.R. 50 %.
Calculate B.E.P.

PROBLEM NO. 25
The information of two periods are given as :-
Year Sales Profit
1 year 20,00,000 2,00,000
2nd year 30,00,000 4,00,000
You all required to calculate Break-even-point.

PROBLEM NO. 26
 BBA-SEM 2 18
You are required to calculate profit-volume-ratio and break-even point from the following information.
Fixed cost Rs. 80,000
Variable Cost per unit Rs. 4
Estimated sales for the period are valued at Rs. 2,00,000. The selling price per unit is Rs. 20.

PROBLEM NO. 27
The Shipa company limited furnishes you the following information :-
Particulars 97 98
Sales 8,25,000 10,75,000
Total Cost 7,90,000 9,99,000
Calculate :-
1) Profit Volume Ratio
2) Fixed Cost
3) The amount of profit or loss when sales are Rs. 7,00,000
4) The amount of sales required to earn a profit of Rs. 1,20,000

PROBLEM NO. 28
Calculate profit earned if :-
Material Rs. 55 per unit. LabourRs. 35 per unit Variable Cost Rs. 20 per unit Selling price Rs. 160 per unit Sales
Rs. 2,60,000 Fixed cost Rs. 50,000
Also calculate profit earned if labour cost increases by 5 % and material cost is decrease by 10 %
simultaneously.

PROBLEM NO. 29
a) P/V Ratio is 60 % and the marginal cost of the product is Rs. 50. what will be the selling price ? what is fixed
cost if sales in units are 10,000. Also calculate profit if sales are 20 % above B.E.P.

PROBLEM NO. 30
You are given the following data of Shyamsunder Limited for the year 2003 :-
Budgeter Output (Units) 1,00,000
Fixed Expenses Rs. 5,00,000
Variable Expenses Rs. 10 Per Unit.
Selling Price Rs. 20 Per Unit.
If the selling price is reduced to Rs. 18 per unit. What will be the new Break even point ?

PROBLEM NO. 31
The Hislop Company Limited furnishes you the following information :-
Particulars First Half Second Half
Sales 8,10,000 10,26,000
Profit Earned 21,600 64,800
From the above, you are require to compute the following assuming that the Fixed cost remains the same
in both the periods :-
1) Profit Volume Ratio
2) Fixed Cost
3) The amount of profit or loss when sales are Rs. 6,48,000
4) The amount of sales required to earn a profit of Rs. 1,08,000

PROBLEM NO. 32
1) A company sells its products at Rs. 15 per unit. In a period if it produces and sells 8,000 units, it incurs a loss of
Rs. 5 per unit. If the volume is raised to 20,000 units, It earns a profit of Rs. 4 per unit. Calculate B.E.P.
2) A product costs Rs. 3 per unit when production is 10,000 units and Rs. 2.50 when 20,000 units are produced.
You are required to estimate total fixed cost.

PROBLEM NO. 33
Calculate profit earned if :-
materials Rs. 110 per unit.
LabourRs. 60 per unit.
Variable cost Rs. 35 per unit.
Selling price Rs. 250 per unit.
Sales Rs. 2,50,000
 BBA-SEM 2 19
Fixed cost Rs. 30,000.
Also calculate profit earned if labour cost is increased by 5 % and Material cost is decreased by 15 %
simultaneously.

PROBLEM NO. 34
Following information is received from the books of company A and B ; both are engaged in same
business and sale their product in same market :-
Particulars ‘A’ ‘B’
Sales 5,00,000 5,00,000
(-) Variable Cost 3,00,000 3,50,000
Contribution 2,00,000 1,50,000
(-) Fixed Cost 1,00,000 50,000
Net Profit 1,00,000 1,00,000
Calculate :-a) P/V ratio for both companies ; b) B.E.P for both companies ; c) margin of safety for both
companies.

PROBLEM NO. 35
The sales turnover and profit during two years were as follows :-
Year Sales Profit
Rs. Rs.
2002 2,80,000 30,000
2003 3,20,000 40,000
You are required to calculate :-
1) Profit Volume Ratio;
2) Sales Required to Earn a Profit of Rs. 80,000.
3) Profit when Sales are Rs. 2,40,000

PROBLEM NO. 36
Given :-
Selling Price per unit Rs. 20
Variable Cost per unit Rs. 12
Fixed Cost Rs. 36,000
Calculate :-
1) Profit Volume Ratio; 2) Break Even Point; 3) Sales Required to Earn a Profit of Rs. 18,000.
4) B.E.P. if the fixed cost is increased by Rs. 4,000.

PROBLEM NO. 37
A company is able to sell its only product for Rs. 12 per Unit, Variable Cost of Production are Rs. 7 per unit.
Fixed Cost Total Rs.80,000 p.a. You are Required to Calculate.
A) Number of Units to Break Even. B) Sales to Break Even Point. C) What Number of Unit will need to be sold to
earn a Profit of Rs. 30,000. D) What Level of Sales will achieve a Profit of Rs. 30,000 p.a.

PROBLEM NO. 38
From the following results decide the level of Margin of Safety for the sales of Rs. 6,60,000.
Year Sales Rs. Profit Rs.
2000 5,40,000 12,000
2001 6,00,000 30,000
Fixed Cost is 1,50,000.

PROBLEM NO. 39
You are given the following information :-
Period Sales Profit [ + ] / Loss [ - ]
(Rs.) Rs.
November, 2003 90,000 [ - ] 10,000
December, 2003 1,30,000 [ + ] 10,000
Calculate :-
a) Level of Activity if Rs. 25,000 is to be earned as Profit.
b) Expected Profit if Sales are Budgeted at Rs. 1,80,000.

PROBLEM No. 40
 BBA-SEM 2 20
Following is the financial position of Vijay Co.
Amount in Rs.
Sales @ Rs.10 2,40,000
Less:- Variable Cost 1,92,000
Contribution 48,000
Less:- Fixed Cost 20,000
Net Profit 28,000
Find out :-
1. P/V Ratio, BEP in Rs., BEP in units.
2. What should be the selling price per unit if BEP is 12,000 units.
3. What should be the selling price per unit if the BEP should be brought to 8,000 units.
4. Margin of Safety when sales is Rs.3,00,000.
5. Margin of Safety when profit is Rs.30,000.
6. BEP if Manager’s salary is increased by Rs.4,000 p.a.
7. Additional sales required to cover an increase in Sales manager’s salary of Rs.5,000 p.a.
8. No. of units to be sold to earn a profit of Rs.40,000.
9. Profit or loss on the sales of Rs.2,00,000.
10. BEP if 10% increase is effected in sales price which will probably reduce units sold by approximately 5%.
11. Sales volume to earn a net profit of Rs.28,000 after 30% of Income Tax.
12. If the sales are above 20% of BEP volume, determine the net profit.
13. If P/V Ratio is 40% and marginal cost of product is Rs.30, what will be the selling price.
14. Variable Cost when sales Rs.3,00,000.
15. Net profit from sales of 30,000 units.
16. BEP in units, if 10% increase is affected in fixed cost & variable cost is also increased by 10%.
17. BEP in Rs. If 20% increase effected in Fixed Cost and Variable Cost.
18. If the selling price is reduced to Rs.9 p.u. what will be the new BEP.
19. Sales required to earn a profit of Rs.40,000.
20. Find out the sales if Fixed Cost is increase by Rs.10,000.
21. Calculate the number of units to be sold to earn a profit of Re.1
22. Calculate the number of units to be sold to earn a profit of Rs.30,000.
 BBA-SEM 2 21

UNIT-V
BUDGET

FLEXIBE BUDGET

PROBLEM NO. 1
The following data relate to the working of a factory for the year 2002 :-
Fixed costs :- At 50% capacity
Salaries 84,000
Rent & Rates 56,000
Depreciation 70,000
Other administrative expenses 80,0002,90,000
Capacity worked ( 50 % )
Variable costs :-
Materials 2,40,000
Labour 2,56,000
Other expenses 38,000 5,34,000
Possible sales at various level of working are :-
Capacity Sales in Rs.
60 % 9,50,000
75 % 11,50,000
90 % 13,75,000
100 % 15,25,000
Prepare a flexible budget and show the forecast of profit at 60, 75, 90 and 100 % capacity
operations.
(Ans :- Profit 19,200; 59,000; 1,23,800; 1,67,000)
PROBLEM NO. 2
The following information relates to the productive activities of G Ltd. for three months ended 31 st March
2002.
Fixed expenses at 50 % capacity Rs.
Management salaries 2,10,000
Rent and taxes 1,40,000
Depreciation of machinery 1,75,000
Sundry office expenses 2,22,500
Semi-variable expenses at 50 % capacity
Plant and maintenance 62,500
Indirect labour 2,47,500
Salesman salaries 72,500
Sundry expenses 65,000
Variable expenses at 50 % capacity
Materials 6,00,000
Labour 6,40,000
Salesman commission 95,000
It is further noted that semi-variable expenses remain constant between 40 % and 70 % capacity, increase
by 10 % of the above figures between 70 % and 85 % capacity and increase by 15 % of the above figures between
85 % and 100 % capacity. Fixed expenses remain constant whatever the level of activity may be. Sales at 60 %
capacity are Rs.25,50,000, at 80 % capacity Rs. 34,00,000 and at 100 % Rs. 42,50,000. Assuming that all items
produced are sold. Prepare a flexible budget at 60 %, 80 % and 100 % capacity. (Ans :-
25,50,000; 34,00,000; 42,50,000)
 BBA-SEM 2 22
PROBLEM NO. 3
The expenses for the production of 5,000 units in a factory are given as follows :-
Particulars Per unit (Rs.)
Materials 50
Labour 20
Variable overheads 15
Fixed overheads (Rs. 50,000) 10
Administrative expenses ( 5 % variable ) 10
Selling expenses ( 20 % fixed ) 6
Distribution expenses ( 10 % Fixed ) 5
Total cost of sales per unit Rs. 116
You are required to prepare a budget for the production of 7,000 units.
(Ans:- 116.00; 5,80,000; 109.94; 7,69,600)

PROBLEM NO. 5
The following data are available in a manufacturing company for half year periods :-
Fixed expenses Rs. (Lakh)
Wages and salaries 8.4
Rent, rates and taxes 5.6
Depreciation 7.0
Sundry administrative expenses 8.9 29.9
Semi-variable expenses at 50 % capacity
Maintenance and repairs 2.5
Indirect labour 9.9
Sales Department, salaries etc. 2.9
Sundry administrative expenses 2.6 17.9
Variable expenses at 50 % capacity
Material 24.0
Labour 25.6
Other expenses 3.8 53.4
It is assumed that fixed expenses remain constant for all levels of production, semi-variable expenses
remain constant between 45 % and 65 % of capacity, increases by 10 % between 65 % and 80 % of capacity and
by 20 % between 80 % and 100 % of capacity.
Sales at various levels of production are Rs. (in lakhs)
60 % capacity 100.00
75 % capacity 120.00
90 % capacity 150.00
100 % capacity 170.00
Prepare a flexible budget for the half year and for cost and the profit at 60 %, 75 %, 90 % & 100 % capacity.
(Ans:- [-11.88]; [-9.69]; [2.50]; [11.82])

PROBLEM NO. 6
The expenses budgeted for production of 10,000 units in a factory are furnished below :-
Per unit Rs.
Materials 70
Labour 25
Variable overheads 20
Fixed overheads (Rs. 1,00,000) 10
Variable expenses (direct) 5
Selling expenses (10 % fixed) 13
Administrative expenses (Rs. 50,000) 5
Distribution expenses (20 % fixed) 7
Total 155
Prepare a budget for the production of :- a) 8,000 units. b) 6,000 units.
Assume that administrative expenses are rigid for all levels of production.
(Ans :- Total Cost Rs. 10,00,800; Rs. 12,75,400)
PROBLEM NO. 10
Draw up a flexible budget for overheads expenses on the basis of the following data and determine the overhead rates
at 70 %, 80 % and 90 % plant capacity.
 BBA-SEM 2 23
Capacity levels
70 % 80 % 90 %
Variable overheads Rs. Rs. Rs.
Indirect labour --- 12,000 ---
Stores including spares --- 4,000 ---
Semi-variable overheads power --- 20,000 ---
( 30 % fixed ; 70 % variable )
Repairs and maintenance --- 2,000 ---
(60 % fixed ; 40 % variable )
Fixed overheads :-
Depreciation --- 11,000 ---
Insurance --- 3,000 ---
Salaries --- 10,000 ---
Total overheads 62,000
Estimated direct labour hours 1,24,000. (Ans :- 58,150; 62,000; 65,850)

PROBLEM NO. 13
A factory is currently working at 50 % capacity and produces 10,000 units. Estimate the profits of the company when it
works to 60 % and 80 % capacity assuming that the company can sell whatever it produces.
At 60 % working, raw material cost increases by 2 % and selling price falls by 2 %. At 80 %, raw material cost
increases by 5 % and selling price falls by 5 %.
At 50 % working, the product costs Rs. 180 per unit and is sold at Rs. 200 per unit.
The unit cost of Rs. 180 is made up as follows :-

Rs.
Material 100
Labour 30
Factory overhead 30 (40 % fixed)
Administration overhead 20 (50 % fixed)
What comments can you offer ?

CASH BUDGET

PROBLEM NO. 1
From the following forecasts of income & expenditure, prepare a cash budget for the months Jan to April 2000.
Months Sales Purchases Wages Manufacturing Administrative Selling
(Credit) (Credit) Rs. Expenses Expenses Expenses
Nov 1975 30,000 15,000 3,000 1,150 1,060 500
Dec 1975 35,000 20,000 3,200 1,225 1,040 550
Jan 1976 25,000 15,000 2,500 990 1,100 600
Feb 1976 30,000 20,000 3,000 1,050 1,150 620
March 1976 35,000 22,500 2,400 1,100 1,220 570
April 1976 40,000 25,000 2,600 1,200 1,180 710
Additional information is as follows :-
a) The customers are allowed a credit period of 2 months
b) A dividend of Rs. 10,000 is payable in April.
c) Capital expenditure to be incurred : Plant purchased on 15th Jan for Rs. 5,000 ; A Machine has been
purchased on 1st March and the payments are to be made in monthly instalments of Rs. 2,000 each.
d) The creditors are allowing a credit of 2 months.
e) Wages are paid on the 1st of the next month.
f) Lag in payment of other expenses is one month.
g) Balance of cash in hand on 1st Jan, 2000 is Rs. 15,000 /-
(Ans :- (Bal) 18,985 ; 28,795 ; 30,975 ; 23,685)
PROBLEM NO. 2
A co. expects to have Rs. 25,000 in bank on 1 st May 2000 and requires you to prepare an estimate of cash position
during the 3 months May, June and July. The following information is supplied :-
Sales Purchases Wages Office exp. Factory Exp. Selling Exp.
Months Rs. Rs. Rs. Rs. Rs. Rs.
March 50,000 30,000 6,000 4,000 5,000 3,000
 BBA-SEM 2 24
April 56,000 32,000 6,500 4,000 5,500 3,000
May 60,000 35,000 7,000 4,000 6,000 3,500
June 80,000 40,000 9,000 4,000 7,500 4,500
July 90,000 40,000 9,500 4,000 8,000 4,500
Other Information :-
a) 20 % of sales are in cash, remaining amount is collected in the month following that of sales.
b) Suppliers supply goods at two months credit.
c) Wages and all other expenses are paid in the month following the one in which they are incurred.
d) The company pays dividends to shareholders and bonus to workers of Rs. 10,000 and Rs.
15,000 respectively in the month of may.
e) Plant has been ordered and is expected to be received in June. It will cost Rs. 80,000 to be paid in June.
f) Income tax Rs. 25,000 is payable in July.
(Ans :- (Bal) 7,800 ; (-) 60,700; (-) 63,700)
PROBLEM NO. 3
From the following budgeted figures prepare a cash budget in respect of three months to June 30 th.
Month Sales Material Wages Overheads
Rs. Rs. Rs. Rs.
Jan 60,000 40,000 11,000 6,200
Feb 56,000 48,000 11,600 6,600
March 64,000 50,000 12,000 6,800
April 80,000 56,000 12,400 7,200
May 84,000 62,000 13,000 8,600
June 76,000 50,000 14,000 8,000
Expected cash Balance on 1st April Rs. 20,000. Other Information :-
1. Materials and overheads are to be paid during the month following the month of supply.
2. Wages are to be paid during the month in which they are incurred.
3. Terms of sales :- The terms of credit sales are payment by the end of the month following the month of
sales; ½ of the sales are paid when due; the other half to be paid during the next month.
4. 5 % sales commission is to be paid within the month following actual sales.
5. Preference dividend of Rs. 30,000 is to be paid on 1st May.
6. Share call money for Rs. 25,000 is due on 1 st April and 1st June.
7. Plant and Machinery worth Rs. 10,000 is to be installed in the month of Jan and the payment is to be made
in the month of June. (Ans :- (Bal) + 32,600; - 5,600 ; + 2,600.)

PROBLEM NO. 4
A newly started Quick Co. Ltd. wish to prepare cash budget from January, the following estimated revenue
and expenses are given below :-
Month Total sales Material Wages Overheads Selling &
Production distribution
Jan 20,000 20,000 4,000 3,000 800
Feb 22,000 14,000 4,400 3,300 900
March 24,000 14,000 4,600 3,300 800
April 26,000 12,000 4,600 3,400 900
May 28,000 12,000 4,800 3,500 900
June 30,000 16,000 4,800 3,600 1,000
Prepare a cash budget for the four months ending 30th June.
Cash balance on 1st March was Rs. 10,000. a new machine is to be installed at Rs. 30,000 on credit, to be repaid
by two equal instalments in March and April.
Sales commission @ 5 % on total sales is to be paid within two months following actual sales.
Rs. 10,000 being the amount of 2 nd call may be received in March. Share premium amounting to Rs. 2,000 is also
obtained with 2nd call.
Period of credit allowed by suppliers - 2 months
Period of credit allowed to customers - 1 months
Delay in payment of overheads - 1 months
Delay in payment of wages - ½ months
Assume cash sales to 50 % of total sales. (Ans :- [400] [-13,500] [-10,700] [-4,300])

PROBLEM NO. 5
From the following data, forecast the cash position at the end of April, May, and June 2000 :-
 BBA-SEM 2 25
Month Sales Purchases Wages Miscellaneous
Rs. Rs. Rs. exp. Rs.
Feb 1,20,000 84,000 10,000 7,000
March 1,30,000 1,00,000 12,000 8,000
April 80,000 1,04,000 8,000 6,000
May 1,16,000 1,06,000 10,000 12,000
June 83,000 80,000 8,000 6,000
Additional information :-
a. Sales :- 20 % sales are in cash, discount allowed on cash sales 5 % Balance realised equally in 2
subsequent month.
b. Purchases :- these are paid in the month following the month of supply.
c. Wages :- 25 % paid in arrears following month.
d. Misc Exp. Paid a month in arrears.
e. Rent Rs. 1,000 per month paid quarterly in advance due in April.
f. Income tax :- First instalment of advance tax Rs. 25,000 due on or before 15th June.
g. Income from investment :-Rs. 5,000 received quarterly in April, in July etc.
h. Cash in Hand :-Rs. 5,000 on 1st April 2000. (Ans :- (Bal) + 5,200; - 8,260; - 65,590.)

PROBLEM NO. 6
Prepare a cash budget of a company for April, May and June 2001 using the following :-
Month 1994 Sales Rs. Purchases Rs. Wages Rs. Expenses Rs.
Jan 80,000 45,000 20,000 5,000
Feb 80,000 40,000 18,000 6,000
March 75,000 42,000 22,000 6,000
April 90,000 50,000 24,000 7,000
May 85,000 45,000 20,000 6,000
June 80,000 35,000 18,000 5,000
You are further informed that :-
a) 10 % of the purchases and 20 % of the sales are for cash.
b) The average collection period of company is ½ month and the credit purchases are paid off regularly after
one month.
c) Wages are paid half monthly and the expenses are paid in the same month.
d) Cash balance on 1st April was Rs. 15,000 and the company wants to keep it at the end of every month
below Rs. 15,000 (But not less than Rs. 14,000) the excess cash being put in fixed deposits in multiples of
Rs. 1,000.
(Ans :-Bal :- 14,200; 14,700; 14,700 Deposits (-) 12,000; (-) 9,000; (-) 14,000.)