CHAPTER 5-BUSINESS ARITHMETIC

YEAR 2019
1 Give the two forms of budgeting process. 1
Ans

2 Name any two key aspects of financial decision-making. 1

Ans

3 Why is it important for an entrepreneur to do break-even analysis? 2

Ans

4 Aditya Bearings Ltd. are the manufacturers and suppliers of ball bearings to fan manufacturing 3
companies. The company requires 900 kg of wrought iron for its production process. The cost
of placing each order is 50 and carrying cost is 100.
Calculate Economic Order Quantity.
Ans

5 Parvesh has started a restaurant in a small town by the name of ‘Spices of India’ by spending 6
50,00,000. He invested 10,00,000 of his own and took a loan of 40,00,000 from State Bank of
India @ 6% per annum. His monthly sales revenue is 20,00,000 and monthly cost of goods
sold is 10,00,000. He pays a monthly salary of 2,00,000 to his employees. The GST rate is
18%.
Calculate
(a) Return on Investment, and
(b) Return on Equity.
Ans

6 A hotel had varying number of guests during five weeks. The information regarding the 6
number of guests and the average weekly billing is presented in the following table:

(a) What is the ‘Unit of Sale’ and ‘Unit Price’ in this case?
(b) If the cost of goods sold or variable cost is 60% of the sales price, calculate the ‘unit cost’
and the ‘gross profit’
Ans

YEAR 2020

7 Gupta is the owner of KYC stores dealing in grocery items. He has an equity stake of 4,00,000 1
in the business. He has borrowed 6,00,000 from State Bank of India. His net profit for the year
is 1,40,000. The Return on Equity for Gupta will be 23.33%.
TRUE/FALSE
Ans

8 Gross working capital means: 1

(a) sum total of all assets.
(b) sum total of all fixed assets.
(c) sum total of all current assets.
(d) current assets minus current liabilities.
Ans

9 Give the meaning of ‘Cash Conversion Cycle’. How is Cash Conversion Cycle of a trading 2
concern different from a manufacturing concern?
Ans

10 Calculate the Economic Order Quantity from the following information: 3

(a) Annual consumption – 120 units.
 (b) Cost of placing and receiving an order –20
(c) Price per unit – 100
(d) Storage cost as percentage of average inventory – 12%
Ans

11 ‘Flavouright Foods Ltd.’ started a business of making nachos (corn chips) in three variants, 4
Classic Cheese, Toasted Corn and Tangy Tomato. To start with, all the three variants will be
sold in a standard packing of 100 gms each, the selling price would differ due to the
ingredients used. Fixed costs are 38,000 Sales price and variable costs per unit are as follows:

From the above information calculate:

(a) Weighted contribution margin per unit.
(b) Breakeven point – total and per product.
Ans

2022

12 Kwality Stores is famous for its woollen garments sourced from Ludhiana. Its most popular 2
selling item is its sweat-shirt which is sold at 1,000 per piece. The cost of placing an order and
receiving goods is 500 per order. Its holding cost is 300 p.a. Economic order quantity for
Kwality Stores is 200 sweat-shirts. Calculate the annual demand of the sweat-shirts.
Ans

13 (a) Give the meaning of Cash Conversion Cycle (CCC). 3

(b) State the relationship between the Cash Conversion Cycle (CCC) and the quantum of
working capital required by a business.
(c) Calculate the Gross working capital for Ojas Ltd. from the details given below:

Ans

14 Calculate the Return on Equity (ROE) for Neerja International, for the year 2020 2021 from 3
the details given below:

Monthly Sales revenue was 10,00,000 and Cost of goods sold was 4,00,000.
Ans

YEAR 2023

15 Ramandeep is a technical entrepreneur who started developing interactive websites of 1

businesses. Due to lot of competition in this field he is experiencing a decline in the demand.
He wishes to understand his revenue position as compared to his investment. Which one of the
following combinations would help him in assessing the profitability of his business?
(i) Economic Order Quantity
(ii) Return on Investment
(iii) Return on Equity
(iv) Break-even analysis
 (a) (i) and (iii)
(b) (iii) and (iv)
(c) (ii) and (iii)
(d) (i) and (iv)
Ans

16 From the information given below, calculate the circulating capital of a company: 1

(a) 35,000
(b)1,65,000
(c) 2,00,000
(d)2,35,000
Ans

17 Sahiba has a boutique in Nagpur, which she started in 2020. She had invested 2,00,000 from 1
her savings and borrowed 3,00,000 from the bank @ 10% per annum. She made a net profit of
50,000 in the year 2021 2022. In the above case the Return on equity is: -
(a) 10%
(b) 20%
(c) 25%
(d) 40%
Ans

18 Break-Even Point is the level where: 1

(a) the revenue generated is equal to all the expenses required for generating the revenue. (b)
the revenue generated is less than all the expenses required for generating the revenue. (c) the
revenue generated is more than all the expenses required for generating the revenue. (d) Both
(a) and (b)
Ans

19 Give the meaning of cash conversion cycle. How does the nature of business influence its cash 3
conversion cycle? Explain with the help of a diagram.
Ans

20 Baked Delight Ltd. is a well-known name in breads and bakery products. It has diversified 5
into flavoured fox nuts and popcorn. The two were introduced as smart snacking options for
health and diet conscious people. To start with, both will be sold in a standard packing of 50
gm each. Fixed cost for these will be 1,00,000. Sale price and variable cost per unit is as
follows:

From the given information calculate Break-Even Point in units and rupees.
Ans

COMPARTMENT 2019
21 A speciality store sells 1000 insulated water bottles annually. Demand for the product is 3
uniform. Purchase cost is 50 per bottle. Holding cost per annum is 10% of purchase cost.
Ordering cost is 100 per order. Calculate the Economic Ordering Quantity of the bottles for the
speciality store.
Ans

22 Explain the process for developing a cash flow projection. 3

Ans

23 Mohan started his business of manufacturing leather belts and wallets in Kanpur in the name 6
of ‘Essentials’ by spending 15,00,000. He invested 8,00,000 of his own money and took a loan
of 7,00,000 from Dena Bank @ 7% per annum. His monthly sales revenue is 6,00,000 and
 monthly cost of goods sold is 2,50,000. He pays a monthly salary of 50,000 to his employees.
Monthly maintenance of machinery is 15,000. Electricity and miscellaneous charges per
month are 10,000. The tax rate on profit is 12%.
Calculate the following:
(a) Return on Investment
(b) Return on Equity
Ans

24 ‘Breezolit Pvt. Ltd.’ started a business of making three varieties of designer fans – Vitara, 6
Grand, Quadraflow. From the following information, calculate Breakeven point in units for
the company and state which variety is most revenue generating. Fixed costs are 15,20,000.

Ans

COMPARTMENT 2020

25 __________ shows expected inflows and outflows of cash. 1

Ans

26 In Fast Moving Consumer Goods Industry, the relationship between unit price and unit cost
could be 80% to 85% (Cost as a percentage of selling price).
TRUE/FALSE
Ans

27 For the calculation of break-even point for sales mix, certain assumptions are to be made. 1
Which of the following assumptions is not correct ?
(A) Sales price per unit, variable cost per unit and total fixed cost are constant.
(B) All units produced are sold.
(C) The sales mix changes within the relevant time period.
(D) All costs can be categorised as variable cost or fixed cost.
Ans

28 Jain invested 5,00,000 as his capital to start a small-scale enterprise. He took a loan of 2
2,00,000 from the bank. During the year he earned a net profit of 70,000.
Calculate Jain’s ‘Return on Investment’.
Ans

29 Mahindra Stores sells 4000 units of power banks annually. Demand for the product is uniform. 3
Purchase cost per power bank is 400. Holding cost per annum is 10% of the purchase cost.
Ordering cost is 200 per order.
Calculate the Economic Ordering Quantity for Mahindra Stores for the power banks.
Ans

30 From the following information related to sales mix of products X, Y and Z, calculate 4
breakeven point in units:
Total fixed cost is < 2,46,500.

Ans

COMPARTMENT 2022
31 'Gizmo Gadgets' sold a variety of 'Android Tablets' and 'Pen Tablets' during the COVID-19 2
pandemic as the schools and offices operated online.
Monthly demand for 'Android Tablets' for the year 2021 — 2022 is 150 units. Purchase