AD-1006

M.Com. Semester–II (CGS) Examination

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ACCOUNTING FOR MANAGERIAL DECISIONS
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Time : 3 Hours] [Maximum Marks : 80

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Note :
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(1) All questions are compulsory. Section 'A' and Section 'B' should both be solved.

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(2) The figures to the right indicate marks to the questions.

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(3) Give working notes wherever necessary.
SECTION—A

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1. Management accounting provides valuable services to management in performing :

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(a) All Managerial Functions (b) Planning Function
(c) Controlling Function (d) Coordinating Function
2. The ratios which reveal the final result of the managerial policies and performance is :
(a) Turnover ratio (b) Profitability ratios
(c) Short-term solvency ratio (d)
a ilLong-term solvency ratio
3. Current ratio is a :
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(a) Short-term solvency ratio
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(c) Profitability ratio (d) Turnover ratio
4.
(a) Journal
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Management accounting maintains :
(b) Ledger
(c) Trial Balance (d) None of these
5. Which of the following is not application of cash ?
(a) Redemption of debentures (b) Securities premium
(c) Purchase of investment (d) Payment of dividends
6. Which of the following is not a cash inflow ?
(a) Decrease in debtors (b) Issue of shares

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(c) Decrease in creditors

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Statement of cash flow includes :
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(a) G E
Operating activities (b) Investing activities G E
(c) R E
Financing activities (d) R
All of the above
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8. A R
Increase in amount of prepaid expense result in : A R
(a) Increase in cash (b) Decrease in cash
(c) No change in cash (d) None of the above
LT–1504 1 (Contd.)
9. The term standard cost means :
(a) Estimated cost of actual production (b) Actual cost of actual production

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(c) Estimated cost of budgeted production (d) Actual cost of budgeted production

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10. In which industry standard costing system is more widely applied ?
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(a)
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Manufacturing Industry (b) Service Industry

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(c)
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Steel Industry (d) Cotton Industry

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11. Basic standard is established for a :

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(a) Long period (b) Indefinite period

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(c) Short period (d) Current period

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12. Which of the following variance arises when more than one material is used ?
(a) Material cost variance (b) Material price variance
(c) Material usage variance (d) Material Mix variance
13. Marginal cost is taken as equal to :
(a) Prime cost plus all variable overheads (b) Prime cost minus all variable overheads
(c) Variable overheads (d)
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None of the above
14. Which of the following equation is not correct ?
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(a) F = (S × PVR) – P
E G (b) C=S–V
(c) P = (S – PVR) + F
R R (d) C = S × PVR
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15. What will be the contribution if sales is 3,00,000 and variable cost is 40% of sales ?
(a) 1,00,000 (b) 1,50,000
(c) 1,80,000 (d) 2,00,000
16. Fixed cost includes ______
(a) Rent (b) Insurance premium
(c) Property taxes (d) All of the above
17. Which of the following is not a function of budgeting ?

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(a) Decision making (b) Controlling
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(c) Planning (d) Motivating
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18. A plan expressed in financial terms may also be known as a :
(a) Budget R (b) Forecast R E
(c) A R
Balanced score card (d) Final Account A R

LT–1504 2 (Contd.)
19. Which of these reports provides information without any evaluation ?
(a) Interpretative (b) Routine

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(c) Informational (d) Progress

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20. The budgeting system designed to change in relation to the level of activity actually attained is known

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(a) Fixed budgeting (b) Flexible budgeting

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(c) Performance budgeting (d) Functional budgeting 20×1=20

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SECTION—B

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1. Following information is available from the books of Shri Ram & Com.

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Particulars : Rs.

Sales for the year 6,00,000

Cost of goods sold 3,60,000

Capital & Liabilities :

Share Capital 3,00,000
Surplus
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87,000
Debentures
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1,50,000
Creditors
E G 60,000

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Bills Payable 30,000
Other General Liabilities
A 3,000

6,30,000

Assets :
Goodwill 1,80,000
Plant & Machinery 2,25,000
Stock 1,20,000
Debtors 67,500
Cash 25,500
Misc. Assets 12,000

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You are required to calculate the following ratios : E m
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(a)
(b) R R
Quick Ratio
Inventory Turnover Ratio R R
(c) AAverage Collection Period A
(d) Debt to Equity Ratio 12
OR
LT–1504 3 (Contd.)
 Discuss the importance of Management Accounting for managerial decision-making. How does
management accounting help the Management in Planning and Control ? 12
The Balance Sheets of a firm as on 31st December, 2021 and 2022 are given below :
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2.

2021
m a 2022 2021 2022

G E Rs. Rs. Rs. Rs.

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E
RR
Share Capital 1,00,000 1,60,000 Fixed Assets at

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A
Retained Earning 70,250 85,300 Cost 1,52,000 2,00,000

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Accumulated Inventory 93,400 89,200

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Depreciation 60,000 40,000

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12% Debenture 50,000 - Debtors 30,800 21,100
Sundry Creditors 28,000 48,000 Expenses prepaid 3,950 3,000
Bank 28,100 20,000
3,08,250 3,33,300 3,08,250 3,33,300

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The following additional information for 2022 are also given :
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(i) Net Profit Rs. 27,050
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(ii)
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Depreciation charged Rs.10,000
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(iii) A
Cash dividend declared during the period Rs.12,000
(iv) An addition to the building was made during the year at a cost of Rs.78,000 and fully depreciated
equipment costing Rs.30,000 was discarded as no salvage being realised.
Prepare a cash flow statement. 12
OR
The Balance Sheets of 'S' Ltd., as on 31st March 2021 and 31st March, 2022 were as follows :
2021 2022
Rs. Rs.
Assets :
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Land & Building
E m 80,000 1,20,000
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Stock E G
Plant and Machinery 5,00,000
1,00,000
8,00,000
75,000E G
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Sundry Debtors 1,40,000
R R 1,50,000
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Prepaid Expenses 14,000 A 12,000
Cash at Bank 16,000 18,000
8,50,000 11,75,000
LT–1504 4 (Contd.)
 Liabilities :
Share Capital 5,00,000 7,00,000

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Profit & Loss Account 1,00,000 1,60,000

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General Reserve 50,000 70,000

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Sundry Creditors 1,63,000 2,00,000

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RR
Bills Payable 30,000 40,000

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A Outstanding Expenses 7,000 5,000

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8,50,000 11,75,000

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Additional information :

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(i) Rs.50,000 depreciation has been charged to Plant and Machinery during the year 2022.
(ii) A piece of Machinery was sold for Rs.8,000 during 2022. It had cost Rs.12,000 depreciation
of Rs.7,000 has been provided on it.
Prepare cash flow statement from the above details. 12
3. Define standard costing. Explain its advantages and limitations. 12
OR
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The standard cost on 'Material' and 'Labour' for the making of a unit of a certain product are estimated
as under :
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Material
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80 kg at Rs.1.50 per kg
Labour A
18 hrs at Rs.1.25 per hr
On completion of the production of a unit, it was found that 75 kg of material costing Rs.1.75 per kg
has been consumed and that the time taken was 16 hours, the wage rate being Rs.1.5 per hour.
You are required to analyse material and labour variances. 12
4. Following information has been made available from the cost records of Universal Automobile Ltd.
manufacturing Spare parts.
Direct Material Per Unit
A Rs. 8
B Rs. 6
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Direct Wages :
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 G 24 Hours @ 25 paise per hour
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RBR 16 Hours @ 25 paise per hour.
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Variable overheads : 150% of wages A
Fixed overheads : Rs. 750

LT–1504 5 (Contd.)
 Selling price
A Rs. 25 per unit
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Rs. 20 per unit
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The director want to acquainted with the desirability of adopting any one of the following alternative
sales mix in the budget for the next period :
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(a) E
250 units of 'A' and 250 units of 'B'
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(b) R
400 units of 'B' only
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(c) 400 units of 'A' and 100 units of 'B'
(d) 150 units of 'A' and 350 units of 'B'

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State which of the alternative you would recommended to the management. 12
OR
Zenith Company submitted following information :
Selling price per unit Rs. 20
Trade discount 5%
Material per unit Rs. 6
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Wages per unit Rs. 4
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Variable overheads 100% of labour
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Fixed Cost Rs.20,000
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You are required to find out : A
(a) BEP in rupees
(b) BEP in units
(c) What will be the profit if sales is10% more than the break even point
(d) Sales to earn profit of Rs.6,500. 12
5. The following data are available in a manufacturing company for the year 2022 :

(Rs. in lakhs)
Fixed expenses :
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Wages & Salaries
E m 66.50
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Rent, Rates & Taxes
E G 46.20
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Depreciation
R R 51.80
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Sundry administration - Expenses 45.50 A

LT–1504 6 (Contd.)
 Semi-Variable Exp. (at 50% capacity) :
Maintainance and repairs 24.50

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Indirect Labour 55.30

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Sales Department salaries 26.60

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Sundry Administration - Salaries 19.60

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Variable Exp. (at 50% capacity) :

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Material 151.90

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Labour 142.80

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Other Expenses 55.30

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686.00

Assume that the fixed expenses remain constant for all the levels of production, semi-variable expenses
remain constant between 45 percent and 65 percent of capacity, increase by 10 percent between 65
percent and 80 percent capacity and by 20 percent between 80 percent and 100 percent capacity.
Sales at various levels :
Capacity (Rs. in lakhs)
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50% 700
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60% 840
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75%
R R1,050
100% A 1,260

Prepare flexible budget for the year and forecast the profit at 50%, 60%, 75% and 100% of
capacity. 12
OR
What is reporting ? Explain its objectives and needs at different managerial levels. 12

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E m E m
E G E G
R R R R
A A

LT–1504 7 25