1. Discuss the activities performed by accounting personnel and the role and responsibilities that they undertake in an organisation.
2. You are required to prepare Funds Flow Statement and Cash Flow Statement for the year ending 31st
March 2015, based on the information given below.
Balance Sheet (As on 31st March)
| Liabilities | 2014 | 2015 | Assets | 2014 | 2015 |
| Trade Creditors | 100 | 40 | Cash at Bank | 100 | 65 |
| Bills Payable | 50 | 60 | Accounts Receivable | 105 | 120 |
| Outstanding Expenses | 25 | 20 | Bills Receivable | 130 | 140 |
| Bonds Payable | 220 | 140 | Inventory | 110 | 40 |
| Accumulated depreciation | Machinery | 120 | 160 | ||
| – on Machinery | 30 | 35 | Building | 300 | 310 |
| – on Building | 75 | 85 | Land | 60 | 130 |
| Reserves | 100 | 115 | Patents | 55 | 60 |
| Retained Earnings | 130 | 170 | |||
| Share capital | 950 | 360 | |||
| 280 | 1025 | 980 | 1025 |
Profit from operations after providing Rs. 10,000 as depreciation on building and Rs. 10,000 on machinery and Rs. 5,000 as amortization on Patents for the year ‘April 14 – March 15’ was Rs. 35,000. Other revenues for the year were Rs. 40,000. An old machine with original cost of Rs. 15,000 was sold at a loss of Rs. 5,000.
3. Explain briefly the technique of Marginal Costing. In what ways you consider this technique useful in Management Accounting.
4. A company manufactures a single product in its factory utilizing 60% of its capacity. The selling price and cost details are given below:
| Rs. | |
| Sales (6,000 units) | 5,40,000 |
| Direct materials | 96,000 |
| Direct labour | 1,20,000 |
| Direct expenses | 18,000 |
| Fixed overheads: | |
| Factory | 2,00,000 |
| Administration | 21,000 |
| Selling and Distribution | 25,000 |
12.5% of factory overheads and 20% of selling and distribution overheads are variable with production and sales. Administrative overheads are wholly fixed. Since the existing product could not achieve budgeted level for two consecutive years, the Company decides to introduce a new product with marginal investment but largely using the existing plant and machinery. The cost estimates of the new product are as follows:
| Cost elements | Rs. per unit |
| Direct materials | 16.00 |
| Direct labour | 15.00 |
| Direct expenses | 1.50 |
| Variable factory overheads | 2.00 |
| Variable selling and distribution overheads | 1.50 |
It is expected that 2,000 units of the new product can be sold at a price of Rs. 60 per unit. The fixed factory overheads are expected to increase by 10%, while fixed selling and distribution expenses will go up by Rs. 12,500 annually. Administrative overheads remain unchanged. However, there will be an increase of working capital to the extent of Rs. 75,000, which would take the total cost of the project to Rs. 8.75 lakh. The company considers that 20% pre-tax and interest return on investment is the minimum acceptable to justify any new investment.
You are required to
(a) Decide whether the new product be introduced.
(b) Make any further observations/recommendations about profitability of the Company on the basis of the above data, after making assumption that the present investment is Rs. 8 lakh.
5. How do you envisage your role as a Finance Manager in matters related to dividend policy? What are the alternatives and factors that you may consider before finalizing your views on dividend policy?
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