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FIRST ASSIGNMENT Course Code Course Title Assignment Code Coverage : : : : MS-04 Accounting and Finance for Managers 04/TMA-1/SEM-II/2006 Blocks1, 2 & 3 Note: Please attempt all the questions and send them to the Co-ordinator of the Study Centre you are attached with. 1. In your organization or any other organization of your choice try to find out about the accounting concepts that are being used, whether the accounting practices are standardized, if so, why. Also write in brief as to how accounting information helps them in the allocation of resources. 2. XYZ Ltd. manufactures a product that it sells for Rs.125. The variable cost to manufacture the product is Rs.70 per unit and the variable cost to market and distribute the product is Rs.15 per unit. The company has fixed manufacturing costs of Rs.12,00,000 and fixed selling and administrative costs of Rs.4,00,000. Management’s current profit objective is to earn Rs.1,20,000 of income. The new Finance Manager proposed a target income of 15 percent on sales. You are required to: a. b. c. 3. Calculate the break-even volume of activity both in units and in rupees. Calculate the required volume of sales in units and in rupees to earn the firm’s current target income. Calculate the required volume of sales in units and in rupees to earn the Manager’s proposed target profit. The Financial Statements of a Sugar Company from the 2005 Annual Report are as follows : Income Statement for year ended December 31, 2005 ______________________________________________________ Sales Rs.1,000 Cost of goods sold (650) Depreciation expense (100) Sales and general expense (100) Interest expense (50) Income tax expense (40) __________ Net Income Rs.60 3 Balance Sheets at December 31, 2004 and 2005 _______________________________________________________ 2004 2005 Rs Rs _______________________________________________________ Assets Cash 50 60 Accounts receivable 500 520 Inventory 750 770 _______ ________ Current assets (net) 1,300 1,350 Fixed assets (net) 500 550 _______ ________ Total assets 1, 800 1 ,900 Liabilities and Equity Notes payable to banks Accounts payable Interest payable Current liabilities Long-term debt Deferred income tax Capital stock Retained earnings Total liabilities and equity 100 590 10 ________ 700 300 300 400 100 ________ 1,800 75 615 20 ________ 710 350 310 400 130 ________ 1, 900 Use the direct method to prepare a statement of cash flows for the year ended December 31,2005. 4 SECOND ASSIGNMENT Course Code Course Title Assignment Code Coverage : : : : MS-04 Accounting and Finance for Managers 04/TMA-2/SEM-II/2006 Blocks 4 & 5 Note: Please attempt all the questions and send them to the Coordinator of the Study Centre you are attached with. 1. Select any organization of your choice and discuss the cash management system in that organization. According to you what are the reasons that have contributed to the present state of cash management in that organization. Give your views or suggestions on the prevailing system of cash management in that organization. 2. “Dividend can be paid only out of profits” Explain this statement and also discuss your role as a Finance Manager in the matters of dividend policy. 3. There are two mutually exclusive investment projects under consideration at Anuja Ltd. Both would involve purchase of machinery with a life of 5 years. Project 1 would generate annual cash flows (receipts less payments) of Rs.2,00,000; the machinery would cost Rs.5,56,000 and have a scrap value of Rs.56,000. Project 2 would generate annual cash flows of Rs.5,00,000; the machinery would cost Rs. 16,16,000 and have a scrap value of Rs.4,31,000. The company uses the straight line method for providing depreciation. Its cost of capital is 15% per annum. Assume that annual cash flows arise on the anniversaries of the initial outlay, that there will be no price changes over the projects life and that acceptance of one of the projects will not alter the required amount of working capital. You are required to calculate for each project : (i) the accounting rate of return (ratio, over project life, of average accounting profit to average book value of investment) to nearest 1%. (ii) the net present value (iii) the internal rate of return to nearest 1%, and (iv) the pay back period to one decimal place. Also state which project you would select giving reasons for your choice. Ignore taxation. 5 THIRD ASSIGNMENT Course Code Course Title Assignment Code Coverage : : : : MS-04 Accounting and Finance for Managers 04/TMA-3/SEM-II/2006 All Blocks Note: Please attempt all the questions and send them to the Coordinator of the Study Centre you are attached with. 1. “Accounting is an information system” Do you agree? Substantiate your answer with reasons. How does an Accountant help in planning and controlling a large commercial organization? Explain. 2. You are required to calculate material variances, labour variances and only total variance for factory over-head from the information as indicated in the records of Alpha Engineering Corporation for the month of April, 2005: Standards Direct material Direct labour Factory overhead 4 gallons @ Rs. 1.20 3 hours @ Rs. 1.80 Rs..60 per labour hour Total manufacturing cost Unit Cost 4.80 5.40 1.80 --------12.00 --------- Month of April Activity (i) Production during the month of April, 2005 has been 6,500 units with no beginning or ending work-in-progress inventories. (ii) Materials: Purchased 32,000 gallons @ Rs 1.18 per gallon Used in production 25,600 gallons Labour: Hours worked 20,000 Average hourly wage rate Rs.1.75 Factory overhead Total overhead cost incurred Rs.12,500 (iii) (iv) 6 3. You are required to prepare the cash budget for April-Oct. 2006 from the information relating to ABC Agencies, a trading concern:- Balance Sheet as on 31st March, 2006 Liabilities Rs. Assets Rs. Proprietor’s Capital 1,00,000 Cash 20,500 Outstanding Liabilities 17,000 Stock 50,500 Sundry debtors 26,000 Furniture 25,000 Dep. -5,000 20,000 --------------------1,17,000 1,17,000 ----------------------_______________________________________________________________________ Sales and salaries for different months are expected to be as under: Months April May June July August September October Sales 80,000 52,000 50,000 75,000 90,000 35,000 25,000 Salaries 3,000 2,500 35,000 4,000 4,000 3,000 3,000 The other expenses per month are: Rent Rs.1,000, Depreciation Rs.1,000, Misc. Expenses Rs.500 and Commission 1% of sales. Of the sales, 80% is on credit and 20% for cash. 70% of the credit sales are collected in one month and the balance in two months. Debtors on March 31, 2006 represents Rs.6,000 in respect of sales of February and Rs.20,000 in respect of sales of March. There are no debt losses. Gross profit on sales on an average is 30%. Purchases equal to the next month’s sales are made every month and they are paid during the month in which they are made. The firm maintains a minimum cash balance of Rs.10,000. Cash deficiencies are made up with bank loans which are repaid at the earliest available opportunity and cash in excess of Rs.15,000 is invested in securities (Interest on bank loans and securities is to be ignored). Outstanding liabilities remain unchanged. 7