Set No.

Code No.310106
III B.Tech. I-Semester Regular Examinations, November-2003
1
MANAGERIAL ECONOMICS AND PRINCIPLES OF ACCOUNTANCY
(Common to Civil Engineering, Mechanical Engineering, Production Engineering,
Mechanical Manufacturing Engineering, Chemical Engineering, Metallurgy and
Material Technology, Mechatronics and Computer Science and Systems
Engineering)
Time: 3 hours Max.Marks:80
Answer any FIVE questions
All questions carry equal marks
---

1. Define Managerial economics and point out its chief characteristics. How is
Macro – economics useful to Managerial economics?

2. What is promotional elasticity of demand? How does it differ from cross elasticity
of demand?

3. How will you define economies of scale? Explain the factors which cause
increasing returns to scale.

4. Write short notes on the following:

a) Profit-Volume Ration
b) Margin of Safety

5. Consider the case of the company with the following two investment alternatives
each costing Rs. 9 lakhs. The details of the cash inflows are as follows;

Rs. In Laks.
Project 1 Project 2
Year 1 3 6
2 5 4
3 6 3

The cost of capital is 10 % per year. Which one will you choose
a) under NPV method (b) under IRR method

6. Compare and contrast between perfect competition and monopoly.

7. Explain the features of sole trader form of organisation. Discuss the relative
advantages and limitations of sole trader form of organization.

(Contd…2)
 Code No.310106 -2- Set No.1

8. The summarized balance sheet and Income particulars of Vijetha Electronics for
the year 2001 are given below (Fig. lakhs of Rupees)

Liabilities and Equity Assets

Equity capital 100 Cash and Bank balances 50

Reserves &Surplus 225 Fixed Assets (Net) 300
Long term debt 125 Receivables 150
Short term loans 150 Inventories 200
Trade creditors 100 Prepaid Expenses 25
Provisions 50 Others 25
_____
______
750 750
===== ======
Net sales 950 Cost of goods sold 720
Operating expenses 105 Non operating surplus 26
Interest 50 Taxes 50
Dividends 18 Retained earnings 33

Compute
(a) Gross Profit Margin Ratio (b) EBIT
(c) Current Ratio. (d) Return on Investment.

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 Set No.

Code No.310106
III B.Tech. I-Semester Regular Examinations, November-2003
2
MANAGERIAL ECONOMICS AND PRINCIPLES OF ACCOUNTANCY
(Common to Civil Engineering, Mechanical Engineering, Production Engineering,
Mechanical Manufacturing Engineering, Chemical Engineering, Metallurgy and
Material Technology, Mechatronics and Computer Science and Systems
Engineering)
Time: 3 hours Max.Marks:80
Answer any FIVE questions
All questions carry equal marks
---

1. Explain how Managerial Economics is related to Economics, Statistics,

Mathematics and Accounting.

2. Describe the various methods of measurement of price elasticity of demand.

3. Define and explain isoquants. What are the properties of isoquants? How do they
compare with the properties of indifference curves?

4. Write short notes on the following:

(a) Fixed Cost (b) Variable Cost

5. The following are the details pertaining to a company which is considering to

acquire a fixed asset:
Project A: Cost of the proposal Rs. 42,000, Life 5 years, Average annual
cash inflow Rs.14,000.
Project B: Cost of the proposal Rs. 45,000, Life 5 years
Annual cash inflows: 1st year 28000, 2nd year 12000, 3rd year 10,000 4th year
10,000 and 5th year Rs.10,000. Determine IRR. Which projects do you
recommend?

6. Distinguish between perfect and imperfect markets.

7. Compare and contrast the Partnership business and sole trading business.

(Contd…2)
 Code No.310106 -2- Set No.2

8. The following is the financial information of a Company:

BALANCE SHEET AS ON 31st Dec.2001
LIABILITIES ASSETS
Equity share capital 12,00,00 Fixed Assets 6,05,000
Debentures 2,30,000 Cash & bank 2,20,000
Creditors 1,65,000 Debtors 2,75,000
Bills payable 2,20,000 Stock on hand 8,25,000
Contingent liabilities 1,10,000
________ ________
19,25,000 19,25,000
======= ========

STATEMENT OF PROFIT

Sales Rs.27,50,000
Purchases 10,45,000
Wages 6,60,000
Factory overheads 3,24,500
Selling & distribution expenses 2,75,000
Administration expenses 3,07,000
Interest on debentures 23,000
Income tax 57,750

Determine the following:

(a) Current ratio (b) Debtor-Turnover ratio (c) Inventory-Turnover ratio
(d) Gross profit ratio (e) Net profit-Net worth ratio

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 Set No.

Code No.310106
III B.Tech. I-Semester Regular Examinations, November-2003
3
MANAGERIAL ECONOMICS AND PRINCIPLES OF ACCOUNTANCY
(Common to Civil Engineering, Mechanical Engineering, Production Engineering,
Mechanical Manufacturing Engineering, Chemical Engineering, Metallurgy and
Material Technology, Mechatronics and Computer Science and Systems
Engineering)
Time: 3 hours Max.Marks:80
Answer any FIVE questions
All questions carry equal marks
---

1. “Managerial economics is the discipline which deals with the application of

economic theory to business management.” Discuss.

2. What are the factors that are considered while estimating a firm’s sales?
Enumerate the special difficulties in forecasting sales of consumers’ durables.

3. What is optimum combination? Explain the principle of least cost combination of

factors.

4. Write short notes on:

a) Out of pocket costs
b) Imputed costs

5. A project involves initial outlay of Rs. 1,29,600. Its working life is expected to be
3 years. The cash inflows are likely to be as follows:
1st year.64,000, 2nd year: Rs.56000, 3rd year: Rs. 24,000. Compute the Internal
Rate of Return.

6. Compare between monopoly and perfect competition.

7. Define partnership business and explain its salient features.

(Contd…2)
 Code No.310106 -2- Set No.3

8.a) Determine operating ratio (figures in ‘000s of rupees)

Sales 17,874
Sales returns 4
Other incomes 53
Cost of goods sold 15,440
Administration &
Selling expenses 1,843
Depreciation 63
Interest charges 456

b) From the following particulars determine the following:

(i) Current ratio (ii) Net profit ratio (iii) Gross profit ratio

Stock Rs.50,000 cash Rs.30,000 Debtors Rs.40,000

Bills receivable 10,000 Advances offered 4,000 Bills payable 40,000
Bank overdraft 4,000 Sales 7,00,000 Gross profit 50,000
Net profit 30,000

*** *** ***

 Set No.

Code No.310106
III B.Tech. I-Semester Regular Examinations, November-2003
4
MANAGERIAL ECONOMICS AND PRINCIPLES OF ACCOUNTANCY
(Common to Civil Engineering, Mechanical Engineering, Production Engineering,
Mechanical Manufacturing Engineering, Chemical Engineering, Metallurgy and
Material Technology, Mechatronics and Computer Science and Systems
Engineering)
Time: 3 hours Max.Marks:80
Answer any FIVE questions
All questions carry equal marks
---

1. Managerial Economics is prescriptive rather than descriptive in character.

Examine this statement.

2. Explain the concepts and kinds of elasticity of demand that are relevant to the
manager of a firm.

3. Explain Cobb-Douglas production function. What are its assumptions and

limitations?

4. Write short notes:

a) Sunk costs
b) Abandonment costs

5. Given that a project yields the following cash inflows for six years at an original
cost of Rs.50,000, determine IRR
Year Cash inflows after taxes
Rs.
1 10,000
2 16,000
3 24,000
4 30,000
5 30,0000
6 30,000

6. What is Perfect Competition? How is Market Price determined under conditions

of Perfect Competition?

7. What do you mean by Sole Proprietorship? Explain its merits and limitations.

(Contd…2)
 Code No.310106 -2- Set No.4

8. You have been provided with the financial information of Aruna Mills Ltd for the
current year.
Balance Sheet (Rs. In ‘000)
Liabilities Assets
Equity share capital (Rs.100/--each) 1000 Machinery 640
Reserve & Surplus 368 Land & Buildings 80
Sundry Creditors 104 Cash 160
Bills Payable 200 Debtors 320
Others Contingent Liabilities 20 Stock 480
Pre-paid Insurance 12
___________________________________________________________
TOTAL 1692 1692
___________________________________________________________

PARTICULARS OF INCOME
Sales: Rs.40,00,000; Cost of goods sold: 30,80,000;
Operating Expenses: 6,80,000; Taxes: 1 ,20,000.
Sundry Debtors and stock at the beginning of the year were Rs.3,00,000 and
Rs.4,00,000 respectively.

Determine the following: (a) Current ratio (b) Quick ratio

(c) Stock- Turnover ratio (d) Gross profit ratio (e) Earnings per share and
(f) Return on Equity capital.

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