EXAMINATION PAPER

FACULTY : BUSINESS AND ACCOUNTANCY

COURSE : MASTER OF BUSINESS ADMINISTRATION (MBA)

YEAR/SEMESTER : FIRST YEAR / SEMESTER ONE

MODULE TITLE : BUSINESS ACCOUNTING & FINANCE

CODE : ACC 501

DATE : 19-AUG, 2018, SUNDAY

TIME ALLOWED : 3 HOURS

START : 01:00 PM FINISH : 4:00 PM

Instruction to candidates

1. This question paper has THREE (3) Section

2. Answer ALL questions in Section A, MCQ.

3. Answer 5 questions in Section B, MSAQ.

4. Answer 2 questions in Section C, MEQ.

5. No scripts or answer sheets are to be taken out of the Examination Hall.

6. For Section A, answer in the OMR form provided.

Do not open this question paper until instructed

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 SECTION A
Multiple Choice Questions (30*1=30)

1. Accounting is a science because_______.

a. It is the body of knowledge which gathered the accounting information in a
systematically, classified and organized manner.
b. It requires creative skills and judgment.
c. It records quantitative financial data.
d. It is an information system.

2. A business firm is separate and distinct from its owners is the assumption of
______.
a. business entity
b. going concern entity
c. money measuring entity
d. accounting Period concept

3. Which of the following transactions will increase cash and cash equivalents and
increase non-current liabilities?
a. Purchasing goods on credit
b. Payment from a customer
c. Payment to a supplier
d. A bank loan

4. Which of the following is the major device for measuring the profitability of a
firm?
a. Balance sheet
b. Income statement
c. Statement of cash flow
d. None of the above

5. The cash flow statement shows all of the following EXCEPT:

a. How the firm's balance sheet changed from one period to another.
b. How funds from operations were used to finance the company's assets.
c. How the firm has matched sources of funds with uses of funds.
d. The firms cost of new borrowing.

6. The ideal level of liquid ratio is______.

a. 3:3
b. 4:4
c. 5:5
d. All of the above

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7. Cost accounting is a specialized branch of accounting which deals with______.
a. classification, recording, allocation and control of costs
b. classification, processing, allocation and directing
c. classification, recording, planning and control of costs
d. classification, recording, allocation and directing

8. The per-unit amount of three different production costs for Jones, Inc., are as
follows:
Production Cost A Cost B Cost C
20,000 $12 $15 $20
80,000 $12 $11.25 $5
What type of cost is each of these three costs?
a. Cost A is mixed, Cost B is variable, Cost C is mixed
b. Cost A is fixed, Cost B is mixed, and Cost C is variable.
c. Cost A is fixed, Cost B is variable, and Cost C is mixed.
d. Cost A is variable, Cost B is mixed, and Cost C is fixed.

9. Which of the following costs is not included while computing unit product cost
under variable costing?
a. Direct Material Cost
b. Direct labor cost
c. Variable Manufacturing Overhead Cost
d. Fixed Manufacturing Overhead Cost

10. Product cost under absorption costing is characteristically______.

a. equal to variable costing
b. lower than under variable costing
c. higher than under variable costing
d. higher sometimes and lower sometimes than variable costing

11. If the contribution margin is 30 percentages, the selling price is $5000, then the
contribution margin per unit will be______.
a. $900
b. $1,200
c. $1,500
d. $1,600

12. The variable cost per unit is multiplied to the quantity of sold units to
calculate______.
a. per unit cost
b. variable cost
c. fixed cost
d. multiple cost

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13. If the contribution margin per unit is $700 per unit and the break-even per unit
is $40, then the fixed cost would be______.
a. $35,000
b. $28,000
c. $17,500
d. $82,000

14. Factor, which are largely considered in making or buying decisions is:
a. quality of suppliers
b. dependability of suppliers
c. production irrelevancy
d. both ‘a’ and ‘b’

15. An opportunity cost is______.

a. unplanned new business
b. obtaining new business opportunities
c. the next best alternatives course of action
d. lost business

16. Costs those are always relevant in decision-making are____.

a. sunk cost
b. fixed cost
c. avoidable cost
d. variable cost

17. The budget which calculates the expected revenues and expected costs, based on
the actual output quantity is named as______.
a. flexible budget
b. fixed budget
c. variable budget
d. multiplied budget

18. Numbers of units are multiplied to per unit price, to calculate______.

a. multiple budget variable
b. fixed budget variable
c. flexible budget variable
d. constant budget

19. Which of the following budgets is normally prepared first?

a. Cash budget
b. Sales budget
c. Merchandise purchases budget
d. Selling expense budget

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20. Contribution margin center is also known as______.
a. Expense center
b. Profit center
c. Investment center
d. All of the above

21. When the revenues are reported in the accounting period under accrual basis of
accounting?
a. When cash is received
b. When service or goods have been delivered
c. When the expenses incurred
d. both ‘a’ & ‘b’

22. Deferred credits will appear on the balance sheet with the______.
a. assets
b. liabilities
c. owner's equity
d. none of the above

23. As per Accounting Standard, the cash flow statement consist of______.
a. operating activities
b. investing activities
c. operating, investing and financing activities
d. both ‘a’ and ‘b’

24. In break-even chart, the angle which is formed by the intersection of sales line
and total cost line that is known as______.
a. margin of safety
b. angle of incidence
c. break-even point
d. none of the above

25. A company wants to earn a profit of Rs.40, 000, what is the value of margin of
safety, if the selling price per unit is Rs.10, variable cost per unit is Rs.6 and
fixed cost is Rs.40, 000?
a. Rs.120, 000
b. Rs.110, 000
c. Rs.100, 000
d. Rs.90, 000

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26. What is the value of debt equity ratio if the value of share capital is Rs.320, 000,
reserve & surplus is 100,000, 10% debenture is Rs.100,000 and preliminary
expenses is Rs.20,000?
a. 24%
b. 26%
c. 25%
d. 28%

27. A Perfection standard______.

a. tends to motivate employees over a long period of time
b. is attainable in an ideal operating environment
c. would makes allowances for normal amounts of scrap and waste
d. is generally perfected by behavioral scientists

28. Which of the following costs is not a component of manufacturing overhead?

a. Indirect material
b. Factory utilities
c. Factory equipment
d. Indirect labor

29. Means of collecting and using information, to coordinate decision and planning
through an organization are termed as______.
a. customer control system
b. business control system
c. financial control system
d. management control system

30. A variance represents the difference between an actual cost and its
corresponding standard costs of which of the following?
a. Material
b. Labor
c. Overheads
d. All of the above

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 SECTION B
Short Answers Questions
Answer any five (5) questions out of seven (7) questions (5*6=30)

1. Explain the purpose of accounting in a business context.

2. The Following is the balance sheet of John Company as on 31 March 2017.

Liabilities Amount Assets Amount

Share Capital 2,00,000 Land & Building 1,40,000
Profit & Loss Account 30,000 Plant & Machinery 3,50,000
General Reserve 40,000 Stock 2,00,000
12 % Debenture 4,20,000 Sundry Debtors 1,00,000
Sundry Creditors 1,00,000 Bills Receivable 10,000
Bills Payable 50,000 Cash at bank 40,000
Total 8,40,000 Total 8,40,000
Requirements
i. Current Ratio (1)
ii. Quick Ratio (1)
iii. Inventory to working capital (2)
iv. Debt Equity Ratio (2)

3. North Face manufacturing company produced and sold 5,000 jackets during the year
and average price of Rs.2,000 per unit. Variable manufacturing cost were Rs.1,000
per unit and variable marketing cost were Rs.200 per unit sold. Fixed cost amounted
to Rs.12,00,000 for manufacturing and Rs.900,000 for marketing and selling
activities.
Required:
a. Compute BEP in units and BEP amount. (2)

b. Compute the number of sales unit required to earn a net income of Rs140,000.
(2)
c. If variable manufacturing cost is expected to increase by 20% in the coming
year. Compute the new BEP in sales revenue. (2)

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4. Harry Furniture manufactures computer tables. Recently a supplier has offered the
tables of the same quality at $14 each with an assurance of continued supply. The
following is the budget for 4000 units prepared for the quarter ending 30 September
2016:

Raw Material Cost $20000

Direct Wages $18000

Production Overheads:
Variable $12000
Fixed $14000

Distribution costs:
Variable $6000
Fixed $7500

Administration Costs:
Variable $5000
Fixed $12500

Required:
i. Should Harry Furniture accept the offer from the supplier? (5)
ii. What would be the decision if the supplier offered the tables at $12 each? (1)

5. The data for the various costs and units of output is given as follows.

Outputs in units 5,000 10,000

Direct material Rs.20,000 Rs.40,000
Direct labor 30,000 60,000
Depreciation 30,000 30,000
Supervision 25,000 45,000
Rent of factory 20,000 20,000
building
Repairs and 20,000 30,000
maintenances
Heat, light and power 20,000 25,000

Required:
Prepare flexible budget for 7,000 and 8,000 units

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6. The following information is supplied to you;
Material A - 30 kg @ Rs.10/kg
Material B - 70 liters @ Rs.15/liter
Standard loss 10% of input is expected in production process

Actual data for the period were:

Material A - 400 kg @ Rs.12/kg
Material B – 600 liters @ Rs.14/liter
Actual output for the period was 850 units

Required:
Possible material variances

7. Elaborate the concept and objective of Management Control System. (2+4)

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 SECTION C
Long Answer Questions
Attempt any two (2) questions out of three (3) questions. (2*20=40)

1. What are the financial statements? Explains the objectives of financial statement?
Describe the conceptual framework for accounting and the qualitative characteristics
of accounting information of financial statement? (4+6+10)
2.
A. A company has provided the following information.
Normal capacity 20,000 units
Production unit's 22,000 units
Sales unit's 25,000 units
Beginning inventory units 5,000 units
Selling price per unit Rs. 10
Direct material per unit Rs. 2
Direct labor per unit Rs. 2
Variable factory overhead per unit Re. 1
Fixed factory overhead Rs. 30,000
Variable selling overhead per unit Re. 1
Fixed administrative overhead Rs. 20,000
Required:
i. Income Statement under Absorption costing method (7)
ii. Reconciliation Statement. (3)

B. Define Standard Cost and Standard Costing. Both Standard Costing and Budgetary
Control have the common objective of Controlling cost and expenses. Explain.
(4+6)

3. The information needed for the preparation of master budget have been provided
below:

Balance Sheet at the end of 2016

Liabilities Rs. Assets Rs.

Share Capital 200,000 Cash at bank 20,000
Retained Earning 20,000 Inventory 120,000
12% Debenture 50,000 Account Receivable 150,000
Account Payable 120,000 Machinery & Plant 100,000
Total 390,000 Total 390,000

Sales units for 4 months:

January February March April

Sales units 20,000 25,000 30,000 25,000

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Selling price per unit is Rs.10. Gross profit averages 40% of sales. Ending inventory
of merchandize will be sales need of next month. Experience shows that all
purchases are paid in the next month of purchase.
50% sales are for cash. Credit sales will be collected in the next month of sales.
Selling and Administrative expenses will be 15% of sales which will be paid same
month. Company is going to purchase machinery in the month of January costing
Rs.100, 000. Depreciation per year will be Rs.30, 000. Company will pay Debenture
on February. Provision for tax and dividend are 25% and 10% respectively. On
March Company issues share capital for Rs.50, 000. The company keeps minimum
cash balance of Rs.30, 000. If the cash is not sufficient, company can take loan from
bank at 12% interest rate per annum which is paid on repayment of loan. All the
borrowings and payments are made in the multiple of Rs.2, 000.
Required:
i. Sales Budget for January to March (3)
ii. Merchandize Purchase Budget for three months ending March (3)

iii. Cash Budget for three months ending March (4)

iv. Budgeted Income Statement up to March (5)
v. Budgeted Balance Sheet at the end of March (5)

****BEST OF LUCK****

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