MANAGEMENT PROGRAMME
Term-End Examination
December, 2015
MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS
Time : 3 hours Maximum Marks : 100
Note : Attempt any five questions. All questions carry equal
marks. Use of calculators is allowed.

1. (a) What do you understand by Accounting Standards ? Why are they necessary ? Explain with examples.

(b) Explain Money Measurement and Continuity Concepts in accounting and discuss the limitations of the former concept.

2(a) What do you understand by the term 'provisions' ? For what purposes are provisions made and how are they shown in the final accounts ? Why are pre - paid expenses and Net loss shown on the asset side of the balance - sheet ?

3. Explain the Internal Rate of Return method of appraisal of investment proposals. Point out its merits and limitations. Is this method related to the Pay Back method ? Explain.

4. What do you understand by Break - even analysis ? Explain with the help of a chart. Are there any assumptions underlying the Break even analysis ? Explain how do these assumptions make Break - even analysis unrealistic ?

5. Discuss the concepts of Gross and Net Working Capital. What factors are taken into consideration while determining the amount of working capital for a business entity ? How does a low Inventory Turnover Ratio affect the working capital needs of a firm ?

6. Explain the following statements :

(a) Dividend, Investment and Financing decisions are inter-dependent.

(b) Debt is a double - edged knife.

(c) Higher profit margin need not necessarily lead to higher rate of return on investment.

(d) Retained earnings do have a cost

sol see similar questions

7. A company produces 30,000 units of product - A and 20,000 units of product - B per annum. The sales value and costs of the two products are as follows :

Sales Value 7,60,000

Direct Material 1,40,000

Direct Labour 1,90,000

Factory Overheads 1,90,000

Administrative and Selling overheads 1,20,000

50% of the factory overheads are variable and 50% of the administrative and selling overheads are fixed. The selling price of A is rs12 per unit and B is rs 20 per unit. The direct material and labour ratio of product A is 2 : 3 and for B is 4 : 5. For both the products the selling price is 40% of direct labour. The factory overheads are charged in the ratio of direct labour and administrative and selling overheads are recovered at a flat rs 2 per unit of A and rs 3 per unit of B. Due to fall in demand of the above products the company has a plan to diversify and make product - C using 50% capcity. It has been estimated that for product - C direct material and direct labour cost will be ! 2.50 and Z 3 per unit respectively. Other variable costs will be the same as applicable to product - A. The Selling Price of product - C is rs14 per unit and production will be 30,000 units. Assuming 50% capacity is used for manufacture of A and B,

calculate : (a) Present costs and profit,

(b) Costs and profit after diversification and

(c) Give your recommendation as to whether to diversify or not