Appendix. IPCC Gr. I (New Course) (Solution upto November & Question of May ) Free of Cost ISBN :

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1 Free of Cost ISBN : Appendix IPCC Gr. I (New Course) (Solution upto November & Question of May ) Paper - 3A : Cost Accounting Chapter-1 : Basic Concepts Nov [5] (i) Please refer Nov [1] {C} (a) (i) on page no. 13. Chapter-2 : Material Cost Nov [7] (c) Please refer May [5] (c) on page no. 38 Chapter-3 : Employee Cost Nov [1] {C} (b) Standard Time = 150 hours Actual Time = 120 hours i.e. 15 days Time Saved = 30 hours Hourly Wage Rate = ` 10 DA = ` 30 / day = = 450 (i) Rowan Premium Plan (Actual Time Time Rate) + (Time Saved Time Rate) = ( DA) + (30 10) (ii) = ( ) + (240) = 1, = ` 1,890 Emerson's Efficiency Plan Total Wage = Wage + Bonus = Normal Wage + DA + Bonus. Now Normal Wage = = 1,200

2 Appendix IPCC Gr. I Paper - 3 I-2 DA = = 450 efficiency level = 100 = 100 = 25% Bonus upto 100% = 20% Bonus from 101% to 125% = 25% Total Bonus % = 45% Thus Bonus = 45% of Normal Wage = 45% 1,200 = ` 540 Total Wage = 1, = ` 2,190 Chapter-4 : Overheads Nov [2] (a) Absorbed overheads = Actual Man days Rate = 1,50, = ` 75,00,000 Under absorption of overheads = Actual overheads - Absorbed overheads = 79,00,000-75,00,000 = ` 4,00,000 Reasons for under-absorption: 1. Defective Planning 4,00,000 60% = ` 2,40, Increase in overhead cost 4,00,000 40% = ` 1,60,000 Treatment in Cost Accounts: (i) The unabsorbed overheads of ` 2,40,000 on account of defective planning to be treated as abnormal and thus be charged to costing profit & loss account. (ii) The balance of unabsorbed overheads i.e. ` 1,60,000 be charged as below on the basis of supplementary overhead absorption rate Supplementary Rate = ` 1,60,000 (30, , % of 10,000) = ` 4 per unit (a) To Cost of Sales Account = 30,000 4 = ` 1,20,000 (b) To Finished Stock Account = 5,000 4 = ` 20,000 (c) To WIP Account = 50% of 10,000 4 = ` 20,000 ` 1,60,000

3 Appendix IPCC Gr. I Paper - 3 I-3 Chapter-5 : Integrated & Non-Integrated Accounts Nov [4] (b) Stores Ledger Control A/c Particulars ` Particulars ` To Balance b/d To General Ledger To Adjustment A/c To Work in Process A/c 9,000 48,000 24,000 By Work in Process By Overhead Control A/c By Overhead Control A/c (Deficiency) By Balance c/d 48,000 6,000 1,800* 25,200 81,000 81,000 Work in Progress Control A/c Particulars ` Particulars ` To To To To Balance b/d Stores Ledger Control A/c Wages Control A/c Overheads Control a/c 18,000 48,000 18,000 72,000 By Stores Ledger Control a/c By Costing P/L a/c (Balancing figures being Cost of finished goods) By Balance c/d 24,000 1,20,000 12,000 1,56,000 1,56,000 Overheads Control A/c Particulars ` Particulars ` To Stores Ledger Control A/c To Stores Ledger Control A/c To Wages Control A/c (21,000-18,000) To General Ledger Adjustment A/c 6,000 1,800 3,000 75,000 By Work in Process A/c By Balance c/d (Under absorption) 72,000 13,800 85,800 85,800 Costing Profit & Loss A/c Particulars ` Particulars ` To Work in progress To General Ledger Adjustment A/c (Profit) 1,20,000 12,000 By General ledger Adjustment A/c (Sales) (1,20, ,000) 1,32,000 1,32,000 1,32,000

4 Appendix IPCC Gr. I Paper - 3 I-4 Chapter-8 : Contract Costing Nov [7] (d) Notional Profit: Notional Profit is the excess of income till date over expenditure till date on a contract. Since actual profit can be computed only after the contract is complete, notional profit is used to recognise profit during the course of contract. The notional profit is computed as follows: Value of work certified Add: Cost of work uncertified xxx x xxxx Less: Costs incurred till date x Notional profit xxx Retention Money: The contractor gets money on the basis of work completed as certified by the certificate of work done. Some times the customer does not pay the whole value of work done. As per the agreement, a certain percentage of the value of work done is retained by the customer. This is called Retention Money. The objective behind Retention Money is to place the customer in a favourable position as against the contractor. It safeguards the interest of the customer as against failure of the contractor to fullfil any of the clause of the agreement or against the defective work found later on. Chapter-10 : Process Costing Nov [3] (a) (i) Statement of Equivalent Production Particulars Units Material Labour and Overhead Production units completed Normal Loss 8% of (1,82, ,000) Closing WIP Total Less: Abnormal Gain 1,58,000 15,200 18,000 1,91,200 1,200 % Units % Units ,58,000 18,000 1,76,000 1, ,58,000 12,600 1,70,600 1,200 Total 1,90,000 1,74,800 1,69,400

5 Appendix IPCC Gr. I Paper - 3 I-5 (ii) Statement of cost Particulars Materials Labour Overhead Opening WIP input of Materials Expenses Total Less: Sales of Scrap (15,200 8) 63,900 7,56,900 8,20,800 1,21,600 ` ` ` 10,800 3,28,000 3,38,800 5,400 1,64,000 1,69,400 Net cost 6,99,200 3,38,800 1,69,400 Equivalent units 1,74,800 1,69,400 1,69,400 Cost Per Unit ` 4.00 ` 2.00 ` 1.00 Total cost per unit = = ` 7.00 Chapter-12 : Standard Costing Nov [6] (b) Budgeted Production 30,000/6 = 5,000 units Budgeted Fixed Overhead Rate = 4,50,000/5,000 = ` 90 per unit 1. Material Cost Variance = Total Standard Cost for Actual Output - Total Actual Cost = 4, ,25,000 = 4,80,000-5,25,000 = 45,000 (A) 2. Labour Cost Variance = Total Standard Cost of labour for Actual Output - Total Actual Cost of labour = 4, ,55,000 = 1,58,400-1,55,000 = 3,400 (F) 3. Fixed OH Cost Variance = Recovered Fixed overhead - Actual Fixed overhead = 90 4,800-4,70,000 = 38,000 (A) 4. Variable OH Cost Variance = Recovered Variable overheads - Actual Variables overheads = 4, = 2,88,000-2,93,000 = 5,000 (A)

6 Appendix IPCC Gr. I Paper - 3 I-6 Chapter-13 : Marginal Costing Nov [1] {C} (a) (i) P/V Ratio : 50% Margin of Safety : 40% Sale Volume : 500 units Sale Revenue : ` 5,00,000 Sale / Unit : ` 1,000 Now : Margin of Safety = 100 or 40 = 100 or 2,00,000 = 5,00,000 - BEP or BEP = 3,00,000 BEP / Unit = = = 300 (ii) BEP / Unit = 300 Profit at present level of sale Margin of Safety = Profit = Margin of Safety P/V Ratio = (40% 5,00,000) 50% = 2,00,000 50% = ` 1,00,000 Fixed Cost = (Sales P/V Ratio) - Profit = (5,00,000 50%) - 1,00,000 = 2,50,000-1,00,000 = ` 1,50,000 Now Desired Profit = 10% on Sale Let the Sale be x Desired Profit = 10% of x Again Sales = or x = 50% of x = 1,50, % of x

7 Appendix IPCC Gr. I Paper - 3 I-7 or x = ` 3,75,000 Sales = ` 3,75,000 Thus sales in units to earn a profit of 10% on sales = = 375 units Chapter-14 : Budgets & Budgetary Control Nov [5] (ii) Fixed Budgets: A budget prepared for a particular level of activity is called fixed budget. It presents the cost details for a specific level of activity, Consequently, budgeted costs for budgeted level of activity are compared with the actual costs for actual level of activity. Therefore, fixed budget is not going to highlight the cost variances due to the difference in the levels of activity. Flexible Budgets: A budget prepared for a range of activities rather than a single level of activity is called flexible budget. It is capable of furnishing the budgeted cost at any level of activity. It recognises the behaviour of costs and classifies them into variable, fixed and semi-variable. On the basis of this, the budget is designed to change (i.e., flex) in relation to the level of activity attained. Therefore, it is able to compute and compare the budgeted costs for actual level of activity attained. In order to prepare the flexible budgets, tabular method is normally used Nov [7] (e) (ii) Advantages of budgetary control are: 1. Budget establishes the objective of the organisation and enables the management to conduct business in the most efficient manner. 2. Budget is helpful in allocating scarce resources in most optimal way. 3. Budget identifies the areas of in-efficiencies within the organisation. 4. Budget is the most important tool of controlling because it provides a yardstick against which the performance of organisation can be evaluated. 5. Budget is a basis for management by exception by comparing actual and budgeted results. 6. Budget ensures effective utilisation of men, machine, material and money. Paper - 3B : Financial Management Chapter-1 : Scope and Objectives of Financial Management Nov [7] (a) Please refer May [7] (b) on page no Chapter-2 : Time Value of Money Nov [7] (b) Please refer May [8] (a) on page no. 526

8 Appendix IPCC Gr. I Paper - 3 I-8 Chapter-3 : Financial Analysis and Planning Nov [2] (b) (i) Quick ratio = Quick Assets = Current Assets - Stock - Prepaid Expenses = 30,50,000-21,60,000-10,000 Quick Assets = 8,80,000 Quick Ratio = 8,80,000/10,00,000 = 0.88:1 (ii) Debt-Equity Ratio = = 0.57:1 (iii) Return on Capital Employed (ROCE) = ROCE = 100 (iv) Average Collection Period = 360 = 360 = 100 = 27.27% = 45 days Chapter-4 : Financing Decisions-Cost of Capital & Capital Structure Nov [1] {C} (d) (i) Cost of Equity Share Capital (K e ) K e (after tax) = DPS = 25% of ` 4 = ` 1.00 K e = K e = 10.5% (ii) Cost of Debt (K d ) K d (After tax) = 100 (1 - T) Interest on ` 10% = 20,000

9 Appendix IPCC Gr. I Paper - 3 I-9 Interest on ` 15% = 30,000 50,000 K d = 100 (1-0.3) = 8.75% (iii) Weighted Average Cost of Capital (WACC) Source (1) Equity Debt Amount (2) In ` 6,00,000 4,00,000 Weights (3) Cost of Capital (4) Weighted Average Cost (5) = (3) (4) Weighted Average Cost of Capital or 9.8% Chapter-5 : Business Risk, Financial Risk & Leverage Nov [3] (b) Total Assets = ` 48,00,000 Total Assets Turnover Ratio = 2.5 Total Sales = 48,00, = ` 1,20,00,000 Computation of Profit after Tax (PAT) Particulars Sales Less: Variable Cost (60% of Sales Contribution) Contribution Less: Fixed Cost (other than Interest) Less: Interest on Debentures (15% of 28,00,000) PBT Less: 30% PAT Amount 1,20,00,000 72,00,000 48,00,000 28,00,000 20,00,000 4,20,000 15,80,000 4,74,000 11,06,000 (i) EPS = = = ` (ii) DCL = Or =

10 Appendix IPCC Gr. I Paper - 3 I-10 = = 3.04 Chapter-6 : Types of Financing Nov [5] (iii) Basis of Difference Finance Lease Operating Lease Lease Term Risk and Rewards transferred Bearer of Risk of obsolescence Continuation of Lease Lease term is for the major part of the economic life of the assets. Under finance lease the Lessor transfers substantially all the risk and rewards incident to ownership of an asset to the Lessee. The risk of obsolescence falls on the Lessee. Continuation of lease is reasonably certain. Cancellation Finance Leases are generally non-cancellable unless contract provides otherwise Nov [7] (e) (i) Please refer May [9] (b) (iii) on page no. 652 Chapter-8 :Capital Budgeting and Investment Decisions Nov [5] (iv) Please refer May [2] (a) (iii) on page no Nov [6] (a) Working Notes: Depreciation on Machine X = = ` 30,000 Depreciation on Machine Y = = ` 40,000 Lease term is significantly less than the economic life of the assets. Under operating lease, the lessor does not transfer substantially all the risks and rewards incident to ownership of an assets to the Lessee. The risk of obsolescence falls on the Lessor. Continuation of lease is not reasonable certain. Operating leases are generally cancellable unless contract provides otherwise.

11 Appendix IPCC Gr. I Paper - 3 I-11 Particulars Machine X (`) Machine Y (`) Annual Savings: Wages Scrap Total Savings (A) Annual Estimated Cash Cost: Indirect Material Supervision Maintenance Total Cash Cost (B) Annual Cash Savings (A-B) Less: Depreciation Annual Savings before Tax Less: 30% Annual Savings/Profit (After Tax) Add: Depreciation 90,000 10,000 1,00,000 6,000 12,000 7,000 25,000 75,000 30,000 45,000 13,500 31,500 30,000 1,20,000 15,000 1,35,000 8,000 16,000 11,000 35,000 1,00,000 40,000 60,000 18,000 42,000 40,000 Annual Cash Inflows 61,500 82,000 Evaluation of Alternatives (i) Average Rate of Return Method (ARR) ARR = Machine X = 100 = 42% Machine Y = 100 = 35% (ii) Decision: Machine X is better. Present Value Index method Present Value = Annual Cash inflow P.V. 10% Machine X = 61, = ` 2,33,085 Machine Y = 82, = ` 3,57,028 P.V. Index = Machine X = =

12 Appendix IPCC Gr. I Paper - 3 I-12 Machine Y = = Decision: Machine X is better. Chapter-9 : Meaning, Concept & Policies of Working Capital Nov [4] (a) Computation of Operating Cycle (1) Raw Material Storage period (R) = = = days Raw Material Consumed = Opening Stock + Purchases - Closing Stock = 1,80, ,00,000-2,00,000 = ` 10,80,000 (2) Conversion/Work-in-Process Period (W) Conversion/Processing Period = = = 18.7 days Production Cost: Opening Stock of WIP = 60,000 Add: Raw Material Consumed = 10,80,000 Add: Wages = 3,00,000 Add: Production Expenses = 2,00,000 16,40,000 Less: Closing Stock of WIP = 1,00,000 Production Cost 15,40,000 (3) Finished Goods Storage Period (F) Finished Goods Storage period = = = days Cost of Goods Sold ` Opening Stock of Finished Goods 2,60,000 Add: Production Cost 15,40,000 18,00,000 Less: Closing Stock of Finished Goods 3,00,000 15,00,000

13 Appendix IPCC Gr. I Paper - 3 I-13 (4) Debtors Collection Period (D) Debtors Collection Period = = = 31.5 days (5) Creditors Payment Period (C) Creditors Payment Period = = = 72 days (6) Duration of Operating Cycle (O) O = R + W + F + D - C = = days Computation of Working Capital (i) Number of Operation Cycles per Year = 360/Duration Operating Cycle = 360/ = (ii) Total Operating Expenses ` Total Cost of Production 15,00,000 Add: Administration Expenses 1,75,000 Selling Expenses 75,000 17,50,000 (iii) Working Capital Required Working Capital Required = Assumption: No. of days in a year = 360 days. Chapter-12 : Management of Receivables Nov [1] {C} (c) Working Notes: (i) Receivable Turnover = = 8 Times = = ` 5,28,541 (ii) Average Investment in Receivables = = = ` 12,750 (iii) Opportunity Cost of Funds Blocked = 12,750 40/100 = 5,100

14 Appendix IPCC Gr. I Paper - 3 I-14 Evaluation of Credit to New Customer A. Profit on Additional Sales Increase in Annual Sales 1,20,000 Less: Cost of Sales being 85% 1,02,000 18,000 Less: Bad Debts Loss (10% on sales) 12,000 Profit before Tax 6,000 Less: 30% 1,800 Net Profit after Tax 4,200 B. Opportunity Cost of Investment in Receivables (12,750 40) 5,100 C. Net Benefit/Loss (A - B) (900) Decision: The offer should not be accepted since ` 4,200 the estimated profit after tax on additional sales is less than the required return on additional investment of ` 5,100 in receivables. Question Paper of May, 2012 Chapter-1 : Basic Concepts May [5] (b) State the types of cost in the following cases : (i) Interest paid on own capital not involving any cash outflow. (ii) Withdrawing money from bank deposit for the purpose of purchasing new machine for expansion purpose. (iii) Rent paid for the factory building which is temporarily closed. (iv) Cost associated with the acquisition and conversion of material into finished product. (4 marks) Chapter-2 : Material Cost May [7] (e) Distinguish between bill of material and material requisition note. (4 marks) Chapter-3 : Employee Cost May [3] (a) The management of a company wants to formulate an incentive plan for the workers with a view to increase productivity. The following particulars have been extracted from the books of company. Piece Wage rate ` 10 Weekly working hours 40 Hourly wages rate ` 40 (guaranteed) Standard/normal time taken per unit 15 minutes.

15 Appendix IPCC Gr. I Paper - 3 I-15 Actual output for a week : Worker A 176 pieces Worker B 140 pieces Differential piece rate: 80% of piece rate when output below normal and 120% of piece rate when output above normal. Under Halsey scheme, worker gets a bonus equal to 50% of Wages of time saved. Calculate : (i) Earning of workers under Halsey s and Rowan s premium scheme. (ii) Earning of workers under Taylor s differential piece rate system and Emerson s efficiency plan. (8 marks) Chapter-4 : Overheads May [1] {C} (b) A machine costing ` 10 lacs was purchased on The expected life of the machine is 10 years. At the end of this period its scrap value is likely to be ` 10,000. The total cost of all the machines including new one was ` 90 lacs. The other information is given as follows: (i) Working hours of the machine for the year was 4,200 including 200 nonproductive hours. (ii) Repairs and maintenance for the new machine during the year was ` 5,000. (iii) Insurance Premium was paid for all the machine ` 9,000. (iv) New machine consumes 8 units of electricity per hour, the rate per unit being ` (v) The new machine occupies area of the department. Rent of the department is ` 2,400 per month. (vi) Depreciation is charged on straight line basis. Compute machine hour rate for the new machine. (5 marks) Chapter-5 : Integrated & Non-Integrated Accounts May [5] (a) What is an Integrated Accounting System? State its advantages. (4 marks) Chapter-8 : Contract Costing May [2] (a) A contractor commenced a contract on The costing records concerning the said contract reveal the following information as on : Amount ` Material sent to site 7,74,300 Labour paid 10,79,000 Labour outstanding as on ,02,500 Salary to Engineer 20,500 per month Cost of plant sent to site ( ) 7,71,000 Salary to Supervisor 9,000 per month

16 Appendix IPCC Gr. I Paper - 3 I-16 (3/4 time devoted to contract) Administration & other expenses 4,60,600 Prepaid Administration expenses 10,000 Material in hand at site as on ,800 Plant used for the contract has an estimated life of 7 years with residual value at the end of life ` 50,000. Some of material costing ` 13,500 was found unsuitable and sold for ` 10,000. Contract price was ` 45,00,000. On two third of the contract was completed. The architect issued certificate covering 50% of the contract price and contractor has been paid ` 20,00,000 on account. Depreciation on plant is charged on straight line basis. Prepare Contract Account. (8 marks) Chapter-10 : Process Costing May [6] (a) A product passes through two processes A and B. During the year 2011, the input to process A of basic raw material was 8,000 ` 9 per unit. Other information for the year is as follows : Process A Process B Output units 7,500 4,800 Normal loss (% to input) 5% 10% Scrap value per unit (`) 2 10 Direct wages (`) 12,000 24,000 Direct expenses (`) 6,000 5,000 Selling price per unit (`) Total overheads ` 17,400 were recovered as percentage of direct wages. Selling expenses were ` 5,000. There are not allocate to the processes. 2/3 of the output of Process A was passed on to the next process and the balance was sold. The entire output of Process B was sold. Prepare Process A and B Accounts. (8 marks) Chapter-12 : Standard Costing May [4] (a) SJ Ltd. has furnished the following information : Standard overhead absorption rate per unit ` 20 Standard rate per hour ` 4 Budgeted production 15,000 units Actual production 15,560 units Actual overheads were ` 2,95,000 out of which ` 62,500 fixed. Actual hours 74,000 Overheads are based on the following flexible budget. Production (units) 8,000 10,000 14,000 Total Overheads (`) 1,80,000 2,10,000 2,70,000 You are required to calculate the following overhead variances (on hour s basis) with appropriate workings:

17 Appendix IPCC Gr. I Paper - 3 I-17 (i) Variable overhead efficiency and expenditure variance. (ii) Fixed overhead efficiency and capacity variance. (8 marks) Chapter-13 : Marginal Costing May [7] (c) Write short notes : (ii) Angle of Incidence (2 marks) May [7] (d) Discuss basic assumptions of Cost Volume Profit analysis. (4 marks) Chapter-14 : Budgets & Budgetary Control May [1] {C} Answer the following: (a) AK Limited produces and sells a single product. Sales budget for calendar year 2012 by quarters is as under: Quarters I II III IV No. of units to be sold 18,000 22,000 25,000 27,000 The year is expected to open with an inventory of 6,000 units of finished products and close with inventory of 8,000 units. Production is customarily scheduled to provide for 70% of the current quarter s sales demand plus 30% of the following quarter demand. The budgeted selling price per unit is ` 40. The standard cost details for one unit of the product are as follows: Variable Cost ` per unit. Fixed Overheads 2 hours 30 ` 2 per hour based on a budgeted production volume of 1,10,000 direct labour hours for the year. Fixed overheads are evenly distributed through-out the year. You are required to: (i) Prepare Quarterly Production Budget for the year. (ii) In which quarter of the year, company expected to achieve break-even point. (5 marks) Paper - 3B : Financial Management Chapter-1 : Scope and Objectives of Financial Management May [7] Answer the following : (a) The profit maximization is not an operationally feasible criterion. Comment on it. (4 marks) Chapter-3 : Financial Analysis and Planning May [2] (b) The Balance Sheet of X Ltd. as on and are as under: Liabilities Assets Equity Share capital (` 10 each) General Reserve 18,00,000 7,50,000 22,00,000 6,00,000 Fixed Assets (Including machine) Stock 20,50,000 7,10,000 18,75,000 8,95,000

18 Appendix IPCC Gr. I Paper - 3 I-18 Security premium Profit & Loss A/c 7% Debentures Creditors Provision for tax 50,000 4,50,000 3,00,000 1,50,000 1,45,000 45,000 5,30,000 2,00,000 2,15,000 1,65,000 Debtors Cash Balance Preliminary Expense 7,25,000 1,25,000 35,000 9,80,000 1,80,000 25,000 36,45,000 39,55,000 36,45,000 39,55,000 Additional Information : (i) Depreciation charged on fixed assets during the year was ` 2,05,000. An old machine costing ` 2,00,000 (WDV ` 80,000) was sold for ` 65,000 during the year. (ii) Provisions for tax made during the year for ` 1,78,000. (iii) On company redeemed debenture of ` 1,00,000 at a premium of 5%. (iv) Company has issued fully paid bonus shares of ` 2,00,000 by capitalisation of profit. Prepare Cash Flow Statement. (8 marks) May [7] Answer the following : (b) Explain the important ratios that would be used in each of the following situations. (i) A bank is approached by a company for a loan of ` 50 lakh for working capital purposes. (ii) A long term creditors interested in determining whether his claim is adequately secured. (iii) A shareholder who is examining his portfolio and who is to decide whether he should hold or sell his holding in the company. (iv) A finance manager interested to know effectiveness with which a firm uses its available resources. (4 marks) Chapter-4 : Financing Decision-Cost of Capital & Capital Structure May [1] {C} (c) RES Ltd. is an all equity financed company with a market value of ` 25,00,000 and cost of equity, k e = 21%. The company wants to buyback equity shares worth ` 5,00,000 by issuing and raising 15% perpetual debt of the same amount. Rate of tax may be taken as 30%. After the capital restructuring and applying MM Model (with taxes), you are required to calculate: (i) Market value of RES Ltd. (ii) Cost of Equity k e (iii) Weighted average cost of capital and comment on it. (5 marks) May [5] (d) What is Net Operating income theory of capital structure? Explain the assumptions on which the NOI theory is based. (4 marks)

19 Appendix IPCC Gr. I Paper - 3 I-19 Chapter-5 : Business Risk, Financial Risk & Leverage May [6] (b) The capital structure of JCPL Ltd. is as follows : ` Equity share capital of ` 10 each 8,00,000 8% Preference share capital of ` 10 each 6,25,000 10% Debenture of ` 100 each 4,00,000 18,25,000 Additional Information : Profit after tax (tax rate 30%) ` 1,82,000 Operating expenses (including depreciation ` 90,000) being 1.50 times of EBIT Equity share dividend paid 15%. Market price per equity share ` 20. Required to calculate : (i) Operating and financial leverage. (ii) Cover the preference and equity share dividends. (iii) The earning yield and price earning ratio. (iv) The net fund flow. (8 marks) Chapter-6 : Types of Financing May [5] (c) Discuss factors that a venture capitalist should be considered before financing any risky project. (4 marks) May [7] (c)write short notes : (i) Deep Discount Bonds (2 marks) Chapter-8 :Capital Budgeting and Investment Decisions May [4] (b) ANP Ltd. is providing the following information : Annual cost of saving ` 96,000 Useful life 5 years Salvage value zero Internal rate of return 15% Profitability index 1.05 Table of discount factor : Discount factor Years Total 15% % % You are required to calculate : (i) Cost of the project (ii) Pay back period

20 Appendix IPCC Gr. I Paper - 3 I-20 (iii) Net present value of cash inflow (iv) Cost of capital (8 marks) Chapter-9 : Meaning, Concept & Policies of Working Capital May [3] (b) STN Ltd. is a ready made garment manufacturing company. Its production cycle indicates that materials are introduced in the beginning of the production phase; wages and overhead accrue evenly throughout the period of cycle. The following figures for the 12 months ending 31 st December 2011 are given. Production of shirts 54,000 units Selling price per unit ` 200 Duration of the production cycle 1 month Raw material inventory held 2 month s consumption Finished goods stock held for 1 month Credit allowed to debtors is 1.5 months and credit allowed by creditors is 1 month. Wages are paid in the next month following the month of accrual. In the work-in-progress 50% of wage and overheads are supposed to be conversion costs. The ratios of cost to sales price are - raw materials 60%, direct wages 10% and overheads 20%. Cash is to be held to the extent of 40% of current liabilities and safety margin of 15% will be maintained. Calculate amount of working capital required for the company on a cash cost basis. (8 marks) Chapter-12 : Management of Receivables May [1] {C} (d) A company is presently having credit sales of ` 12 lakh. The existing credit terms are 1/10, net 45 days and average collection period is 30 days. The current bad debts loss is 1.5%. In order to accelerate the collection process further as also to increase sales, the company is contemplating liberalisation of its existing credit terms to 2/10, net 45 days. It is expected that sales are likely to increase 1/3 of existing sales, bad debts increase to 2% of sales and average collection period to decline to 20 days. The contribution to sales ratio of the company is 22% and opportunity cost of investment in receivables is 15% percent (pre tax). 50 percent and 80 percent of customers in term of sales revenue are expected to avail cash discount under existing and liberalisation scheme respectively. The tax rate is 30%. Should the company change its credit terms? (Assume 360 days in a year). (5 marks) Shuchita Prakashan (P) Ltd. 25/19, L.I.C. Colony, Tagore Town, Allahabad Visit us :