Summer Exam-2009

(Intermediate)

Performance Measurement (05-05-2009) Duration: 3 hrs.

[Instructions]
Ensure that the question paper delivered to you is the same, in which you intend to appear. Read the instructions given on the title page of Answer Copy.

Marks-100

Attempt all Questions

Q.1.
(a)

What is function of MRP system?

(05)

(b)

ABC recognizes the factors other than volume. It provides useful system for analyzing (02) the different types of transaction which cause overhead to incurred. What are those different types of transactions? What is Customer Profitability Analysis (CPA)? What is Management by Exception? What Standard Cost Card Shows? Define Sales Price Variance. Define Activity Based Costing (ABC). What is Budget Slack? Define Limiting Factor. What ratios are included under the head liquidity & working capital? Calculate the quantity of material used from the following data in:
Budgeted Actual

(c)

(04) (03) (02) (04) (05) (05) (05) (05) (04)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Q.2.

Material for one unit Cost/Kg. Units produced Adverse Material usage
Q.3.

5 Kg. Rs. 5 575 Nos. Rs. 150

M/S Sabir (Pvt.) Ltd. uses standard costing system. Data given below relate to Labour. Actual Hours worked Standard allowance for actual productions Standard rate per hour Rate variance (Adverse) What is actual rate of pay per hour? 20,800 hours 16,640 hours Rs. 2.5 Rs. 2,080

(04) (04)

Q.4.

Calculate the standard cost of direct material & direct labour using the following data?

Deptts Standard Labour rate/unit Standard Labour rate/unit Direct Material Tyre Wire Nut/Bolts

A 04 08 Quantity 50 25 500

B 2.5 12 Rate 0.10 each 0.05 0.02

C 06 10

(Contd. on back)

Q.5.

Calculate the break even point in units when: Sales Price Sales Variable Cost (0.5 per unit) Fixed Cost = Rs. 1 each = Rs. 60,000 = Rs. 30,000 = Rs. 20,000

(05)

Q.6.

M/S Tolta Ltd. manufacture various products. It has its selling division in each big city (06) and it transfers products from manufacturing division to selling division on regular bais. During June 2008 manufacturing division transferred 10,000 units to Multan selling division. Each unit cost Rs. 140 to manufacture. The variable cost is Rs. 98 per unit. It is sold for Rs. 240. Multan selling division incurred marketing and distribution costs of Rs. 32,000. Tax rate is 40%. All transfer of product is made at variable cost. Required: Profit after Tax of Multan selling division.

Q.7.

A company sells two products F & G. The budgeted figure depict the under mentioned (07) picture. Product F
(per unit) Rs.

Product G
(per unit) Rs.

Selling Price Variable Cost Common fixed Cost Required:

120 60 Rs. 1,025,800

144 120

Which product should be promoted & why?

Q.8.

M/S Delta is an Engineering firm & manufactures various parts for other allied units on their specific order. It consists of various departments such as Foundry, Machine Shop, Fitting Shop, Welding Shop, Assembly etc. There is one central store from where the material on each job is issued. Labor is paid on monthly basis. There is no piece rate system. The costs are recorded as are actually booked in the accounts books. The data for the 1st month is as under: Units Sft Budgeted Actual Standard 3000 3100 Selling Price 150 145 140 95 Full cost of Product Variable cost

In foundry, the various metals are mixed to cast various parts. Central store record show that following material A & B were issued to make spare part D. A B Product D Kgs 2500 3650 80 units

Cont

The standard materials usage & cost of one unit D are as follows: Material A B 25Kg @ Rs. 2 per kg 50Kg @ Rs. 3 per kg Rs. 50 150 200

The company obtained orders on continuous basis. There was no shut down during the year. The Profit & Loss statement & Balance Sheet is given below: Profit & Loss Statement Sales Cost of Sales Gross Profit Selling & Admin. Exp. Interest Taxation Profit after Taxation Balance Sheet Bank Receivable Inventories Fixed Assets Total: Required: a) Calculate from the data for the 1st month:
i) ii) iii) iv) Selling Price Variance Volume profit variance Sales volume contribution variance Sales volume revenue variance

Rs. 1,962 1,290 672 400 58 458 214 104 110

Rs. 116 282 606 492 _____ 1,496

Ordinary Share Capital Retained Profits Long Term Loans Trade Payable Other Payable

Rs. 200 660 276 150 210 1,496

(12)

b) Calculate from Material Record:

i) Material usage variance

(04) (04) (10)

c) What cost system is suitable for finding the cost and why? d) Calculate:
i) ii) iii) iv) Gross Profit Margin Debt/Equity Ration Quick Ratio Gearing ration

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Winter Exam-2009
(Intermediate)

Performance Measurement (03-11-2009) Duration: 3 hrs.

[Instructions]
Ensure that the question paper delivered to you is the same, in which you intend to appear. Read the instructions given on the title page of Answer Copy.

Marks-100

Attempt all Questions

Q.1.

Prepare the statement of equivalent unit in total for the process 2nd of a two stage (05) production process for the month of August 2009. The data is as under: Closing Stock Completes as to Process 1st Material Added Material Labour Overhead Opening Stock Completes as to Material from 1st process Added Material Labour Overhead 50 Units 100% 60% 50% 50% 100 Units 100% 90% 80% 80%

In Aug. 2009, 600 units were transferred from process 1st.

Q.2.

M/S. Alpha production wants to know the following:a) b) c) d) Direct Labour rate variance Direct Labour efficiency Variance Idle time variance Direct Labour total variance

(08)

When in the year 2008 i) Actual Hours worked Total Direct Labour Cost Units produced Hours Utilized only due to shortage of orders ii) Standard Rate per unit Labour rate per hour Hours required for one unit
Q.3.

Rs.

12320 70,000 6,000 11,920

Rs.

10 5 2

Axe, a division of Baig Consultative Group, manufactures bolts which it sells to external customers and also to Cax division, another member of the group. Baig Consultative Groups policy on prices is that divisions have the freedom to set transfer prices and choose their suppliers. The Baig Consultative Group uses Residual Income (RI) to assess divisional performance and each year it sets each division a target RI. AXE DIVISION Budget for the following year is detailed as follows:
Maximum capacity External sales External selling price Variable cost Fixed cost Target residual income 250,000 bolts 200,000 bolts Rs.30 per bolt Rs.20 per bolt Rs.1,580,000 Rs.1,0175,00

(Contd. on back)

If Cax division tentatively requests a quotation for 80,000 bolts from Axe Division for the coming year, Required: (i) Calculate the transfer price per bolt that Axe division should quote in order (08) to meet its residual income target. (ii) Calculate the two prices Axe division would have to quote to Cax division if it (04) became group policy to quote transfer prices based on opportunity cost.
Q.4.
(a)

Avanti Furniture Limited manufactures two types of furniture items tables and chairs for domestic use. The company has decided to introduce a comprehensive budget system in its last management meeting. The following are the companys forecasts for two months of January and February 2009. 1. Budgeted stocks of finished goods in unit Products Month Chair Table 1 January 2009 2,400 3,200 28 February 2009 600 1,000 2. Budgeted sales and costs of production per unit: Chair Table Sales in quantity 4,800 6,200 Selling price Rs. 225 300 Materials: Rs. Rs. Wood 105 180 Nails 50 48 Glue 35 42 3. Stock of raw materials and work-in-progress are not available at the beginning and end of the two months. Required: Prepare: (03) (i) Sales budget (03) (ii) Production budget (05) (iii) Material usage and purchases budget Explain the concept of Throughput Accounting.

(b)

(03)

(c)

How the concept of Throughput Accounting is different from conventional cost (04) accounting? In 2008, the production of Best Company Ltd. was at its expected capacity of 180,000 units but sale of only 150,000 units were made. Fixed overheads amounting to Rs. 540,000 was absorbed based on expected production capacity. Variable manufacturing costs were Rs.12 per unit, and the selling price was Rs. 20. At first consideration the CEO of the company was very satisfied with 2008 earnings as shown results based on absorption costing below, due to recession and prevailing economic conditions in general. After a more complete analysis, however, he became concerned about the impact of producing 30,000 units more than the number sold. The CEO is also interested in the cost behavior of the selling expenses, which decreased by Rs.36,000 in 2008 from the last year when 180,000 units were sold, at the same time administrative expenses of Rs.219,000 were the same for both years.
Best Company Ltd. Income Statement (Absorption Costing) Year ended December 2008

Q.5.

Rs.
Sale Cost of Goods Sold Gross Profit Operating Expenses Selling Administrative Total Net Income 3,000,000 2,250,000 750,000 305,000 219,000 524,000 226,000

(Contd.)

Required: (i) What will be the net income of Best Ltd. for year 2008 under Marginal Costing?
(ii) (iii) (iv) (v)

(12) Explain the difference in net income with absorption costing and the amount with (03) (02) (02) (02) (03) (03) (03)

marginal costing. Compute the Companys break even point in sale units and sale amount. Based on the 2008 income statement, what was the companys margin of safety? If the CEO wants the firm to earn a before tax net income of Rs.272,000 in 2009,how many units must be sold , assuming that the selling price, variable cost rates and total costs remain same as 2008. (vi) If the firm increases its fixed manufacturing costs by Rs.96,000 what is the break even point for 2009. (vii) Describe the major advantages of the absorption costing method. (viii) Describe the major advantages of the Marginal costing method.
Q.6.
(a)

Zenith Ltd. applies following basis for labour overheads Budgeted labour hours Budgeted overheads Actual labour hours Actual overheads 8,500 Rs.148,750 7,928 Rs.146,200

Based on the data given above, i. What is the labour hour overhead absorption rate?
ii.
(b)

(02) (02)

What is the amount of overhead under/ over-absorbed?

FAB Limited budgeted to produce and sell 8,000 units of its product. Due to some technical fault at one hydro power project, there was an external power failure and 3 days production out of the possible 20 days was lost. Budgeted data: selling price Rs.30, variable cost Rs.10, quantity sold 7,150 units. Based on the data given above calculate.
i. ii.

Operating variance Planning variance

(02) (02) (04)

(c)

What is the difference between normal costing and standard costing? Vanguard Ltd. manufactures four types of camera which all use CompX, a component made only in one factory. Each Comp X costs Rs.50 to purchase. Due to a prolonged strike of workers in the CompX factory, Vanguard Ltd. will only be able to purchase 20,000 this year. The following information relates to each type of camera manufactured by Vanguard Ltd.
Digital cameras Maximum demand (units) Costs per camera CompX Other direct materials Direct labour Fixed costs Profit per camera 10,000 Rs. 50 40 20 60 50 220 Cine cameras 4,000 Rs. 100 90 30 80 70 370 Closed circuit Television cameras 3,000 Rs. 200 98 30 40 52 420 Medical cameras 500 Rs. 350 300 55 70 490 1265

Q.7.

(a)

Selling price per camera

Required: Calculate the numbers of each type of camera to be produced and sold that would maximize the profit of Vanguard Ltd.
(b)

(12)

Explain the learning Curve Theory. **************************

(03)

Summer Exam-2010
(Intermediate)

Performance Measurement (04-05-2010)

Duration: 3 hrs.
[Instructions]
Ensure that the question paper delivered to you is the same, in which you intend to appear. Read the instructions given on the title page of Answer Copy.

Marks-100

Attempt all Questions

Q.1. Define the following:
a) b) c) d) e) f) g) h) Common Cost Conversion Cost Incremental Cost Prime Costs Sunk cost Degree of Operating Leverage Margin of Safety Activity-based Costing (ABC)

(02) (02) (03) (02) (02) (03) (03) (03) (15)

Budgeted Expenses
Rs.

Q.2. Make out a cash budget for July-September, 2010 from the following information:
Actual Sales
Rs.

Actual Purchase
Rs.

Actual Wages
Rs.

Actual Expenses
Rs.

Budgeted Sales
Rs.

Budgeted Purchase
Rs.

Budgeted Wages
Rs.

April May June

80,000 80,000 75,000

45,000 40,000 42,000

20,000 18,000 22,000

5,000 6,000 6,000

July August September

90,000 85,000 80,000

50,000 45,000 35,000

24,000 20,000 18,000

7,000 6,000 5,000

Other Informations: a) b) c) d) e) f) Special Advance Income Tax in August Rs. 4,000/-, Plant in July Rs. 10,000/Rent of Rs. 300/- payable each month is not included in expenses 10% of purchases and sales are on cash terms Credit purchases are paid after 1 month and credit sales are collected after 2 months Time lag in wages and expenses is half month Cash and Bank Balances on July 1st is Rs. 13,000/-.

Q.3. Engine Limited manufactures engine mountings for wide-bodied air lines. They have been asked
to bid on a prospective contract for 90 engine mountings for the jumbo jet aircraft. They have just completed an initial run of 30 of these mounting at the following costs:
Rs.

Direct materials Direct labour (6,000 hours @ Rs. 40/-) Tooling Cost (re-usable) Variable overhead (Rs. 5/- per labour hour) Fixed overhead (Rs. 10/- per labour hour)

200,000 240,000 30,000 30,000 60,000 560,000

An 80% learning curve is thought to be pertinent in this case. The marketing director believes (15) that the quote is unlikely to be accepted if it exceeds Rs. 1,100,000/- and as the company are short of work, he believes the contract to be vital. You are required to comment whether it is worth accepting at Rs. 1,100,000/-. State your assumptions clearly.

Contd. on back

Q.4. Processed Foods Limited has recently launched a new product, Tastewell, after initial
estimation of demand and costs; company would like to have a review through fresh projections based on available information on actual production, cost and revenues. The product is sold in one kg. home packs. Performance, pertaining to the previous two quarters can be taken a presenting representative pattern of costs and operations that can be projected to the future. There were no inventories at the end of each quarter. Tax incidence can be reckoned at 50 per cent.
First Quarter Rs. Sales 60,000 packs at Rs. 160/Cost of goods sold Gross Profit Selling and Administration Expenses Profit before Tax Tax (50%) Profit (Loss) after Tax 9,600,000 5,800,000 3,800,000 4,800,000 (1,000,000) ---(1,000,000) 80,000 packs at Rs. 160/Second Quarter Rs. 12,800,000 7,000,000 5,800,000 5,200,000 600,000 300,000 300,000

Required: a) b) c) What is the break even volume in terms of quarterly sales of home packs?

(13)

On an investment of Rs. 1,000,000/- for Tastewell, an after tax return of 15 per cent is (07) expected. What should be the Sales Revenue for getting this return? The Marketing Manager of Processed Foods Limited expects a 20 per cent increase in (10) sales over the second quarter, if a reduction of Rs. 10 per pack in price is coupled with an advertisement outlay of Rs. 600,000/-. Should this proposal be accepted?

Q.5. An engineering company manufacture a single product whose standard cost structure is as
follows:
Direct Material 2.4 Kgs. @ Rs. 30/- per Kg. Direct Labour 6 hours @ Rs. 4/- per hour Factory Overhead 6 hours @ Re. 0.75 per hour 72.00 24.00 4.50 100.50

The factory overhead is based on the following flexible budget:

Production (units) Variable Overheads (Rs.) Fixed Overheads (Rs.) Total Overheads (Rs.) 80% 6,000 18,000 11,250 29,250 90% 6,750 20,250 11,250 31,500 100% 7,500 22,500 11,250 33,750 110% 8,250 24,750 11,250 36,000

Actual data for the month of January, 2010:

Budget Production Materials used Direct Labour Actual Factory Overheads Production Completed Details of work-in-progress: Opening Closing 7,500 units 19,240 Kgs. @ Rs. 31 per Kg. 46,830 hours @ Rs. 4.20 per hour Rs. 36,340 7,620 units 120 units, materials fully supplied 50% converted. 100 units, materials fully supplied 50% converted.

Determine and Analyze: i) ii) iii) iv) v) Statement of Equivalent Units Price Variance Materials Usage Variance Labour Cost Variances Labour Rate Variance

(08) (03) (03) (03) (03)

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Winter Exam-2010
(Intermediate)

Performance Measurement (02-11-2010)

Duration: 3 hrs.
[Instructions]
Ensure that the question paper delivered to you is the same, in which you intend to appear. Read the instructions given on the title page of Answer Copy.

Marks-100

Q.1. Describe the following:

a) b) c) d) e) f) g) Sunk cost Opportunity cost Direct cost Breakeven point Absorption costing Learning curve effect Planning variance

(02) (03) (03) (03) (03) (03) (03)

Q.2. A company uses linear programming to establish an optimal production plan in order to
maximize profit. The company finds that for next year material and labour are likely to be in short supply. Details of companys products are as follows: Materials (at Rs. 2 per kg) Labour (at Rs. 6 per hour) Variable overhead (at Re. 1 per hour) Variable cost Selling price Contribution A 6 30 5 41 50 9 B 8 18 3 29 52 23

There are only 30,000 kg of material and 36,000 labour hours available. The company also has agreement to supply 1,000 units of product A which must met. Required: a) Formulate the objective function and constraint equations for this problem. b) Plot the constraint on a suitable graph and determine the optimal production plan. c) Explain what is meant by slack and surplus using your answer from parts (a) & (b) d) Explain how this company could use shadow price.

(05) (05) (05) (05)

Q.3. CTC Ltd manufactures three products X, Y, Z using the same material & labour. Unit cost
information is as follows : X Rs. 30 10 12 10,000 Y Rs. 36 15 12 15,000 Z Rs. 56 20 24 8,000

Selling price/unit Material @ Rs5/kg Labour @ Rs3/hr Annual demand (units)

In a particular year only 100,000 Kgs of material is available and 145,000 labour hours are available.

Contd. on back

Required: a) Identify the limiting factor b) Rank these products in order of priority in which they should be produced c) Calculate the optimal production plan d) Calculate the maximum contribution which can be earned

(02) (02) (03) (03)

Q.4.

In company ML Ltd you are a management trainee. Your task for the week which has been assigned to you from your senior is to prepare some components of master budget. a) Sales Budget b) Production Budget c) Labour Budget d) Material usage Budget Data available is; Sales volume Opening stock Closing stock Standard selling price Labour1 Labour2 Material A Material B 23,000units 5,000 units 2,000 units Rs. 80 5hrs @ Rs. 2/hr 3hrs @ Rs. 5/hr 5Kgs @ Rs. 6/kg 3Kgs @ Rs. 10/kg

(02) (02) (03) (03)

Q.5.

You are given an assignment from your teacher to evaluate the financial performance of a company and you have chosen the company X. Following data available for two consecutive years. 2008 Rs. 300,000 75,000 30,000 500,000 2009 Rs. 350,000 25,000 32,000 450,000

Sales Revenue Gross profit Profit before interest and tax Capital employed Required: a) Calculate the following ratios:
i) ii)

Net profit margin Asset turnover

iii) Return on capital employed

(02) (02) (02) (04) (04) (02) (02) (02)

b) Interpret the performance of company X specially discussing the relationship between the ratios calculated in part (a) c) Discuss why non-financial performance measurement is essential for companys success d) Explain the following terms:
i)

Financial gearing

ii) Transfer pricing iii) Liquidity

Contd.

Q.6.

Crumbly Cakes make cakes, which are sold directly to the public. The new production manager (a celebrity chef) has argued that the business should use only organic ingredients in its cake production. Organic ingredients are more expensive but should produce a product with an improved flavor and give health benefits for the customers. It was hoped that this would stimulate demand and enable an immediate price increase for the cakes. Standard cost card for one cake (not adjusted for the organic ingredient change) Ingredients Flour Eggs Butter Sugar Total input Normal loss (10%) Standard weight of a cake Standard sales price of a cake Standard contribution per cake after all variable costs Kg 010 010 010 010 040 (004) 036 Rs. 012 per kg 070 per kg 170 per kg 050 per kg

085 035

The budget for production and sales in April was 50,000 cakes. Actual production and sales was 60,000 cakes in the month, during which the following occurred: Ingredients used Flour Eggs Butter Sugar Total input Actual loss Actual output of cake mixture Actual sales price of a cake All cakes produced must weigh 036 kg as this is what is advertised. Kg 5,700 6,600 6,600 4,578 23,478 (1,878) 21,600 Rs. 741 5,610 11,880 2,747 20,978

Re. 0.99

Required:
Calculate the material price, mix and yield variances and the sales price and sales contribution volume variances for April. You are not required to make any comment on the performance of the managers.

(20)

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Winter Exam-2011
(Intermediate)

Performance Measurement (01-11-2011)

Duration: 3 hrs. M a r k s 1 0 0 [Instructions]

Ensurethatthequestionpaperdeliveredtoyouisthesame,inwhichyouintendtoappear. ReadtheinstructionsgivenonthetitlepageofAnswerCopy.

Q.1. ABC Company produces a chemical in a single processing center. Raw materials in the form of
chemicals are added at the beginning of the process and a container is added at the end. Conversion costs are incurred uniformly throughout the process. The following cost & production dataareavailableforthemonthofApril2011: BeginningWIP: Units Costofchemicaladded Costofcontainersadded Directlaborcosts Manufacturingoverheadcosts Apriloperatingperformance: Unitsstarted Unitsfinished Costofchemicaladded Costofcontainersadded Directlaborcosts Manufacturingoverheadcosts 10,000liters Rs.20,000 Nil Rs.2,500 Rs.70,500 200,000liters 195,000liters Rs.400,000 Rs.39,000 Rs.197,500 Rs.592,500

ThebeginningWIPwasonefourthcompletedastoconversioncostsandtheendingWIPwasone thirdcompleted. Required:

(a) (b) (c)

Prepare a statement of equivalent units of production for raw materials & conversion costs (05) inApriliftheweightedaveragemethodisused. Prepare a statement of equivalent units of production for raw materials & conversion costs (07) inApriliftheFIFOmethodisused. Whatareequivalentunitsofproduction? (03)

Q.2. Quick Cleaning Company produces and sells a dish washing liquid, marketed under the label of
CleanIt. The firm uses JIT inventory system. The standard costs for the direct materials & direct laborneededforeachbottleareasfollows: Directmaterials Directlabor 10ouncesxRs.0.15perounce 0.4hoursxRs.12perhour

During the month of May, the company produced 32,000 bottles of liquid and incurred the followingactualdirectmanufacturingcosts: Purchasesandusageofdirectmaterials:330,000ouncesatatotalcostofRs.56,100 Usageofdirectlabor:13,100hoursatatotalcostofRs.159,820

Contd.onback

Required:
Computethefollowingvariances: a) MaterialPriceVariance b) MaterialQuantityVariance c) LaborRateVariance d) LaborEfficiencyVariance (03) (03) (03) (03)

Q.3. Oceanus Ltd. is a diversified company of which one segment makes spear guns and another
producesairtanks.CostsforatankproducedbytheTankDivisionareasfollows: Rs. Rs. Directmaterial 12 Directlabor 5 Variableoverhead 3 VariableS&A(bothforexternalandinternalsales) 1 Totalvariablecost Fixedoverhead* FixedS&A Totalfixedcost Totalcostpertank Markupontotalvariablecost(33%) Listpricetoexternal 3 2 21 5 26 7 33

*Fixedcostsareallocatedtoallunitsproducedbasedonestimatedannualproduction. Estimatedannualproduction:400,000tanks Estimatedsalestooutsideentities:300,000tanks EstimatedsalesbytheTankDivisiontotheSpearGunDivision:100,000tanks Themanagersofthetwodivisionsarecurrentlynegotiatingatransferprice.

Required:

(03) (03) (03) (03)

a) Determineatransferpricebasedonvariableproductcost. b) Determineatransferpricebasedontotalvariablecostplusmarkup. c) Determineatransferpricebasedonfullproductioncost. d) Determineatransferpricebasedontotalcostpertank.

e) Assume that the Tank Division has no alternative use for the facilities that make the tanks for (03) internaltransfer. Also assume that the Spear Gun Division can buy equivalent tanks externally for Rs. 25. Calculatetheupperandlowerlimitsforwhichthetransferpriceshouldbeset.

f) Computeatransferpricethatdividestheprofitbetweenthetwodivisionsequally.

(03)

g) In contrast to the assumption in part (e), assume that the Tank Division can rent the facilities (05) in which the 100,000 tanks are produced for Rs. 100,000. Determine the lower limit of the transferprice.

Contd

Q.4. Definethefollowingterms a) Relevantcosts b) Opportunitycost c) Marginalcost d) Flexiblebudgets e) Sensitivityanalysis Q.5. Creative Ltd. produces two products (X & Y). The two products use basically the same
ingredients. The main constraint on production is the availability of labor in each of three processing departments. The table below gives the labor availability and requirements for the twoproducts. (02) (02) (02) (02) (04)

Material DepartmentA DepartmentB DepartmentC

Laborrequirement hours/tonne X Y 10 3 2 4 2 5

Laboravailability hours/month 1000 360 800

Required:
The contribution per tonne is Rs. 150 for X and Rs. 75 for Y. The company sells all that it produces. Formulate a linear programming model for this problem which maximizes the total contributionpermonth.

(10)

Q.6. ThefinalaccountsofLeoLtdfortwoyearswereasfollows;
TradingandProfitandLossAccountsforyearsended31stDecember

Sales lessCostofSales OpeningStock Purchases lessClosingstock GrossProfit lessOperatingexpenses Profitbeforeinterest Interestpayable NetProfit Dividendspayable TransfertoGeneralReserve Retainedprofitforyear Retainedprofitb/f Retainedprofitc/f

2010
Rs.000 110 1,900 2,010 120 126 162 Rs.000 2,700 1,890 810 426 384 84 300 288 12 72 84 120

2011
Rs.000 Rs.000 3,600 2,730 870 468 402 84 318 312 6 84 90

3,140 3,260 530 138 174

Contd.onback

BalanceSheets Asat31stDecember

2010
Rs.000 120 456 192 192 126 84 432 84 768 402 Rs.000 Rs.000 2,790 366 3,156 1,800 516 840 3,156 530 882 730 138 84 340 606 90

2011
1,412 ,1292 Rs.000 3,216 120 3,336 1,800 696 840 3,336

FixedAssetsatNetBookValue CurrentAssets Stock Debtors Bank CurrentLiabilities Creditors Dividendsdue Interestdue Bank NetCurrentAssets Financedby OrdinaryShareCapital(FullyPaid) GeneralReserve RetainedProfits 10%Debentures Allsalesandpurchaseswereoncredit.

Required:
a. Foreachyearcalculatethefollowingtotwodecimalplaces(showyourworking): i. Acidtest(liquid/quick)ratio ii. Stockturnover iii. Debtorscollectionperiod iv. Grossprofitratio v. Netprofitratio vi. Returnoncapitalemployed b. Comment on the changes in the Company from 2010 to 2011, stating for each ratio whetheritisbetterorworse,andwhy. (03) (03) (03) (03) (03) (03) (10)

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