SECTION-A
1. Answer any three of the following questions. The answer of each question should
not exceed 200 words:
(a) A medium size firm is making large profits and they do not have a Cost
Accounting Department. There is a proposal to employ a Cost Accountant.
What would you consider to be his functions and how can he make himself
useful to the management?
20
(b) What are preference shares? How" are they redeemed?
20
(c) Define audit. What special points will you keep in mind in the audit of a
banking company?
20
(d) How will you compute taxable income from house property? Give example.
20
2. (a)What is the significance of 'Contribution' in marginal costing? Discuss the role
played by 'Contribution' in profit maximization decisions.
30
(b) A manufacturer uses 200 units of a component every month and he buys them
entirely from an outside supplier. The order placing and receiving cost is
Rs.100 and annual carrying cost per unit is Rs.12. From the given set of data,
calculate the economic order quantity .
P Ltd. uses. three types of materials A, Band C for production of X, the final
product. The relevant monthly data for components are as given below:
A B Normal usage (units) 200 150 180
Minimum usage (units) 100 100 90
Maximum usage (units) 300 250 270
Recorder quantity (units) 750 900 720
Recorder period (months) 2 to 3 3 to 4 2 to 3
Calculate for each component:
(i) reorder level; (ii) maximum level;
(iii) minimum level; and (iv) average stock level.
30
3. (a) Explain the meaning, utility and limitations of cost-volume-profit analysis.
30
(b) The sales of a company's products are slacking and budget sales of 1,50,000
units per year can only be met if the trade discount is raised from 25% to 30%.
In case the discount is raised to 35%, the sales will increase by 20% over the
budget for which production capacity exists. Indicate which of the. two
alternatives is more profitable. The real price of the product is Rs.10 each. The
cost of product is Rs.6 of which Rs.4 is variable.
4. (a) What is cost audit? Distinguish between Cost Audit and Financial Audit.
30 (b)X, a regular employee of A Ltd. gets the following emoluments during the
previous year 2001-02 :
Basic Salary: Rs.6,000 per month (which has been increased to Rs.7,000 per
month from January 1, 2002); dearness allowance Rs.4,000 p.m. (72% of which is
part of salary for computing retirement benefits); education allowance Rs.550

p.m. per child for 4 children; medical allowance Rs.400 p.m.; transport allowance
Rs.1,150 p.m. (out of which Rs.900 p.m. is used for covering the journey between
office and residence and Rs.250 p.m. is used for other purposes).
Besides, he gets Rs.4,500 p.m. as house rent allowance up to November 30, 2001
(Rent paid at Ghaziabad, Rs.5,500 p.m.). With effect from December I, 2001, he
has been provided a furnished flat by the Employer at Delhi (rent paid by
employer Rs.7,500 p.m.; rent of furniture provided Rs.500; rent recovered from X
Rs.900 p.m.)
Find out the salary chargeable to tax for the assessment year 2002-03 [ignore
standard deduction on the assumption that with effect from January I, 2002 he
joins a part-time employment with B Ltd. (Salary Rs.2,000 p.m.) with the
permission of A Ltd. without leaving the job of A Ltd.]
30
SECTION - B
5. Answer any three of the following in not more than 200 words each:
(a) What is under Capitalization ? 20
(b) Discuss the relevance of cost of capital in capital budgeting. 20
(c) Describe the organisation, growth and weaknesses of stock exchanges in
India. 20 (d) In what ways dividend policy and retention of earnings related to
financing of firms business?
20
6. (a) Critically examine the functions of a Financial Manager in a large scale
industrial establishment. 30 (b) Each of the three projects A, B, C requires an
investment of Rs. 20,000. Their life is 5 years and cash inflows are as under.
Year Cash Inflows
A B C
Rs. Rs. Rs.
1 4,000 5,000 6,500
2 4,000 5,000 5,000
3 5,000 5,000 4,500
4 6,500 5,000 4,000
5 5,000 5,000 5,000
Using the Pay Back and Net Present Value methods, determine the ranking of the
projects. The discount rate is 10%.
Note: The present value of Re. 1 at the discount rate of 10% is as follows:
Year 1 2 3 4 5
Present value .909 .826 .751 .683 .621
30
7. (a)"Ratio-analysis is a tool to examine the health of a firm." Elucidate.
30
(b) A proforma cost sheet of a company provides the following particulars:
Elements of cost: Material 40%, Direct Labour 20%, Overheads 20%.
The following further particulars are available:
(a) It is proposed to maintain a level of activity of 2,00,000 units.