PRIME ACADEMY 31st SESSION MODEL EXAM – PCC COST ACCOUNTING AND FINANCIAL MANAGEMENT QUESTION PAPER CFT No. of Pages: 4 Total Marks: 100 No of Questions: 8 Time Allowed: 3 Hrs All are compulsory Working notes should form part of the answers 1. Answer any five of the following: (i) What do you mean by Direct Costs? (ii) Calculate total passenger kilometres from the following information: Number of buses 8, number of days operating in a month 26, trips made by each bus per day 6, distance covered 25 kilometres (one side), capacity of bus 50 passengers, normally 90% of capacity utilization. (iii) Explain the term Absorption of cost? (iv) Calculate Efficiency and Capacity ratio from the following figures: Budgeted production 700 units Actual production 600 units Standard time per unit 10 hours Actual hours worked 6200 (v) Explain Economic Ordering Quantity (vi) Explain the term margin of safety. (10 Marks) 2. You are the management accountant of T Ltd. The following computer printout shows details relating to April 2010. Sales Volume 4900 units 5000 units Selling price per unit Rs. 11 Rs. 10 Production volume 5400 units 5000 units Direct materials Quanity 10600 kgs. 10000 kgs. Price per kg Rs. 0.60 Rs. 0.50 Direct Labor Hours per unit 0.55 0.50 Rate per hour Rs. 3.80 Rs. 4.00 Fixed overhead Production Rs. 10300 Rs. 10000 Administration Rs. 3100 Rs. 3000 T Ltd uses a standard absorption costing system. There is no opening or closing work in progress. PRIME / ME31 / PCC 1
Transcript
PRIME ACADEMY 31st SESSION MODEL EXAM – PCC
COST ACCOUNTING AND FINANCIAL MANAGEMENT QUESTION PAPER
CFT
No. of Pages: 4 Total Marks: 100 No of Questions: 8 Time Allowed: 3 Hrs
All are compulsory
Working notes should form part of the answers 1. Answer any five of the following:
(i) What do you mean by Direct Costs? (ii) Calculate total passenger kilometres from the following information:
Number of buses 8, number of days operating in a month 26, trips made by each bus per day 6, distance covered 25 kilometres (one side), capacity of bus 50 passengers, normally 90% of capacity utilization.
(iii) Explain the term Absorption of cost? (iv) Calculate Efficiency and Capacity ratio from the following figures:
Budgeted production 700 units Actual production 600 units Standard time per unit 10 hours Actual hours worked 6200
(v) Explain Economic Ordering Quantity (vi) Explain the term margin of safety.
(10 Marks) 2. You are the management accountant of T Ltd. The following computer printout shows details
relating to April 2010. Sales Volume 4900 units 5000 units Selling price per unit Rs. 11 Rs. 10 Production volume 5400 units 5000 units Direct materials
Quanity 10600 kgs. 10000 kgs. Price per kg Rs. 0.60 Rs. 0.50 Direct Labor Hours per unit 0.55 0.50 Rate per hour Rs. 3.80 Rs. 4.00 Fixed overhead Production Rs. 10300 Rs. 10000 Administration Rs. 3100 Rs. 3000
T Ltd uses a standard absorption costing system. There is no opening or closing work in progress.
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Requirements Prepare a statement that reconciles the budgeted profit with the actual profit for April 2010, showing individual variances in as much detail as the above date permits.
(15 Marks) 3. A company is considering which of the two mutually exclusive projects it should undertake.
The finance director thinks that the project with the higher NPV should be chosen whereas the managing director thinks that the one with the higher IRR should be undertaken especially as both projects have the same initial outlay and length of life. The company anticipates a cost of capital of 10 per cent and he net cash flows of the projects are as follows:
a) Calculate the NPV and IRR for each project. b) Recommend with reasons which project we would undertake. c) Explain the inconsistency in ranking of the two projects in view of the remarks of the
Directors. (16 marks)
4. Answer any three of the following:
(i) What are the three main advantages of cost accounting system? (ii) Briefly explain any three different types of cost accounting system? (iii) Three advantages of using Bin Card? (iv) A company produces single product which sells for Rs. 20 per unit. Variable cost is Rs.
15 per unit and Fixed overhead for the year is Rs. 6,30,000.
Required: a) Calculate sales value needed to earn a profit of 10% on sales. b) Calculate sales price per unit to bring BEP down to 1,20,000 units. c) Calculate margin of safety sales if profit is Rs. 60,000.
(3x3=9 Marks) 5. Answer any five of the following:
(i) Explain Modigliani-Miller Approach (MM)and how is it different from NOI approach (ii) Financing a business through borrowing is cheaper than using equity. Give three reasons
for this statement. (iii) Differentiate between Financial risk and Operational risk. (iv) There are two firms Company A and B having net operating income of Rs. 15,00,000 each.
Company B is a levered company whereas Company A is all equity company. Debt employed by Company B is of Rs. 7,00,000 @ 11%. The tax rate applicable to both the companies is 25%. Calculate earnings available for equity and debt for both the firms.
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(v) The demand for a certain product is random. It has been estimated that the monthly demand of the product has a normal distribution with a mean of 390 units. The unit price of product is Rs. 25. Ordering cost is Rs. 40 per order and inventory carrying cost is estimated to be 35 per cent per year.
Required: Calculate Economic Order Quantity (EOQ). (vi) Explain operating leverage with formulae (5x2=10 Marks)
6. X Ltd uses an automated manufacturing process to produce an industrial chemical product P.
X Ltd operates a standard marginal costing system. The standard cost date for Product P is as follows. Standard cost per unit of Product P Material
A 10 Kgs. @ Rs. 15 per kg. 150 B 8 Kgs. @ Rs. 8 per kg. 64 C ` 5 kgs. @ Rs. 4 per kg. 20
23 Kgs. 234
Budgeted fixed production overheads Rs. 350000
In order to arrive at the budgeted selling price the Product P the company adds 80% markup to the standard marginal cost. The company budgeted to produce and sell 5000 units of Product P in the period. There were no budgeted inventories of Product P. The actual results for the period were as follows. Actual production and sales 5450 units Actual selling price 6445 units Material usage and cost
A 43000 kgs. 688000 B 37000 kgs 277500 C 23500 kgs. 99875
103500 kgs. Fixed production overheads 385000
a) Prepare an operating statement which reconciles the budgeted profit so to the actual profit for the period. (The statement should include the material mix and material yield variances).
(15 Marks) 7.
a) A product passes through three processes. The output of each process is treated as the raw material of the next process to which it is transferred and output of the third process is transferred to finished stock.
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Ist Process 2nd Process 3rd Process Rs. Rs. Rs.
Material issued 40,000 20,000 10,000 Labour 6,000 4,000 1,000 Manufacturing overhead 10,000 10,000 15,000
10,000 units have been issued to the 1st process and after processing, the output of each process is as under:
Output Normal Loss Process No. 1 9,750 units 2% Process No. 2 9,400 units 5% Process No. 3 8,000 units 10%
No stock of materials or of work-in-progress was left at the end. Calculate the cost of the finished articles.
(12 Marks)
b) Write short notes on Process Costing. (4 Marks)
8. Answer any three of the following:
(i) Explain Halsey and Halsey Weir systems of wage incentive system. (ii) A worker is paid Rs. 100 per month and a dearness allowance of Rs. 200 p.m. There is a
provident fund @ 8⅓% and the employer also contributes the same amount as the employee. The Employees State Insurance Corporation premium is 1½% of wages of which ½% is paid by the employees. It is the firm’s practice to pay 2 months’ wages as bonus each year. The number of working days in a year are 300 of 8 hours each. Out of these the worker is entitled to 15 days leave on full pay. Calculate the wage rate per hour for costing purposes.
(iii) Explain the common methods used for computing the appropriate overhead rate to be employed.
(iv) Z Ltd.’s operating income (before interest and tax) is Rs. 9,00,000. The firm’s cost of debt is 10 per cent and currently firm employs Rs. 30,00,000 of debt. The overall cost of capital of firm is 12 per cent.
Required: Calculate cost of equity.
(3x3=9 Marks)
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PRIME ACADEMY 31st SESSION MODEL EXAM – PCC
COST ACCOUNTING AND FINANCIAL MANAGEMENT SUGGESTED ANSWERS
1.
(i) Direct costs – Costs that are related to the cost object and can be traced in a economically feasible way.
(ii) Calculation of passenger kilometers: 8��26 ��6 ��2 ��25 ��50 ��90% = 28,08,000 passenger kms.
(iii) Cost absorption - It is defined as the process of absorbing all indirect costs allocated to or apportioned over a particular cost centre or production department by the units produced. Hence, while allocating, the relevant cost objects would be the concerned cost centre or the concerned department, while, the process of absorption would consider the units produced as the relevant cost object. For example, the overhead costs of a lathe centre may be absorbed by using a rate per lathe hour. Cost absorption can take place only after cost allocation. In other words, the overhead costs are either allocated or apportioned over different cost centres and afterwards they are absorbed on equitable basis by the output of the same cost centres.
(iv) Efficiency Ratio = Actual output in terms of standardhours / Actual hours worked x 100
= 6000 / 6200 *100 = 96.7%.
Capacity Ratio = Actual Hours worked / Budgeted hours x 100
= 6200 / 7000 * 100 = 88.6%
(v) Economic Order Quantity (EOQ): Purchase department in manufacturing concerns is usually faced with the problem of deciding the ‘quantity of various items’ which they should purchase. If purchases of material are made in bulk then inventory carrying cost will be high. On the other hand if order size is small each time, then the ordering cost will be high. In order to minimise ordering and carrying costs it is necessary to determine the order quantity which minimises these two costs. The size of the order for which both ordering and carrying cost are minimum is known as economic order quantity.
(vi) The margin of safety can be defined as the difference between the expected level of sale and the breakeven sales. The larger the margin of safety , the higher are the chances of making profits. The Margin of Safety can also be calculated by identifying the difference between the projected sales and breakeven sales in units multiplied by the contribution per unit.
2.
(I) Material variances: (a) Direct material cost variance = Standard cost – Actual cost
= 40,960 x 21 – 2,05,600 x 4.50 = 8,60,160 – 9,25,200 = 65,040 (A)
incurred = 40,960 x 3 x 1.20 – 1,00,000 = 47,456 (F)
(iii) Preparation of income statement Calculation of unit selling price Rs. Direct material 21 Direct labour 9 Factory overhead 3.60 Factory cost 33.60 Margin 25% on factory cost 8.40 Selling price 42.00
Income statement
Rs. Sales 40,000 units ��42 16,80,000 Less: Standard cost of goods sold 40,000 ��33.60 13,44,000
3,36,000 Less: Variances adverse Material price variance 61,680 Material quantity variance 3,360 Labour rate variance 24,240 89,280
2,46,720 Add: Favourable variance Labour efficiency variance 5,040 Factory overhead 47,456 52,496 Actual gross margin 2,99,216 (iv) Labour hour saved Rs. Standard labour hours 40,960 x 3 1,22,880 Actual labour hour worked 1,21,200 Labour hour saved 1,680 Bonus for saved labour = .50 (1,680 x 3) = 2,520. 3. a) The key to this question is in understanding the reinvestment assumptions implicit in NPV
@ 10% NPV project X = Rs. 29,140 @ 10% NPV project Y = Rs. 18,520 @ 20% NPV project X = (Rs. 19,020) @ 20% NPV project Y = (Rs. 2,540) IRR of Project X = 16% IRR of Project Y = 18%
b) Undertake Project X:
It has a positive NPV, indicating that it exceeds the company’s cost of capital. Assuming that the company’s objective is to maximize the present value of future cash flows X offers the higher NPV.
X offers higher NPV, whereas Y offers a high IRR. Where such conflicting indications appear it is generally appropriate to accept the NPV result, NPV being regarded as technically more sound than IRR.
c) The two projects have radically different time profiles. X’s cash inflows are grouped in the
three middle years of the projects, while nearly 90 per cent of Y’s inflows come in the first year of the project. This leads to Y showing a higher IRR.
Risk, uncertainty and timing of cash flows may be considered by the directors in making the final investment decisions.
4. (I)
(a) A good Cost Accounting System helps in identifying unprofitable activities, losses or inefficiencies in any form.
(b) The application of cost reduction techniques, operations research techniques and value analysis technique, helps in achieving the objective of economy in concern’s operations. Continuous efforts are being made by the business organisation for finding new and improved methods for reducing costs.
(c) Cost Accounting is useful for identifying the exact causes for decrease or increase in the profit/loss of the business. It also helps in identifying unprofitable products or product lines so that these may be eliminated or alternative measures may be taken.
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(II) Different Types of Costing Uniform Costing Marginal Costing: Standard Costing and variance analysis: Historical Costing Direct Costing Absorption Costing
(III) Advantages of Bin Cards : (a) There would be less chances of mistakes being made as entries will be made at
the same time as goods are received or issued by the person actually handling the materials.
(b) Control over stock can be more effective, in as much as comparison of the actual quantity in hand at any time with the book balance is possible.
(c) Identification of the different items of materials is facilitated by reference to the Bin Card the bin or storage receptacle.
(IV)
(a) Suppose sales units are x then S = V + F + P S = Sales V = Variable Cost F = Fixed Cost P = Profit 20x = 15x + 6,30,000 + 2x 20x – 17x = 6,30,000
6,30,000 Therefore x = ------------- = 210000
3 Sales value = 2,10,000 x 20 = Rs. 42,00,000
(b) Sales price to down BEP 1,20,000 units
S = V + (F / New BEP) S = 15 + (630000 / 120000) = Rs. 20.25
(c) MS Sales = Profit / PV Ratio = 60000 / PV where PV = C / S * 100 = 60000 / 25 x 100 = 240000 or 5 / 20 x 100 = 25%.
5.
(i) Modigliani-Miller Approach (MM): The NOI approach is definitional or conceptual and lacks behavioural significance. It does not provide operational justification for irrelevance of capital structure. However, Modigliani-Miller approach provides behavioural justification for constant overall cost of capital and, therefore, total value of the firm. The approach is based on further additional assumptions like:
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• Capital markets are perfect. All information is freely available and there are no transaction costs.
• All investors are rational. • Firms can be grouped into ‘Equivalent risk classes’ on the basis of their business
risk. • Non-existence of corporate taxes.
(II) Financing a business through borrowing is cheaper than using equity. This is because:
• Lenders require a lower rate of return than ordinary shareholders. Debt financial securities present a lower risk than shares for the finance providers because they have prior claims on annual income and liquidation.
• A profitable business effectively pays less for debt capital than equity for another reason: the debt interest can be offset against pre-tax profits before the calculation of the corporate tax, thus reducing the tax paid.
• Issuing and transaction costs associated with raising and servicing debt are generally less than for ordinary shares.
(III) BUSINESS RISK AND FINANCIAL RISK
Business risk refers to the risk associated with the firm's operations. It is the uncertainty about the future operating income (EBIT), i.e. how well can the operating income be predicted? Business risk can be measured by the standard deviation of the Basic Earning Power ratio. Financial risk refers to the additional risk placed on the firm's shareholders as a result of debt use i.e. the additional risk a shareholder bears when a company uses debt in addition to equity financing. Companies that issue more debt instruments would have higher financial risk than companies financed mostly or entirely by equity. Financial risk can be measured by ratios such as the firm's financial leverage multiplier, total debt to assets ratio or degree of financial leverage.
(IV) Statement of calculation of earnings available to equity holders and debt holders
Company A Rs.
Company B Rs.
Net operating income 15,00,000 15,00,000 Less: Interest on Debt (11% of Rs. 7,00,000)
− 77,000
Profit before taxes 15,00,000 14,23,000 Less: Tax @ 25% 3,75,000 3,55,750 Profit after tax/Earnings available in equity holders
11,25,000 10,67,250
Total earnings available to equity holders + Debt holders
11,25,000 10,67,250 + 77,000
=11,44,250
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(V) Calculation of Economic Order Quantity (EOQ) The mean of monthly demand = 390 units, Annual demand (A) = 390 ��12 = 4,680 units Ordering cost (O) = Rs. 40 per order, Cost per unit = Rs. 25. Inventory carrying cost of one unit (CC) = Rs. 25 ��35% = Rs. 8.75
EOQ = Whole root of (2AO / CC ) = Whole root of 2 x 4680 x 40 / 8.75 = 206.85 or 207 units
(VI) Operating leverage is the ratio of net operating income before fixed charges to net operating
income after fixed charges. Degree of operating leverage is equal to the percentage increase in the net operating income to the percentage increase in the output.
N ( P – V) OL = -----------------------------------
N ( P – V) – F Where, OL = Operating leverage N = Number of units sold P = Selling price per unit V = Variable cost per unit F = Fixed cost
6. (a) Operating Statement
Rs. Budgeted Profit 586000 Sales volume contribution variance 84240 favorable 670240 Rs. Variance Sales price 129710 favorable Material price A 43000 Adverse B 18500 Favorable C 5875 Adverse Material Mix A 30000 Favorable B 8000 Adverse C 4000 Adverse Material Yield 222300 Favorable Fixed production overheads expenditure 35000 Adverse
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Total Variances 304635 Favorable Actual profit 974875 Workings Mix Variance A B C Total Rs. Rs. Rs. Rs. Actual materials in standard mix 45000 36000 22500 103500 Actual materials in actual mix 43000 37000 23500 103500 Difference 2000 -1000 -1000 Standard price 15 8 4 Variance 30000 8000 4000 18000 Favorable Adverse Adverse Favor. Yield Variance Standard output from material input (103500/23) 4500 units Actual output 5450 units Yield 950 units X 234 Rs. 222300 A Rs. B Rs. C Rs. Material price variance Standard price per Kg. 15.00 8.00 4.00 Actual price per Kg. 16.00 7.50 4.25 -1.00 0.50 -0.25 43000 37000 23500 43000 18500 5875 30875 Adverse Favorable Adv. Adv. 7.
(a) Process No. 1 Account
Units Rs. Units Rs. To Material 10,000 40,000 By Normal wastage 200 ” Labour 6,000 ” Abnormal wastage 50 286 ” Overhead 10,000 (cost per unit,
Rs. 5.714) ” Process No. 2 9,750 55,714 (Transfer of
Note : The cost of the abnormal wastage : Normal Output = 10,000 units – 200 units = 9,800 units Cost per unit of normal output = Rs. 56,000 ÷ 9,800 units = Rs. 5.714 Cost of 50 units = Rs. 5.714 × 50 = Rs. 286
Process No. 2 Account Units Rs. Units Rs.
To Process No. 1 9,750 55,714 By Normal wastage 488 – ” Materials 20,000 (5% of 9,750) ” Labour 4,000 ” Process No. 3 9,400 91,051 ” Overhead 10,000 (cost per unit ” Abnormal gain Rs. 9.686) @ Rs. 9.686 138 1,337 _________
Note : The cost per unit is obtained by dividing Rs. 89,714 by 9,262 units, i.e., 9,750 units less 488 units.
Process No. 3 Account Units Rs. Units Rs.
To Process No. 2 9,400 91,051 By Normal wastage 940 ” Materials 10,000 ” Abnormal wastage 460 6,364 ” Labour 1,000 (Cost per unit ” Overhead 15,000 Rs. 13.836)
Note : The calculation of the cost of abnormal wastage : Normal Output = 9,400 units – 940 units = 8,460 units. Cost per unit of normal output = Rs. 1,17,051 ÷ 8,460 = Rs. 13,836 Cost of 460 units is = Rs. 6,364.
(b) PROCESS COSTING Process Costing is a method of Costing used in industries where the material has to pass through two or more processes for being converted into a final product. It is defined as “a method of Cost Accounting whereby costs are charged to processes or operations and averaged over units produced”. Such type of costing method is useful in the manufacturing of products like steel, soap, chemicals, rubber, vegetable oil, paints, varnish etc. where the production process is continuous and the output of one process becomes the input of the following process till completion.
8.
(i) Halsey and Halsey Weir systems : Under Halsey system a standard time is fixed for each job or process. If there is no saving on this standard time allowance, the worker is paid only his day rate. He gets his time rate even if he exceeds the standard time limit, since his day
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rate is guaranteed. If, however, he does the job in less than the standard time, he gets a bonus equal to 50 percent of the wages of time saved; the employer benefits by the other 50 percent. The scheme also is sometimes referred to as the Halsey fifty percent plan.
Formula for calculating wages under Halsey system = Time taken × Time rate + 50% of time saved × Time rate. The Halsey Weir System is the same as the Halsey System except that the bonus paid to workers is 30% of the time saved.
(II)
Rs. Wages paid to worker during the year 3,600 *Add Provident Fund @ 8.33% 300 *E.S.I. Premium 1% 36 Bonus at 2 months’ wages 600 Total 4,536
(III) Several methods are commonly employed either individually or jointly for computing the appropriate overhead rate to be employed. The more common of these are:
1. Percentage of direct materials. 2. Percentage of prime cost. 3. Percentage of direct labour cost. 4. Labour hour rate. 5. Machine hour rate.
(IV) Calculation of Cost of Equity Calculation of value of firm (v) = EBIT / Overall cost of capital �Ko � = Rs. 900000 / 0.12 = Rs. 7500000 Market value of equity (S) = V – Debts
= 75,00,000 – 30,00,000 = Rs. 45,00,000 Market value of debts (D) = 30,00,000 K (Cost of equity) Ko (v / s ) - Kd (d / s) = 0.12 ( 7500000 / 4500000) − 0.10 (3000000 / 4500000) = 0.20 − .067 = .133 × 100 Ke = 13.3%.
PRIME / ME31 / PCC 13
PRIME ACADEMY 31st SESSION MODEL EXAM - PCC – INCOME TAX, SERVICE TAX AND VAT
QUESTION PAPER
IXX
No. of Pages: 4 Total Marks: 100 No of Questions: 8 Time Allowed: 3 Hrs
All are compulsory
Working notes should form part of the answers
1. Answer the following with reasons having regard to the provisions of the Income Tax Act, 1961
for the Assessment Year 2010-11.
(i) What is the Tax Incidence on any income derived from Saplings or seeding grown in a nursery? Will your answer be different if the assessee is a trader in such Saplings or Seeding?
(ii) Salary paid to MLA’s and MP’s are chargeable under the head Salaries. Do you agree?
(iii) A Ltd, a non-resident, gets interest from B Ltd, an Indian Company, outside India. The capital was borrowed by B Ltd. For the purpose of a business carried on by it outside India. Examine the tax incidence.
(iv) What are the rates of tax for Association of persons, if the Shares of member are determinant and known?
(v) Donations made to political party are deductible u/s 80G. Do you agree? (5x2=10 Marks)
2. Following details are furnished by Mr.Sunil Gavaskar an Indian Citizen for the year ended March 31, 2010.
Rs. Salary (Net of tax and Mr.Sunil’s contribution to Provident Fund) 480,000 Sunil’s contribution to Provident Fund 49,500 Employer’s contribution to Provident Fund 49,500 Interest credited to Provident Fund (@9% per annum) 32,000 LTA Received 140,000 HRA Received 120,000 (Rent paid for House in Mumbai, Rs.120,000)
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Dividends from ACC Ltd. An Indian Company (net of tax) 25,000 Tax deduction at source on Salary 75,000 Contribution to Public Provident Fund 40,000 Contribution to National Laboratory approved u/s 35 50,000 Amount received on maturity of Keyman Insurance Policy 60,000 Mr.Sunil acquired 2,000 shares of Rs.5 Lakhs during the year 1985-86. Company allotted him equal value of Bonus Shares in 1990-91. Second Bonus Issue was made during March 2009, when he received 1 Bonus Shares for every 2 shares held by him. The entire shares held in the company have been sold by him during November 2009 @ 1.00 per share. Determine the total income of Mr.Sunil for the assessment year 2010-11.(Cost of Inflation Index : 1985-86 is 133 1990-91 is 182 and 2009-10 is 632 ) (20 Marks)
3.
a) Mr.Krishna has been provided with the services of :
Servants Salary Per Annum(Rs) Cook 12000 Servant- Maid 3600 Gardener 3500 Night Watchman 3600 Mr.Krishna engages the Cook and Servant Maid while the Employer engages the Gardener and Night Watchman. But the whole cost is met by the Company. Mr.Krishna is a whole time Director of the Company. Calculate the Taxable Value of perquisite for the A.Y. 2010-11 Also compute the value of Perquisite if Mr.Krishna is a non-specified employee?
(7 Marks)
b) Mr.Narayanan owns two houses. Relevant details are given below : House I House II Let out April 1, 2009 to June 30,
2009 July 1, 2009 to March 31,
2010 Self-occupied July 1, 2009 to March 31,
2010 April 1, 2009 to June 30, 2009
Municipal Valuation p.a. Rs.65,000 Rs.110,000 Fair Rent p.a. Rs.70,000 Rs.105,000 Standard Rent p.a. Rs.76,000 Rs.112,000 Rent of let out period Rs.50,000 Rs.125,000 Interest on Housing Loan Rs. 4,000 Rs. 42,000 Municipal Taxes Paid Rs.12,000 Rs. 20,000 Repayment of Housing Loan(Principal)
Rs.12,000 Rs. 48,000
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Assuming that income of Mr.Narayanan from business is Rs.600,000 (he does not have any other income) and he deposits Rs.65,000 in Public provident fund, find out his total income for the A.Y.2010-11 (8 Marks)
4. (a) State with reasons whether tax deduction at source provisions are applicable to the
following transactions and if so the rate of Tax Deduction: (i) Mr.John, a resident provides consultancy services to n Indian Company. For the
F.Y. 2009-10. He charges Rs.250, 000. He does not have a Permanent Account Number.
(ii) M/s Vinayaga Transport in engaged in the business of transport of Water Tankers. The amount charged for FY 2009-10 is Rs.750,000.
(iii) M/s JWT an advertisement company provides services of Rs.1,200,000 to M/s
Joyalukkas.
(iv) Rent paid to Mr.Omanakutty Rs.110,000 for hire of Crane from 1st November 2009 to 31st March 2010.
(4x2= 8 Marks)
(b) Mr.Hari, an individual carries on Cosmetics business. His stock and machinery were damaged and destroyed in a fire accident. The value of the stock lost (totally damaged) was Rs.650,000. Certain portion of the machinery could be salvaged. The opening WDV of the block as on 1-4-2009 was Rs.1,080,000. During the process of safeguarding machinery and in the fire fighting operations, Mr.Hari lost his gold chain and a diamond ring, which he had purchased in April 2004 for Rs.120,000. The market value of these two items as on the date of fire accident was Rs.180,000. Mr.Hari received the following amounts from the Insurance Company: (i) Towards loss of stock Rs.480,000 (ii) Towards Machinery Damage Rs.600,000 (iii) Towards Gold Chain and Diamond Ring Rs.180,000 You are requested to briefly comment on the tax treatment of the above three items under the provisions of Income Tax Act, 1961. (6 Marks)
5. Answer the following with reference to Income Tax Act, 1961:
(i) Explain what is an “Electoral trust” u/s 2(22AAA) of the Income Tax Act, 1961? (ii) What is “Pre-construction period” with reference to Computation of Income from House
Property? What is the deduction allowed for Interest during Pre-Construction period? (iii) Explain briefly the provisions of Set off of Income under the head Capital Gains. (iv) What is Defective or Incomplete return? Within what time limit it can be rectified?
(4x4=16 Marks)
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6. Answer the following:
(i) Mr.Bobby rendered service of Rs.200,000 in Feb’2010. However the payment was realized in April’2010. Determine the due date for payment of Service Tax by Mr.Bobby.
(ii) Whether Service Tax is payable on the value of Income Tax deducted at Source by the Service Recipient from Service Charges?
(iii) What are the different methods of Computation of VAT? Write Briefly.
(iv) What are “Trade Notices” in the context of Service Tax? Explain its purpose.
(v) What are the due dates for payment in case of e-payment of Service Tax in case of Companies rendering taxable service?
(5x2=10 Marks)
7. Mr.Ajith, a Practicing Chartered Accountant provides the following details for services rendered
in financial year 2009-10. Compute the value of Taxable Service and tax payable thereon. Rs.
a) Audit Fees charged from Clients 772,100 (Including Service Tax)
b) Out of above Payment received during 2009-10 496,350 (Net of TDS @ 10%)
c) Reimbursement of out of pocket expenses 135,000 d) Certification Charges 99,270
(Including Service tax fully realized net of TDS in 2009-10) (6 Marks)
8.
(a) Compute the Invoice value to be charged and amount of tax payable under VAT by M/s Y & Co : as per following details: Goods Purchased from ZDB India Ltd Rs.500,000 Expenses Loaded on Sale Price Rs. 35,000 Profit Loaded on Sale Price Rs. 25,000 Sale Value Rs.560,000 Assume rate of VAT on Purchase and Sales is 12.5%.
(b) Explain the provisions for filing of returns under Service Tax with respect to Individual rendering taxable service.
(c) What are the Purchases not eligible for Input Tax Credit under VAT Law? (3x3 = 9 Marks)
PRIME / ME31 / PCC 4
PRIME ACADEMY 31st SESSION MODEL EXAM - PCC – INCOME TAX, SERVICE TAX AND VAT
SUGGESTED ANSWERS 1.
(i) Any income derived from Saplings or seeding grown in a nursery shall be deemed to be Agricultural Income. However in case of an Assessee who is a Trader of such saplings or seeding, the same shall be charged to tax under the head profits and gains of Business or Profession.
(ii) MLA’s and MP’s are not employees of the government. As there is no employer employee relationship, they shall not be chargeable under the head Salaries. It shall be chargeable under the head Income from Other Sources.
(iii) In case of an Interest paid by a resident and borrowed sum is used for carrying on business/profession outside India or earning any income outside India, the Income is not deemed to accrue or arise in India as enunciated u/s 9 of the Income Tax Act. Accordingly Interest Income is not taxable in this case.
(iv) Rates of tax for Association of persons, if the Shares of member are determinant and known:
Where none of member have taxable income
AOP is taxable at Normal Rates applicable to individual
Where any member has taxable income AOP is taxable at Maximum Marginal rate (MMR) 30.9%
Where any member is taxable at a rate higher than MMR
Income of AOP to the extent of Share of Such member is taxable at Higher rate & Balance at MMR
(v) Disagree. Donations made to political party are not deductible u/s 80G. The donations
made to Political Party are deductible u/s 80GGB for Companies and u/s 80GGC for other assessees. Here Political Party means a political party registered u/s 29A of the Representation of People Act,1951.
2.
Computation of Total Income of Mr.Sunil Gavaskar for the A.Y.2010-11
Particulars Amount(Rs.) Amount(Rs.) Income from Salaries:
Basic Salary (480000+49500+75000) (Tax and PF Contribution added back)
604,500
Employer Contribution to RPF (Exempt up to 12%) Nil Interest on RPF (Not in excess of 9.5%) Nil Leave Travel Concession (Note 4) Nil House Rent Allowance (Note 1) 60,450
PRIME / ME31 / PCC 5
Amount Received from Keyman Insurance Policy 60,000 Gross Salary 724,950 Deduction u/s 16 Nil Chargeable Salary 724,950 Capital Gains (Note 5) 200,000 Income from Other Sources: Dividend from an Indian Company(Note 2)
NIL
GROSS TOTAL INCOME (A) 924,950 Less: Deductions: U/s 80C (RPF 49,500 + PPF 40,000) (Restricted to Max.100,000) U/s 80GGA – Note 3
89,500
50,000
139,500 Total Taxable Income 785,450 Note 1: House Rent Allowance is exempt to the extent of least of following u/s 10(13A):
a. Actual HRA – Rs.120,000 b. 50% of Basic (since in Mumbai) - Rs.302,250 c. Rent paid in excess of 10% of Salary - (120000-60450) – Rs.59,550
Therefore HRA Taxable = 120,000-59,550 = 60,450 Note 2: Dividend is exempt from tax under section 10(34). Note 3: It is assumed that the National Laboratory is approved u/s 35(1)(ii). Accordingly the donation is deductible u/s 80 GGA. Note 4: It is assumed that Mr.Sunil has incurred travel expenditure via Air/Rail to the extent of Rs.140,000 for availing exemption u/s 10(5). Note 5: It is assumed that the Shares are sold/transferred, in a recognized stock exchange in India. Consequently Securities Transaction Tax is applicable i.e. @ 0.1% of Sale Consideration. Long Term Capital Gain is not chargeable to tax. Short Term Capital Gain is taxable at 10%+SC+Cess. However if the shares are not transferred in recognized stock exchange STT will not be applicable and LTCG will be chargeable to tax. Computation of Capital Gains:
Details 2000 Original Shares
2000 First Bonus Shares
2000 Second Bonus Shares
Sale Consideration @ 100 per share
200,000 200,000 200,000
Less: Indexed Cost of acquisition (5 Lakhs x 632/133)
2,375,939 NIL NIL
PRIME / ME31 / PCC 6
Long Term Capital (Loss)/Gains (Not chargeable to tax)
(2,175,939) 200,000 -
Short Term Capital Gains - - 200,000 3.
a) Valuation of Perquisites of Mr.Krishna : The value of the perquisite in respect of Domestic Servants shall be the actual cost to the employer as reduced by the amount paid by the employee for such services. Cost includes the Salary and other benefits paid or payable to the servants by the employer. Situation 1: Mr.Krishna is a Director. So he is a Specified Employee. Situation 2: If the obligation of the employee is paid by the employer, then it is taxable in case of all employees. The cost of the servants engaged by the employer is not taxable in the hands of Non-specified Employee.
b) Computation of total Income of Mr.Narayanan for A.Y 2010-11
Particulars House I House II Municipal valuation per annum 65,000 110,000 Fair Rent per Annum 70,000 105,000 Standard Rent per Annum 76,000 112,000 Annual Letting Value(ALV) Higher of Municipal Valuation and Fair Rent but restricted to Standard Rent
70,000 110,000
Actual rent for let out period 50,000 125,000 Gross Annual Value(Higher of ALV and Actual rent)
70,000 125,000
Less : Municipal tax 12,000 20,000 Net Annual Value(NAV) 58,000 105,000 Less: Standard Deduction u/s 24 30% of NAV Interest on Borrowed Capital
17,400 14,000
31,500 42,000
Income from House Property 26,600 31,500
Computation of Taxable Income Details Amount (Rs.)
Income from House Property I and II 58,100 Business Income 600,000 Gross Total Income 658,100
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Less: Deduction u/s 80C Repayment of housing Loan(Principal) 60,000 Contribution to Public Provident Fund 65,000 Restricted to
100,000
TOTAL INCOME 558,100 Note: In this case since neither House I nor House II is self-occupied by Mr.Narayanan throughout the previous year 2009-10, the benefit of adopting the Annual value as Nil would not be available in respect of either of the business.
4.
a) (i) The Consultancy Service provided by Mr.John is covered u/s 194J and
accordingly TDS is applicable @ 10%. Mr.John has to apply PAN Number and furnish the details to the service recipient. As per the amendments made in Finance Act (No.2) 2009, the requirement of furnishing PAN is compulsory w.e.f 1.4.2010. In case the PAN is not furnished Tax is deductible at a higher rate of 20%.
(ii) M/s Vinayaga Transport in engaged in the business of transport of Water Tankers. The amount charged for FY 2009-10 is Rs.750, 000. The transaction is covered u/s 194C and the TDS is applicable @ 2% till 30th September 2009. However the TDS is applicable @ 1% from Oct’1, 2009 as per the amendment made in Finance Act (no.2) of 2009. In case M/s Vinayaga Transport provides the PAN Number, the TDS applicable is NIL w.e.f. 1.10.2009.
(iii) Up to Sep’30, 2009, TDS is applicable @ 1% for advertising contracts and
accordingly M/s JWT will suffer Tax Deduction @ 1%. However from Oct’1, 2009, in case of Companies rate is 2% and Individuals 1%. Assuming M/s JWT is a Company; Tax is liable to be deducted at 2%.
(iv) Rent paid for Plant & Machinery or Equipment is covered u/s 194 I and tax is
deductible at the rate of 2% with effect from Oct’1, 2009. Since the Crane is hired from Nov’2009, TDS is applicable at 2%.
b) Tax Treatments for Mr.Hari
(i) Compensation Received against loss of stock:
Insurance claim received against any loss or damage of stock in trade is to be treated as trading receipt. Hence, Rs.480,000 received as claim against loss of stock (480,000-650,000) has to be assessed as Income Under the head “Profits and gains of Business or Profession”.
PRIME / ME31 / PCC 8
(ii) Compensation received against damage of Machinery: In the given data it is not mentioned whether the Salvaged Machinery is taken over by the insurance Company or not or whether there was any replacement of machinery during the year. Accordingly it is assumed that the salvaged machinery is taken over by the Insurance Company and since there was no new addition of machinery during the year, the block of machinery will cease to exist. Hence Rs.480,000(Rs.1,080,000-Rs.600,000) will be assessed as Short Term Capital Loss.
(iii) Compensation received against loss of gold Chain and Diamond Ring: Gold Chain and Diamond Ring are treated as Capital Asset as they are not “personal effects” goods. So as per Sec.45(1A), if any gain arises in previous year as receipt of claim of insurance then the same shall be chargeable to tax as Capital Gain. In this case Capital Gains will be as follows: Insurance Claim : 1,80,000 Indexed COA (120,000*632/497) : 1,52,595 ---------------- Long Term Capital Gain 27,405
5.
(i) Clause 22AAA has been inserted in Section 2 with effect from Assessment Year 2010-11 to define an Electoral Trust. As per the Clause, Electoral Trust means a trust so approved by Board in accordance with the scheme made in this regard by the Central Government. Voluntary contributions received by an Electoral trust in treated as income u/s 2(24) (iia). Section 13B has been inserted with effect from Assessment Year 2010-11 which provides for exemption to donations received by an Electoral trust if the following conditions are satisfied. a. Electoral trust is approved by Central Board of Direct Taxes. b. Electoral Trust distributes 95 percent of the aggregate donations received by it during
the previous year along with the surplus if any brought forward from previous years. c. Electoral trust functions in accordance with the rules made in this regard by the Central
Govt.
(ii) With reference to the Computation of Income from House Property, “Pre-construction period” is defined as the period commencing from the date of borrowing of loan and ending with March 31st immediately prior to the date of completion of construction/date of acquisition or date of repayment of loan whichever is earlier. Interest payable by assessee in respect of funds borrowed for the acquisition or construction of a house property and pertaining to the Pre-construction period as defined above, is deducted in five equal annual installments commencing form the previous year in which the house is acquired or constructed.
(iii) Sec.70 and Sec.71 of Income Tax Act provides the following modes of set-off for Income under the head Capital Gains: 1. Inter Source Adjustment: (Sec.70)
a. Short Term Capital Loss can be against any capital gain whether long term or short term.
PRIME / ME31 / PCC 9
b. Long Term Capital Loss can set off only against Long Term Capital Gains. 2. Inter Head Adjustment (Sec.71)
Any loss under the head Capital Gains cannot be set off against income under other heads of income.
(iv) Sec.139 (9) of the Income Tax Act, enunciates the cases of Defective or Incomplete
Return. A return of income is regarded as defective or incomplete when:
a. Return form has not been duly filed b. Annexures, Statements, Accounts etc are not furnished with return
The Assessing officer may intimate the defect to the assessee. The assessee is given an opportunity to rectify the defect within 15 days or further extension on application by assessee. If the defect is not rectified by assessee within the time limit as above Assessing officer shall treat the return as an invalid return and other provisions of the Act would apply as if assessee had failed to furnish the return.
6.
(i) As per the provisions of Finance Act, though the Service tax is charged at the time of billing to client, it is payable to Government only when the value of Taxable Services is received by the service provider. Accordingly in this Service Tax is payable by Mr.Bobby as per the due dates applicable in the month of receipt. As the payment is realized in April 2010, the tax is payable at the end of first quarter i.e. on 5th July 2010.(6th July 2010 in case of e-payment).
(ii) Service tax is levied on the Gross Amount Charged to client for the services rendered. Any deduction of taxes from the payment will have to be included for the purpose of calculating service tax. Accordingly Service Tax is payable on the value of Income Tax deducted at source by the Service Recipient from Service Charges.
(iii) Methods of Computation of VAT: a. Addition Method: Aggregating all factor payments and profit. b. Invoice Method: Deducting Tax on inputs, from tax on sales c. Subtraction Method:
1. Direct Subtraction method – here aggregate value of purchases exclusive of tax is deducted from the aggregate value of sales exclusive of tax
2. Intermediate Subtraction Method – here tax inclusive value purchases is deducted from the sales and taxing difference between them.
(iv) Trade Notices are issued by the Central Excise/Service Tax Commissionerates. These
Commissionerates receive various instructions from the Ministry of Finance of Central Board of Excise & Customs for effective implementation and administration of the various provisions of service tax law. The same are circulated among the field officers and the instructions which pertain to trade are communicated to them in the form of Trade Notices.
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(v) As per rule 6(1), where service tax is paid electronically through internet banking, in case of companies due date of payment is 6th of subsequent month except for the month of March. For March the due date is 31st March.
7.
Computation of Value of Taxable Service and Tax for Mr.Ajith
Particulars Amount (Rs.) Audit fees collected during 2009-10 after grossing up TDS & reduce service tax portion (496,350/90*100/110.3*100)
500,000
Reimbursement of out of pocket expenses (assuming charged separately)
NIL
Certification charges after grossing up TDS (99270/90*100/110.3*100)
100,000
VALUE OF TAXABLE SERVICE 600,000 Service Tax Payable @ 10.3% 61,800
8.
a) Computation of Total Invoice Value for M/S Y & Co.
Particulars Amount (Rs.) Purchase Price of goods 500,000 Add: Expenses 35,000 Add: Profit Margin 25,000 Amount of Bill 560,000 Add: VAT (12.5% of 560,000) 70,000 TOTAL INVOICE VALUE 630,000 Computation of VAT to be paid: VAT Charged in Invoice : 70,000 Less: Input Credit (12.5% of 500,000) : 62,500 VAT PAYABLE : 7,500 Note : It has been assumed that the purchase price of Rs.500,000 is exclusive of VAT.
b) Provisions for filing of returns under Service Tax with respect to Individual rendering taxable service:
Section 70 of the Finance Act is the principal section which fixes the responsibility of filing of service tax returns.
The prescribed form for the Service Tax Returns is Form ST-3. This form is applicable for all assesses. The return is to be furnished half-yearly. The periodicity of filing the returns is
PRIME / ME31 / PCC 11
1st April to 30th September – to be filed on or before 25th October and for period 1st October to 31st March – on or before 25th April.
When the due date falls on public holiday, the assessee can file the return on the immediately succeeding working day.
c) Purchases not eligible for Input Tax Credit under VAT Law: i) Purchases from unregistered dealers; ii) Purchases from registered dealer who opt for composition scheme under the
provisions of the Act; iii) Purchase of goods as may be notified by State Government; iv) Purchase of goods where the purchase invoice is not available with the claimant or
there is evidence that the same has not been issued by selling registered dealer; v) Purchase of goods where invoice does not show the amount of tax separately; vi) Purchase of goods which are being utilized for manufacture of, exempted goods; vii) Goods imported from other states i.e inter-state purchases viii) Goods imported from outside territory of India ix) Purchase of goods for personal use/consumption or provided free of charge as
gifts.
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PRME ACADEMY 31st SESSION MODEL EXAM – PCC
INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT QUESTION PAPER
ITY No. of Pages: 3 Total Marks: 100 No of Questions: 10 Time Allowed: 3 Hrs
All are compulsory
Section–A
1. a) Describe briefly the following terms:
(i) Audit Trail (ii) CHAT (iii) Electronic Mail (iv) Expert System (v) Hack
(5 x 1 = 5 Marks)
b) Explain each of the following: (i) TCP/IP (ii) Primary Storage (iii) System software (iv) Backup (v) Client Server Technology
(5 x 1 = 5 Marks) 2. Answer any two of the following:
a) Different types of Communication components b) Transaction Servers c) Functions of Operating System
(2 x 5 = 10 Marks)
3. a) What do you mean by object oriented programming and what are its advantages b) Limitations of Data Management System
(2 x 5 = 10 Marks) 4. You are given a list of names and marks in 3 subjects for 250 students. Calculate average marks
For every student and display a list of name and average marks for all the students. (10 Marks)
5. a) Write short notes on Web casting or Push technology b) What do you mean by B2C with reference to E-Commerce
(4 + 6 = 10 Marks)
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Section–B 6. State with reasons which of the following statements is correct/incorrect
(Attempt any three) a) Strategic management is not needed in non–profit Organizations. b) Global Strategies are needed to be identified to sustain a competitive advantage c) Identifying environmental opportunities and threats are performed as part of
marketing analysis d) Changes in strategies often require changes in structure e) BPR is about business reinvention not business improvement or enhancement
(3 x 2 = 6 Marks)
7. Briefly answer any two of the following: a) Bench Marking b) Six Sigma c) Macro Environment
(2 x 2 = 4 Marks) 8. What are the different forms of organizational Structure .Explain the characteristics of a Functional
Structure (3 + 7 = 10 Marks)
9. a) Distinguish between Efficiency And Effectiveness b) What are the various methods for determining the Net Worth of a business
(4 + 6 = 10 Marks)
10. Airtel comes to you from Bharti Airtel Limited, one of Asia’s leading integrated telecom services providers
with operations in 19 countries across Asia and Africa. Bharti Airtel since its inception has been at the forefront of technology and has pioneered several innovations in the telecom sector. When the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked; Airtel did not own its own towers, until recently which was the strength of its competitors . Stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel, with whom they hold a strategic alliance. The company possesses a customized version of the Google search engine which will enhance broadband services to customers. The new iPhone will be launched in India via an Airtel distributorship. Another strategic partnership is with BlackBerry Wireless Solutions. Despite being forced to outsource much of its technical operations in the early days, this allowed Airtel to work from its own blank sheet of paper, and to question industry approaches and practices - for example replacing the Revenue-Per-Customer model with a Revenue-Per-Minute model which is better suited to India, as the company moved into small and remote villages and towns. The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox' strategy. Airtel has not pulled off a deal with South Africa's MTN, which opened the door for talks between Reliance Communication's Anil Ambani and MTN, allowing a competing Indian industrialist to invest in the new
PRIME / ME31 / PCC 3
emerging African telecommunications market. Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers. IPTV is another potential new service that could underpin the company's long-term strategy. Bharti Airtel has more than 65 million customers .It is the largest cellular provider in India, and also supplies broadband and telephone services - as well as many other telecommunications services to both domestic and corporate customers. Global telecommunications and new technology brands see Airtel as a key strategic player in the Indian market, whose vision statement is: By 2010 Airtel will be the most admired brand in India: Loved by more customers Targeted by top talent Benchmarked by more businesses We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more
a) What is SWOT analysis? b) What are the strengths of AIRTEL c) What are the weaknesses and threats it faces d) What else need to be done by Airtel to enlarge its market base
(20 Marks)
PRIME / ME31 / PCC 4
PRIME ACADEMY 31st SESSION MODEL EXAM – PCC
INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT SUGGESTED ANSWERS
SECTION – A
1. (a)
1. Audit Trail : Records maintained to show the time the data was stored and trace the output from input data or vice –versa
2. CHAT: Interactive messages which are typed and sent back and forth. Some also use voice messages
3. Electronic Mail: A system in which Computer users have an electronic mailbox and send messages using terminals; communications occur at the convenience of the user without interruptions
4. Expert System: It is a computerized information system that allows non-experts to make decisions comparable to those of an expert system for complex or ill-structured tasks that require experience and specialized knowledge in narrow specific subject area.
5. Hack: To gain unauthorized entry into a computer or a program and also making changes without the prior permission of the user.
(b) 1. TCP/IP: TCP stands for Transmission Control Protocol and IP for internet Protocol. These protocols are
used in Internet. They have two parts and four layers. 2. Primary Storage: It is directly connected to CPU of the Computer. It must be present for the CPU to
function correctly, just as in a biological analogy; the lungs must be present for the heart to function. It primarily consists of three kinds’ viz., Processor register, Main Memory and cache memory.
3. System software: is a computer program which manages and supports a computer system and its information activities. They manage the resources of a computer and provide a set of standard services to its users. Generally they are developed and written by the vendor and sold to the end user along with the system.
4. Backup: It is a process, which is very essential to take a copy of all the files in a tape or other storage device to be able to retrieve in case of loss of data due to power failure or under any other unforeseen circumstances.
5. Client Server Technology: Client/Server Technology refers to computing technologies in which the hardware and software components (i.e., client and servers) are distributed through network. Client/Server is defined as the provision of information that is required by a user, which is easily accessed despite the physical location of data within the organization.
2.
(a) Different types of Communication components There are five basic components in any data communication network (whether it is the Internet, a LAN, and WAN OR A VAN):
1. Sending device – the originating terminal which transmits dat 2. Communication interface devices 3. Communication channel 4. Receiving device – the ending terminal which receives data 5. Communication software
(b) Transaction Servers: Servers refers to the system that provides the required data to the clients. They
await requests from the client and regulate access to shared resources. Transactions Servers execute a
PRIME / ME31 / PCC 5
series of SQL commands, an online transaction processing program (OLTP) that responds t a single client command. It is a software component that is used in implementing transactions. A transaction involves multiple parts which must be completed automatically. It is a part of the system that is available in the background whenever one of our applications requires it.
(c) Functions of Operating System: An operating system is an integrated act of specialized program that are used to manage the overall resources of and operations of the computer. It is specialized software that controls/monitors the execution of all other programs that reside in the computer, including application program and other system software. Major functions of an operating system are
• Job Management • Scheduling • Acceptance of tasks • Communication with terminals • Computer resources management • Data management • Job accounting • Access control
3. (a) Object oriented programming: With traditional programming approaches, developing a new
program means writing entirely new codes which may take years to complete, yet not meeting the desired quality standards. The solution of this problem is a new way of developing programs using an object-oriented language. An object is a predefined set of program codes that, after having been written and tested, will always behave the same way so that it can be used for other applications. All programs consist of specific tasks such as saving or retrieving data and calculation. In object oriented programming, an object is written for each specific task and saved in the library so that anyone can use it. In OOP, objects are selected by pointing to a representative icon, small amount of code necessary for finishing the program is written and then linking these objects together creates a new program. OOP offers the following advantages: � ease of use; � allows graphical user interface; � faster development of programmes; � programs produced are more reliable; and � when an object is updated, all programs using that object are updated automatically. However, initial cost of development using OOPs and time consumed is very large. Large programs produced by OOPs are slower and use more memory and other computer resources.
(b) Limitations of Data Management System – Refer Text 4. You are given a list of names and marks in 3 subjects for 250 students.
5. 5.
(a) Web casting or Push technology Webcasting or push technology is web-based technology. This allows users to passively receive broadcast information rather than actively search the Web for information. Push technology allows users to choose from a menu of sources, specifying what kind of information they want to receive. Once selected, the information is automatically forwarded to the user. Internet news services, which deliver the day’s activities to the user’s desktop, are an example of push technology.
PRIME / ME31 / PCC 6
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Users can also download software, select the frequency with which they will receive services, and subscribe to a variety of information sources. There is very little cost involved to the user for push services because information is delivered with advertising, and users view their custom-tailored news off-line. Webcasting eliminates the frustration of the user which he/she faces while surfing the Internet to get right kind of information
(b) Meaning – is a form of electronic commerce in which products or services are sold from a firm to consumer Classification – Direct Seller like E-tailers, Manufacturers and (2) on-line Intermediaries Payment options available- like smart card, Electronic bill presentment and payment, Electronic cheques, financial cyber mediary. Suitable goods – Convenience goods, specialty goods, commodity like goods and digital goods. Advantages- convenience, instant changes to prices, integration of web site with call centre, enhanced buying experience. And the challenges faced by B2c e-COMMERCE – building traffic and sustaining customer base. Refer Text- FOR DETAILED ANSWER
SECTION–B: STRATEGIC MANAGEMENT
6. (a) Strategic management is not needed in non–profit Organizations.
Incorrect – Strategic management applies equally to profit as well as non-profit organizations. Though non-profit organizations are not working for the profit, they have to have purpose, vision and mission. They also work within the environmental forces and need to manage strategically to stay afloat to accomplish their objectives.
(b) Global Strategies are needed to be identified to sustain a competitive advantage : Correct (c) Identifying environmental opportunities and threats are performed as part of marketing analysis : Correct (d) Changes in strategies often require changes in structure Correct (e) BPR is about business reinvention not business improvement or enhancement: Incorrect .
BPR stands for business process reengineering. 7.
(a) Bench Marking Benchmarking is an approach of setting goals and measuring productivity based on best industry practices. It developed out of need to have information against which performance can be measured. Benchmarking helps businesses in improving performance by learning from the best practices and the processes by which they are achieved. Thus, benchmarking is a process of continuous improvement in search for competitive advantage. It measures company’s products, services and practices against those of its competitors or other acknowledged leaders in the industry.
(b) Six Sigma Means maintenance of the desired quality in processes and end products by taking systematic and integrated efforts in that direction
(c) Macro Environment Constitutes the general environment , which affects the working of all Firms. It is largely external to the firm and thus beyond the direct influence and control of the firm, but which the organization comes into frequent contact in the course of its functioning. It consists of individuals, group’s agencies,
organizations, events, conditions and forces with which the organization comes into frequent contact in the course of its functioning.
8. Different forms of organizational structure Centralized Structure : Simple organization structure, where decisions are taken by the owner – Manager Decentralized Structure: Functional, Decisional, Strategic Business unit, Matrix and Network structure
Characteristics of Functional Structure
9.
PRIME / ME31 / PCC 8
(a) Distinguish between Efficiency And Effectiveness
Efficiency Effectiveness 1 To be efficient means to do the things right To be effective means to do the right things 2 Focuses on relationship between inputs and
outputs Focus on relationship between means and ends
3 Short run horizon Long-run horizon 4 Introspective effect i.e., within the Firm Highlights linkages between Firm and its external
• Bharti Airtel has more than 65 million customers (July 2008). It is the largest cellular provider in India, and also supplies broadband and telephone services - as well as many other telecommunications services to both domestic and corporate customers.
• Other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel, with whom they hold a strategic alliance. This means that the business has access to knowledge and technology from other parts of the telecommunications world. The company has covered the entire Indian nation with its network. This has underpinned its large and rising customer base
Weaknesses
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PRIME / ME31 / PCC 10
• An often cited original weakness is that when the business was started by Sunil Bharti Mittal over 15 years ago, the business has little knowledge and experience of how a cellular telephone system actually worked. So the start-up business had to outsource to industry experts in the field.
• Until recently Airtel did not own its own towers, which was a particular strength of some of its competitors such as Hutchison Essar. Towers are important if your company wishes to provide wide coverage nationally.
• The fact that the Airtel has not pulled off a deal with South Africa's MTN could signal the lack of any real emerging market investment opportunity for the business once the Indian market has become mature.
Opportunities
• The company possesses a customized version of the Google search engine which will enhance broadband services to customers. The tie-up with Google can only enhance the Airtel brand, and also provides advertising opportunities in Indian for Google.
• Global telecommunications and new technology brands see Airtel as a key strategic player in the Indian market. The new i Phone will be launched in India via an Airtel distributorship. Another strategic partnership is held with BlackBerry Wireless Solutions.
• Despite being forced to outsource much of its technical operations in the early days, this allowed Airtel to work from its own blank sheet of paper, and to question industry approaches and practices - for example replacing the Revenue-Per-Customer model with a Revenue-Per-Minute model which is better suited to India, as the company moved into small and remote villages and towns.
• The company is investing in its operation in 120,000 to 160,000 small villages every year. It sees that less well-off consumers may only be able to afford a few tens of Rupees per call, and also so that the business benefits are scalable - using its 'Matchbox' strategy.
• Bharti Airtel is embarking on another joint venture with Vodafone Essar and Idea Cellular to create a new independent tower company called Indus Towers. This new business will control more than 60% of India's network towers. IPTV is another potential new service that could underpin the company's long-term strategy.
Threats
• Airtel and Vodafone seem to be having an on/off relationship. Vodafone which owned a 5.6% stake in the Airtel business sold it back to Airtel, and instead invested in its rival Hutchison Essar. Knowledge and technology previously available to Airtel now moves into the hands of one of its competitors.
• The quickly changing pace of the global telecommunications industry could tempt Airtel to go along the acquisition trail which may make it vulnerable if the world goes into recession. Perhaps this was an impact upon the decision not to proceed with talks about the potential purchase of South Africa's MTN in May 2008. This opened the door for talks between Reliance Communication's Anil Ambani and MTN, allowing a competing Indian industrialist to invest in the new emerging African telecommunications market.
• Bharti Airtel could also be the target for the takeover vision of other global telecommunications players that wish to move into the Indian market.
