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Ca-final sfm classes by dr. rajesh kumar v

cmanjula (Tax & Audit Manager) (205 Points)

06 January 2014

HI Friends,

Dr. V Rajesh Kumar Sir, have launched his own academy. CA- Final - SFM classes for May'2014 starts from 23rd Jan'2014 at Vijaya College, Southend Circle, Bangalore. For more details visit www.vittempravinagurushala.in or contact 9620439399.

Wish you all the best.

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1 Replies

BRN Murthy (asst. professor) (21 Points)
Replied 12 January 2015

Dear Dr. Rajesth Kumar

I am a chartered accountant serving as faculty at Dayananda sagar college.

I request you to kindly provide answers to the following questions at the earliest.

Problems requiring solutions :

In organic Chemicals limited is about to replace its old boiler equipment, either by coal fired system or by an oil fired system. Finance costs 15% a year , and other estimated costs are as follows :

	Coal	Oil
Initial cost of boiler	70,000	1,00,000
Annual operating costs	60,000	45,000

If the company expected the new boiler at last fifteen years, which system should be chosen ?

Sportech ceramics ltd, is about to replace its rapidly deteriorating boiler equipment . Three types of boiler system are being considered as a suitable replacement :

Coal fired b. Gas fired c. oil fired

The associated costs are as follows :


Cost of boiler (incl installation and commissioning	55000	74,000	67000
Annual fuel cost	27000	23000	25000
Annual operating labour costs	8000	-	---
Annual maintenance costs	4000	3000	3000
Annual electricity costs	1000	1000	1000
TTOTAL ANNUAL OPERATING COSTS	40000	27000	29000

The new boiler is expected to last at least 10 years . the company has an opportunity cost of finance of 15% per year. Which system should be chosen?

Indo –gulf fertilizers Ltd supports the concept of terotechnology or life cycle costing for new investment decisions covering its engineering activities. The finalized of this philosophy is now well established and its principles extended to all other areas of decision making.

The company is to replace a number of its machines and the production manager is to run between the X machine , a more expensive machine with a life of 12 years, and the W machine with an estimated life of 6 years . if the W machine is chosen it is likely that it would be replaced at the end of 6 years by another W machine. The pattern of maintenance and running costs differs between the two types of machine and relevant data are shown below:

	X	W
Purchase price	19000	13000
Trade – in -value	2000	3000
Annual repair costs	2000	2600
Over haul costs per annum	4000	2000
Estimated financing costs averaged over machine life, per annum	10%	10%

You are required to recommend with supporting figures , which machine to purchase , stating any assumptions made.

A house wife is looking at ways of producing domestic hot water and considers two possibilities – an electric immersion heater having an installation cost of Rs. 160 and estimated annual electrical charges of Rs. 200 and a gas boiler with an installation cost of Rs. 760 with annual fuel bills of Rs. 80.

Assuming yourself as a consultant to this cost –conscious –house wife . advise her suitably by comparing two systems. On the basis of 1. Total expenditure, and 2. Present value over a five years period . Take interest at 9%

What will be your recommendation if you consider both the equipments for a 8 year period ?

A company is considering a cost saving project. This involve purchasing a machine costing “Rs. 7000, which will result in annual saving on wage costing of Rs. 1000 and on material costs of Rs. 400.

The following forecasts are made of the rates of inflation each lyear for the next 5 years:

Wages costs 10%

Material costs 5%

General prices 6%

The cost of capital of the company , in monetary terms is 15%

Evaluate the project, assuming that the machine has a life of 5 years and no scrap value.

S Engineering company is considering to replace or repair a particular machine, which has just broken down. Last year, this machine coasted Rs. 20,000 to run and maintain. A further useful life of 5 years is expected , if immediate repairs of Rs. 19000 are carried out. If the machine is not repaired, it can be sold immediately to realize about Rs. 5000 ( ignore loss/gain on such disposal)

Alternatively the company can buy a new machinery for Rs. 49,000 with an expected life of 10 years with no salvage value after providing depreciation on straight line basis. In this case, running and maintenance costs will reduce to Rs. 14,000 each year

The company considers a normal return of 10% per annum after tax for a minimum requirement on any new investment. Which alternative will you choose ? assume straight line method of depreciation is acceptable for income tax purposes also. Take corporate tax rate as 35%.

From the following information in respect of Alpha Ltd calculate the total value of human capital by following Lev and Schwartz model :

Age	Unskilled		Semi skilled		Skilled
	No.	Average annual earnings	No.	Average annual earnings	No.	Average annual earnings
30-39	70	3000	50	3500	30	5000
40-49	20	4000	15	5000	15	6000
50-59	10	5000	10	6000	5	7000