1. (a) Explain the steps for coming up with a production budget. [10 marks]

(b) An agri-firm has a total fixed cost (TFC) of K200,000 per year, an average unit cost of K800 per unit and an average revenue (AR) of K1,200 per unit. You are required to budget for the following:

(i) Breakeven point for this firm [2 marks]

(ii) Gross profit of K850,000 [4 marks]

(iii) Breakeven and Gross profit if average cost rises K1,000 [4 marks]

2. A fresh milk firm supplies the commodity through 4 channels. Information for each channel is given below.

Channel

1

2

3

4

Sales

300

350

450

420

Returns inwards

20

50

40

40

Opening stock

30

10

40

20

New supplies

100

100

100

100

Unsold stock

40

60

40

20

Expenses

40

50

40

60

Tax

5

5

4

8

You are required to identify the best channel for this firm. What must it do to raise productivity for poor channels. (10)

3. The projected financial information for Nalungwe Fertilizer Marketing Co. for the period April, 2019 to March, 2020, has the following information based on market research:

The company intends to import 200 metric tonnes of fertilizers in June at a cost of K200 per 50kg bag. The sales of all the 200 metric tonnes will run from August to December as follows: 5% of sales will be in August, 15% in September, 25% in October, 45% in November, and 10% in December. Fertilizer prices expected to be K260 per 50kg bag in August and September. In October and November, prices will be K280 per 50kg bag. And in December, they will come down to K275 per 50kg bag. 50% of sales in December will be on credit due to low demand and people will settle their debts in February. Wages are K8000 per month, repairs K4000 in March, June, September, and December. Mukelabai estimates drawings at K15,000 in July. The firm will pay storage costs of K20,000 in April and 20% of the costs will be financed from a bank overdraft payable in March, 2020. The firm will sell some used vehicles in August at K55,000. Tax is paid once a year in April at K2,500 and bank interest of K2,000 on the bank overdraft will be paid together with the overdraft in March, 2020. Moreover, the firm will buy a delivery truck worth K80,000 in June. The company donates K1,000 per month to charitable organizations.

Prepare a cash flow for this firm (6)

Suggest how to manage the business of this company. (4)

4. A farmer intends to go into wheat production from May 2016 to September 2016 on its 60 ha of farm land. He/she will spend K800/ha on planting in May, K600/ha on seed in May, K500/ha on fertilizer in May and June, K3000/month on electricity, K5000/month on wages, K1000.month on charity, K25000/month on family livelihood, K2000/ha on harvesting in September, and K200000 on tax in September. The farmer will realise 6 tonnes/ha at US$500/tonne of sold wheat in September. (Assume the exchange rate to be K8.00=US$1.00).

(a) Prepare a cash flow for this farmer. [10 marks]

(b) Determine periods of surpluses and deficits. [5 marks]

(c) If the farmer will finance the deficits from one bank loan with interest of 18% per annum, what will the farmers net income at the end of September? [5 marks]

Need this information asap