(a) Explain the master budget process. (5 marks) (b) The records of Dubai Company revealed the following information (5 marks): Credit and budgeted sales are respectively as follows: February, $700,000; March, $720,000; and April, $800,000. Dubai Company collects 70% of its sales in the month of sale and 30% in the following month. Cost of goods sold accounts 60% of sales. Cost of purchases equals 65% of the next month's sales and are paid in the month following acquisition. Cash selling and administrative expenses total $120,000 per month and are paid when incurred. Depreciation per month amounts to $36,000. Selected amounts taken from the January 31 balance sheet were: Accounts receivable, $230,000; plant and equipment (net), $214,000; and retained earnings, $170,000. Required: Prepare a budgeted income statement that summarizes activity for the two months ended March 31, 20x105marks) (a)Ahmed constructs buildings in Abu Dhabi. Ahmed was approached recently by a customer regarding a potential project, and he submitted a bid of $967,600, derived as follows: (5 Marks) Land S160,000 Raw materials 200,000 Labor costs 240.000 5.600,000 Construction overhead -25% of direct cost 150,000 Allocated corporate overhead 70.000 Total cost SD 000 Ahmed adds an 18% profit margin to all jobs, computed on the basis of total cost. In this client's case the profit margin amounted to $147,600 ($820,000 x 18%), producing a bid price of $967,600. Assume that 70% of construction overhead is fixed. Required: Suppose that business is presently very slow, and the client countered with an offer on this home of $780,000. Should Ahmed accept the client's offer? Why? (4 marks) If Ahmed has more business than he can handle, how much should he be willing to accept for the home? Why? (1 mark) (b) Abu Dhabi Company has experienced a number of out-of-stock situations with respect to its finished- goods inventories. Inventory at the end of May, for example, was only 10 units an all-time low. Management desires to implement a policy whereby finished-goods inventory is 60% of the following month's sales. Budgeted sales for June, July, and August are expected to be 1,700 units, 1,900 units, and 2,150 units, respectively. Required: Determine the number of units that Abu Dhabi Company must produce in June and July (5 marks: 3 marks no. of units produced in June, 1 mark total finished units needed, 1 mark no. of units to be produced in July). Sharjah Corporation manufactures Auto Mobile Cars. Three months ago, the Company got a special- order from Ajman, Inc. Ajman desires to market Auto Mobile similar to Sharjah's design and has offered to purchase 6,000 units. The following data are available: Cost data for Sharjah's design: direct materials, $45; direct labor, $30 (2 hours at S15 per hour): and manufacturing overhead, S70 (2 hours at $35 per hour). The normal selling price of the car is $180; however, Ajman has offered Sharjah only $115 because of the large quantity it is willing to purchase. Ajman requires a change to be made of the design that will allow a $4 reduction in direct-material cost. Sharjah's production manager notes that the company will incur $8,700 in additional set-up costs and will have to purchase a $3,300 special device to manufacture these units. The device will be discarded once the special order is completed. Total manufacturing overhead costs are applied to production at the rate of $35 per labor hour. This figure is based in part, on budgeted yearly fixed overhead of $1,284,000 and planned production activity of 48,000 labor hours. Sharjah will allocate $10,000 of existing fixed administrative costs to the order. Required: One of Sharjah's staff wants to reject the special order because there is no benefit from the sale. Do you agree with this conclusion Sharjah has excess capacity? Show calculations to support your answer (5 marks) 3. If Sharjah currently has no excess capacity. should the order be rejected from the financial standpoint view? Briefly explain (2.5 marks). Assume that Sharjah currently has no excess capacity. Would outsourcing can be alternative that Sharjah could take into account if management desire to do business with Ajman? Briefly discuss (2.5 marks). Lamar Company is considering a project that would have a five-year life and require a $2,400,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: $3,200,000 1.800.000 1,400,000 Sales...... Variable expenses.. Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs... Depreciation....... Total fixed expenses. Net operating income.. $700,000 300,000 1,000,000 $ 400.000 The company's discount rate is 12%. Required: 1. Compute the annual net cash inflow from the project. 2. Compute the project's net present value. Is the project acceptable? 3. Find the project's internal rate of return to the nearest whole percent. 4. Compute the project's payback period. 5. Compute the project's simple rate of return