ADVANCED OPLOMA INFANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT CALENDAR ADVANCED DPLOMA IN FINANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT GALENUS REQUIRED: 11 Prepare a schedule that shows the relevant cost of the new customer's orde (153 The probabies of the following production volumes are: 500 units per annum 0.1 6 000 uri per annum 0.3 7 000 units per annum OS The present value of R1 per annum at the company's screening for capita proles is follows: 10 years RE 71 R713 12 years R7.52 1.2 Expiais, for each of the resource toma numbered 1 to 7, the reason for each of the values you have included in your worto 1.1 above. (7) QUESTION TWO [20] Chcuss the advantages and disadvantages of contracts on behalf of manufacturers and contracts on behalf of contractees QUESTION THREE (40) Required: Advise the management of Lata Lid on whether they should acquire the machine (14) b) Calculate how much Lola Lid can afford to pay by way of a premium in the frst year for a guarantee that the machine will last 11 years 16) PARTA (20) The management of Lots Lid used discounted cash-flow techniques to evaluate capital expenditure projects. They recognise that budgeting several years ahead is subject to estimating probabiles. They therefore estimate not only the likely cash flows but also the probabilities of different cash-flows They are contemplating the acquisition of a machine at a cost of R234 000 The probabilities of its we expectancy are as follows: 10 years 02 11 years 0.5 0.3 For a premium which will be payable in addition to the purchase price, the supplier of the machine is prepared to guarantee that the machine willast at least 11 years. The machine produces a single product with a selling price of R12 per unit and variable cost of production of R7 per une PART 1 120 Sparkling Lid is contemplating the manufacture of pool equipment and must decide whether to bund a large or a smal plant There is a 06 probability that the demand for the equipment will be strong and a 0.4 probability that the demand will be weak. If demand is strong and a large plantis buit, a profit of R10 milion wil result. However if demand is weak but the plant is large, profits will amount to R1 milion. If Sparkling Lid builds a small plant and demand is weak, profits of Ramilion will be made. If demand is strong and Sparkling Ltd has a small plant, the ikelihood of competition is greater. It is estimated that there is a 75% chance that the company will come up against competion under these circumstances. In such a case, Sparkling uid could either buid another separate small plant in a different area, or expand the easting plant. If Sparking Lid decides not to invest in further plant profits of Romlionara expected, regardless of whether there is any competition 12 years REGENT BUSINESS SCHOOLS) - JANUARY 2020 REGENT BUSINESS SCHOOL (RBS) - JANUARY 2010 25 ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT - ACADEMIC AND ASSESSMENT CALENDAR DISTANCE ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT-ACADEMIC AND ASSESSMENT CALENDAR DISTANCE If there is competition, however, either form of expansion is expected to yolda 0.7 probability of a profit of R8 milion and a 0.3 probability of a profit of no change in the status quo. If there is no competition, building the separate plant would yield profit of R9 million with a 0.8 probability and a profit of R7 milion with a 0.2 probability Expanding the existing plant is expected to result in a profit of R7.5 milion Required: a) Draw a decision tree for Sparkling Ltd. b) Determine the optimal strategy by means of backward induction You are required to show, with reasons: The production plan the company should follow to maximise profits, and the contribution to arising (6) The minimum selling price the company could quote on a special order which required the under mentioned costs: (7) Material x R1 000 Labour R1 000 Machine time R150 Variable costs R400 4.3 Alpha and Beta can be purchased at a price of RS2 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits. (7) (10) (10) QUESTION FOUR [20] A company produces two products, Alpha and Bata, details of which are as follows: Alpha Beta Material X at R5/kg 10 20 ACCOUNTING ASSIGNMENT FND OF ADVANCED MAN Labour at R2 /hour 20 10 Variable machine costs at R3/hour 12 9 Variable costs 6 48 45 60 Selling price Dernand 60 1 000 1 000 Material is restricted, owing to import restrictions, to 5 000kg monthly. The machine hour capacity of the company is 6 000 hours monthly There are no opening or closing of stocks. REGENT BUSINESS SCHOOL (RBS) - JANUARY 2020 27 REGENT BUSINESS SCHOOL IRRS ADVANCED OPLOMA INFANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT CALENDAR ADVANCED DPLOMA IN FINANCIAL MANAGEMENT ACADEMIC AND ASSESSMENT GALENUS REQUIRED: 11 Prepare a schedule that shows the relevant cost of the new customer's orde (153 The probabies of the following production volumes are: 500 units per annum 0.1 6 000 uri per annum 0.3 7 000 units per annum OS The present value of R1 per annum at the company's screening for capita proles is follows: 10 years RE 71 R713 12 years R7.52 1.2 Expiais, for each of the resource toma numbered 1 to 7, the reason for each of the values you have included in your worto 1.1 above. (7) QUESTION TWO [20] Chcuss the advantages and disadvantages of contracts on behalf of manufacturers and contracts on behalf of contractees QUESTION THREE (40) Required: Advise the management of Lata Lid on whether they should acquire the machine (14) b) Calculate how much Lola Lid can afford to pay by way of a premium in the frst year for a guarantee that the machine will last 11 years 16) PARTA (20) The management of Lots Lid used discounted cash-flow techniques to evaluate capital expenditure projects. They recognise that budgeting several years ahead is subject to estimating probabiles. They therefore estimate not only the likely cash flows but also the probabilities of different cash-flows They are contemplating the acquisition of a machine at a cost of R234 000 The probabilities of its we expectancy are as follows: 10 years 02 11 years 0.5 0.3 For a premium which will be payable in addition to the purchase price, the supplier of the machine is prepared to guarantee that the machine willast at least 11 years. The machine produces a single product with a selling price of R12 per unit and variable cost of production of R7 per une PART 1 120 Sparkling Lid is contemplating the manufacture of pool equipment and must decide whether to bund a large or a smal plant There is a 06 probability that the demand for the equipment will be strong and a 0.4 probability that the demand will be weak. If demand is strong and a large plantis buit, a profit of R10 milion wil result. However if demand is weak but the plant is large, profits will amount to R1 milion. If Sparkling Lid builds a small plant and demand is weak, profits of Ramilion will be made. If demand is strong and Sparkling Ltd has a small plant, the ikelihood of competition is greater. It is estimated that there is a 75% chance that the company will come up against competion under these circumstances. In such a case, Sparkling uid could either buid another separate small plant in a different area, or expand the easting plant. If Sparking Lid decides not to invest in further plant profits of Romlionara expected, regardless of whether there is any competition 12 years REGENT BUSINESS SCHOOLS) - JANUARY 2020 REGENT BUSINESS SCHOOL (RBS) - JANUARY 2010 25 ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT - ACADEMIC AND ASSESSMENT CALENDAR DISTANCE ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT-ACADEMIC AND ASSESSMENT CALENDAR DISTANCE If there is competition, however, either form of expansion is expected to yolda 0.7 probability of a profit of R8 milion and a 0.3 probability of a profit of no change in the status quo. If there is no competition, building the separate plant would yield profit of R9 million with a 0.8 probability and a profit of R7 milion with a 0.2 probability Expanding the existing plant is expected to result in a profit of R7.5 milion Required: a) Draw a decision tree for Sparkling Ltd. b) Determine the optimal strategy by means of backward induction You are required to show, with reasons: The production plan the company should follow to maximise profits, and the contribution to arising (6) The minimum selling price the company could quote on a special order which required the under mentioned costs: (7) Material x R1 000 Labour R1 000 Machine time R150 Variable costs R400 4.3 Alpha and Beta can be purchased at a price of RS2 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits. (7) (10) (10) QUESTION FOUR [20] A company produces two products, Alpha and Bata, details of which are as follows: Alpha Beta Material X at R5/kg 10 20 ACCOUNTING ASSIGNMENT FND OF ADVANCED MAN Labour at R2 /hour 20 10 Variable machine costs at R3/hour 12 9 Variable costs 6 48 45 60 Selling price Dernand 60 1 000 1 000 Material is restricted, owing to import restrictions, to 5 000kg monthly. The machine hour capacity of the company is 6 000 hours monthly There are no opening or closing of stocks. REGENT BUSINESS SCHOOL (RBS) - JANUARY 2020 27 REGENT BUSINESS SCHOOL IRRS