ADVANCED OPLOMAN FINANCIAL MANAGEMENT-ACADEMIC AND ASCENT CASION DISTANCE 0.2.2 ADVANCED MANAGERIAL ACCOUNTING [100 QUESTION ONE [20] EC, an engineering company, produces tools and components to customers' specific requirements. EC uses absorption conting to absorb overheads into the cost of such customer order. Selling prices are usually determined by adding a 30% mark up to the costs incurred in completing the order. EC has recently been asked to provide a quotation for a new customer. The details of the work have been discussed at a meeting with the customer and the following resource requirements have been determined. The cost of these resources has been calculated using the company's routine costing system. Note R 1 100 2 150 3 Direct material A Direct material B Skilled labour Unskilled labour Supervision labour Machine overhead Other overhead 800 4 5 square metres @ R20 10 square metres R15 100 hours @ R8 60 hours @ R6 20 hours @ R20 20 hours @ R12 160 labour hours @ R4 360 5 400 6 240 7 840 Total cost 2.690 Notes: 1. Direct material A is currently held in inventory and is in regular use. The latest price paid for material A was R22 per square metre, but the replacement cost would be R23 per square metre. 2. Direct material B is currently not used by EC and would have to be bought if the work is undertaken. The minimum order from the supplier of material B is for 25 to search BI Hloud V Draw Highlight Erase le ADVANCED DIPLOMA IN PINANCIAL MANAGEMENT-ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 3. The skilled labour that would be required is available within EC, but only if those employees are transferred from other work that they are currently doing. This other work opuld be done by sub-contractors who could be hired on an hourly basis at a cost of R7 per hour. Alternatively sub-contractors could be hired to work on this new customer's order at a cost of R9 per hour. EC's current skilled labour is paid R8 per hour. 4. The unskilled labour is paid an hourly rate of R& but only for hours that they are actively working. There are only 40 hours of additional unskilled labour available within normal working hours. In order to complete the customer order on time they would have to work 20 hours of overtime. EC pays an overtime premium of 50% 5. The work would be supervised by the existing supervisor as part of his normal activity. The supervisor is paid an annual salary which is equivalent to R20 per hour for a 40 hour working week. 6. The machines that would need to be used have a running cost of R12 per hour. Two different machines would be required: machine W for 12 hours and machine Z for 8 hours. Both machines are regularly used by EC. Machine W is very specialised and is used for only some of EC's work. There is sufficient spare capacity on this machine. Machine Z is in constant use by EC and, if it is required for this customer order, EC would need to hire an additional machine at a hire cost of R5 per hour (excluding running costs) to fulfill its normal work. 7. EC's non-machine related fixed overhead costs are absorbed into product costs using an absorption rate per labour hour of this customer order is accepted it must be completed during the next 30 days. EC would like to win this order as it believes that it will probably win repeat orders from the customer. The directors have therefore decided to price this work on the basis of its relevant cost plus 10% * E ENG 06:23 2020/09/19 MLUNGISI QUESTIONS.pdf X File | C:/Users/daisy/Desktop/MLUNGISI%20QUESTIONS.pdf + IA! Read aloud ADVANCED DIPLOZANCIAL MANAGEMENT-ACADOS NO ART GALENDAR DISTANCE REQUIRED: 1.1 Prepare a schedule that shows the relevant oost of the new customer's order 1.2 (13) Explain, for each of the resource teme numbered 1 to 7, the moon for mach of the values you have included in your answer to 1.1 above. QUESTION TWO [20] Discuss the advantages and disadvantages of contracts on behalf of manufacturers and contracts on behalf of contractees. QUESTION THREE 1401 PART A 201 The management of Lota Ltd used discounted cash-flow techniques to evaluate capital expenditure projects. They recognise that budgeting several years ahead is subject to estimating probabilities. 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 life expectancy are as follows: 10 years 0.2 11 years 0.5 12 years 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 will last 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 unit. el RI e to search ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT-ACADEAC AD ABDEST CALENDAR DISTANCE The probabilities of the following production volumes are: 5000 unito por unum 0.1 6 000 unito per annum 0.3 7000 units per aum 08 The present value of R1 per arnum at the company's screening role for capital project is as follows: 10 your R8.71 11 years R7.13 12 years R7.52 Required: a) Advise the management of Lota Ltd on whether they should acquire the machine (14) b) Calculate how much Lota Lad can afford to pay by way of a premium in the first year for a guarantee that the machine will last 11 years, (6) PARTB 1201 Sparkling Lid is contemplating the manufacture of pool equipment and must decide whether to build a large or a small plant There is a 0.6 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 plant is built, a profit of R10 million will result. However If demand is waak but the plant is large, profits will amount to R1 millon. If Sparkling Lid builds a small plant and demand is weak, profits of R4million will be made. If demand is strong and Sparkling Lid has a small plant, the likelihood of competition is greater. It is estimated that there is a 75% chance that the company will come up against competition under these circumstances. In such a case, Sparkling Lild could either build another separate small plant in a different area, or expand the existing plant. If Sparding Lid decides not to invest in further plant, profits of R6 million are ENG 06:23 2020/09/19 prt sc. MLUNGISI QUESTIONS.pdf File | C:/Users/daisy/Desktop/MLUNGISI%20QUESTIONS.pdf of + EI AD Read alor ADVANCED DIPLOMAN PINANCIAL MARMOLENT - ACADEMIC AND ART GALENDAR DISTANCE ADVADU You If there competition, however, other form of expansion in expected to yield a 0.7 probability of a profit of Romilon and 0.3 probability of a profit of no change in the w quo. If there is no compellon, building the separate plant would hold a profit of R9 milion with a 0.8 probably and a profit of R7 milion with a 02 probability Expending the axeting plant les expected to root in a profit of R7.6 milion 4.1 42 Required: a) Draw a decision tree for Sparkling Ltd. b) Detombe the optimal strategy by means of backward Induction (10) (10) 4.3 QUESTION FOUR (201 A company produce two products, Alpha and Beta, details of which are as follows: Alpha Material X at RS / kg Beta 10 20 Labour at R2 /hour 20 10 Variable machine costs at R3 / hour 12 9 Variable costs 6 100 48 45 Selling price Demand 60 1 000 60 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. ype here to search BI " IA Read aloud IV Draw Highlight Erase | 0 ADVANCED DPLONAR FINANCIAL MAMAQENENT-ACADEMIC AND ASSESSMENT CALENDAR DISTANCE You are required to show, with reasons: The production plan the company should follow to maximise profts, and the contribution so arising. (8) 4.2 The minimum seling price the company could quote on a special order which required the under mentioned costs: 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 R52 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits. END OF ADVANCED BENG 06:24 2020/09/19 ADVANCED OPLOMAN FINANCIAL MANAGEMENT-ACADEMIC AND ASCENT CASION DISTANCE 0.2.2 ADVANCED MANAGERIAL ACCOUNTING [100 QUESTION ONE [20] EC, an engineering company, produces tools and components to customers' specific requirements. EC uses absorption conting to absorb overheads into the cost of such customer order. Selling prices are usually determined by adding a 30% mark up to the costs incurred in completing the order. EC has recently been asked to provide a quotation for a new customer. The details of the work have been discussed at a meeting with the customer and the following resource requirements have been determined. The cost of these resources has been calculated using the company's routine costing system. Note R 1 100 2 150 3 Direct material A Direct material B Skilled labour Unskilled labour Supervision labour Machine overhead Other overhead 800 4 5 square metres @ R20 10 square metres R15 100 hours @ R8 60 hours @ R6 20 hours @ R20 20 hours @ R12 160 labour hours @ R4 360 5 400 6 240 7 840 Total cost 2.690 Notes: 1. Direct material A is currently held in inventory and is in regular use. The latest price paid for material A was R22 per square metre, but the replacement cost would be R23 per square metre. 2. Direct material B is currently not used by EC and would have to be bought if the work is undertaken. The minimum order from the supplier of material B is for 25 to search BI Hloud V Draw Highlight Erase le ADVANCED DIPLOMA IN PINANCIAL MANAGEMENT-ACADEMIC AND ASSESSMENT CALENDAR DISTANCE 3. The skilled labour that would be required is available within EC, but only if those employees are transferred from other work that they are currently doing. This other work opuld be done by sub-contractors who could be hired on an hourly basis at a cost of R7 per hour. Alternatively sub-contractors could be hired to work on this new customer's order at a cost of R9 per hour. EC's current skilled labour is paid R8 per hour. 4. The unskilled labour is paid an hourly rate of R& but only for hours that they are actively working. There are only 40 hours of additional unskilled labour available within normal working hours. In order to complete the customer order on time they would have to work 20 hours of overtime. EC pays an overtime premium of 50% 5. The work would be supervised by the existing supervisor as part of his normal activity. The supervisor is paid an annual salary which is equivalent to R20 per hour for a 40 hour working week. 6. The machines that would need to be used have a running cost of R12 per hour. Two different machines would be required: machine W for 12 hours and machine Z for 8 hours. Both machines are regularly used by EC. Machine W is very specialised and is used for only some of EC's work. There is sufficient spare capacity on this machine. Machine Z is in constant use by EC and, if it is required for this customer order, EC would need to hire an additional machine at a hire cost of R5 per hour (excluding running costs) to fulfill its normal work. 7. EC's non-machine related fixed overhead costs are absorbed into product costs using an absorption rate per labour hour of this customer order is accepted it must be completed during the next 30 days. EC would like to win this order as it believes that it will probably win repeat orders from the customer. The directors have therefore decided to price this work on the basis of its relevant cost plus 10% * E ENG 06:23 2020/09/19 MLUNGISI QUESTIONS.pdf X File | C:/Users/daisy/Desktop/MLUNGISI%20QUESTIONS.pdf + IA! Read aloud ADVANCED DIPLOZANCIAL MANAGEMENT-ACADOS NO ART GALENDAR DISTANCE REQUIRED: 1.1 Prepare a schedule that shows the relevant oost of the new customer's order 1.2 (13) Explain, for each of the resource teme numbered 1 to 7, the moon for mach of the values you have included in your answer to 1.1 above. QUESTION TWO [20] Discuss the advantages and disadvantages of contracts on behalf of manufacturers and contracts on behalf of contractees. QUESTION THREE 1401 PART A 201 The management of Lota Ltd used discounted cash-flow techniques to evaluate capital expenditure projects. They recognise that budgeting several years ahead is subject to estimating probabilities. 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 life expectancy are as follows: 10 years 0.2 11 years 0.5 12 years 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 will last 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 unit. el RI e to search ADVANCED DIPLOMA IN FINANCIAL MANAGEMENT-ACADEAC AD ABDEST CALENDAR DISTANCE The probabilities of the following production volumes are: 5000 unito por unum 0.1 6 000 unito per annum 0.3 7000 units per aum 08 The present value of R1 per arnum at the company's screening role for capital project is as follows: 10 your R8.71 11 years R7.13 12 years R7.52 Required: a) Advise the management of Lota Ltd on whether they should acquire the machine (14) b) Calculate how much Lota Lad can afford to pay by way of a premium in the first year for a guarantee that the machine will last 11 years, (6) PARTB 1201 Sparkling Lid is contemplating the manufacture of pool equipment and must decide whether to build a large or a small plant There is a 0.6 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 plant is built, a profit of R10 million will result. However If demand is waak but the plant is large, profits will amount to R1 millon. If Sparkling Lid builds a small plant and demand is weak, profits of R4million will be made. If demand is strong and Sparkling Lid has a small plant, the likelihood of competition is greater. It is estimated that there is a 75% chance that the company will come up against competition under these circumstances. In such a case, Sparkling Lild could either build another separate small plant in a different area, or expand the existing plant. If Sparding Lid decides not to invest in further plant, profits of R6 million are ENG 06:23 2020/09/19 prt sc. MLUNGISI QUESTIONS.pdf File | C:/Users/daisy/Desktop/MLUNGISI%20QUESTIONS.pdf of + EI AD Read alor ADVANCED DIPLOMAN PINANCIAL MARMOLENT - ACADEMIC AND ART GALENDAR DISTANCE ADVADU You If there competition, however, other form of expansion in expected to yield a 0.7 probability of a profit of Romilon and 0.3 probability of a profit of no change in the w quo. If there is no compellon, building the separate plant would hold a profit of R9 milion with a 0.8 probably and a profit of R7 milion with a 02 probability Expending the axeting plant les expected to root in a profit of R7.6 milion 4.1 42 Required: a) Draw a decision tree for Sparkling Ltd. b) Detombe the optimal strategy by means of backward Induction (10) (10) 4.3 QUESTION FOUR (201 A company produce two products, Alpha and Beta, details of which are as follows: Alpha Material X at RS / kg Beta 10 20 Labour at R2 /hour 20 10 Variable machine costs at R3 / hour 12 9 Variable costs 6 100 48 45 Selling price Demand 60 1 000 60 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. ype here to search BI " IA Read aloud IV Draw Highlight Erase | 0 ADVANCED DPLONAR FINANCIAL MAMAQENENT-ACADEMIC AND ASSESSMENT CALENDAR DISTANCE You are required to show, with reasons: The production plan the company should follow to maximise profts, and the contribution so arising. (8) 4.2 The minimum seling price the company could quote on a special order which required the under mentioned costs: 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 R52 and R55 respectively, indicate the optimum production and purchasing strategy that the company should follow to maximise profits. END OF ADVANCED BENG 06:24 2020/09/19