ANSWER ALL QUESTIONS Question Sunny Dezigns DAC produces gifts for the tourism industry and has been operating in Ireland for ten years. By analyzing its financial results over time to maximize profits the company has focused production on three main items, keyrings, drinks coasters and fridge magnets. As a consequence of the improvement in the economy, Sunny Design's DAC has recently received orders from new customers. While delighted with the orders, the production director is concerned about the company's capacity to produce the items required. Details extracted from the company's budgeted management accounts and other relevant information are shown below: 1. Product information (per unit: Keyrings Coasters Fridge magnets Ghe Ghe Selling price 2.65 1.20 Materials 0.50 0.75 0.40 Labour 0.30 0.45 0.15 Ghe 2. Total budgeted production overheads for the year are expected to be 211,250. Twenty percent (20%) of all production overheads are variable and are allocated to products based on labour hours. Fived production overheads are considered to be period costs 3. Budgeted annual demand for the three products, including the new orders received is as follows: Keyrings 132.500 mits Counters 60,400 units Fridge magnets 100.000 units 4. The company has budgeted to pay its workers a fixed rate of 12 per hour and has included 6.500 labour hours for the year in its budget. REQUIREMENT: (a) Prepare calculations to show whether Sunny Dezigns DAC will have sufficient production capacity to meet budgeted demand for its products. AN(6 marks) (b) Compute the optimal production plan for Sunny Dezigns DAC and show the annual profit expected AN (10 marks) (e) Briefly explain the following terms, providing examples to illustrate your answer (1) Sunk cost AP (2 marks) (1) Opportunity cost AP (2 marks) Total: 20 Marks! Question 2 You are employed by Casey & Co. a fim of Certified Public Accountants based in Werfon. The firm has recently been engaged by a small manufacturing company to provide advice and recommendations to improve the company's costing system. The managing director of the manufacturing company is particularly interested in implementing standard casting REQUIREMENT: Draft a memorandum for your client that: (a) Outlines the purposes of standard costing AN (7 marks) (b) Describes how a standard costing system operates ANC marks) (c) Outlines POUR factors that influence a company's demand for management accounting information APS marks) Question 2 You are employed by Casey & Co. a firm of Certified Public Accountants based in Wexford. The firm has recently been engaged by a small manufacturing company to provide advice and recommendations to improve the company's costing system. The managing director of the manufacturing company is particularly interested in implementing standard costing REQUIREMENT: Draft a memorandum for your client that: (a) Outlines the purposes of standard costing: AN (7 marks) (b) Describes how a standard costing system operates. AN(8 marks) (c) Outlines FOUR factors that influence a company's demand for management accounting information AP(5 marks) [Total: 20 Marks! Question 3 Nu-Concepts, Inc., a southeastern advertising agency, is considering the purchase of new computer equipment and software to enhance its graphics capabilities. Management has been considering several alternative systems, and a local vendor has submitted a quote to the company of S15,000 for the equipment plus S16,800 for software. Assume that the equipment can be depreciated for tax purposes over three years as follows: year 1,55,000; year 2. $5,000; year 3, $5,000. The software can be written off immediately for tax purposes. The company expects to use the new machine for four years and to use straight-line depreciation for financial reporting purposes. The market for used computer systems is such that Nu-Concepts could sell the equipment for $2,000 at the end of four years. The software would have no salvage value at that time. Nu-Concepts management believes that the introduction of the computer system will enable the company to dispose of its existing equipment, which is fully depreciated for tax purposes. It can be sold for an estimated $200 but would have no salvage value in four years. If Nu-Concepts does not buy the new equipment, it would continue to use the old graphics system for four more years. Management believes that it will realize improvements in operations and benefits from the computer system worth $16,000 per year before taxes. Nu-Concepts uses a 10 percent discount rate for this investment and has a marginal income tax rate of 40 percent after considering both state and federal taxes, a. Prepare a schedule showing the relevant cash flows for the project. AP (8 marks) b. Distinguish between direct and indirect method as used in preparing cash flow statement AN (8 marks) c. Indicate whether the project has a positive or negative net present value. AP/4 marks) [Total: 20 Marks Question 4 Windy Sails Limited has prepared the following cost analysis for 6 months of trading. Sales (sets) 1,800 Price $850 per set Materials costs $150 per set Labour costs $150 per set Other variable costs $150 per set Overheads $600,000 for 6 months operation Advise the company based on the requirement below; REQUIREMENT 1. Determine the break-even quantity, and confirm this by calculation. CR (8 Marks) 2. Identify the firm's margin of safety for the period. EV(3 Marks) 3. Calculate the profit made during the period? AN(8 Marks) 4. Evaluate the use of break-even analysis to a company within its decision-making procedures. EV(1 Marks) [Total: 20 Marks) Question 5 The following information was obtained from the accounting records of DBE Lid on 31 December 2018, which is its financial year-end. The company has an authorized share capital of 750 000 ordinary shares. 1. Extract from the Income Statement for the year ended 31 December 2018: Interest on loan 27 000 Interest on overdraft 380 Depreciation 58 000 Income tax 23 000 Net profit before income tax 100 000 b. Information from the Balance Sheet: 2018 2017 Ghe Ghc Ordinary share capital 678 000 440 000 Retained income 73000 56 000 Loan: TK Bank 130 000 170 000 Fixed assets (carrying value) 549 000 420 000 Inventory 61 000 73 000 Trade and other receivables 214 320 150 600 Bank (favourable) 30 130 Bank overdraft 10 000 Cash float 1 000 1 000 Trade and other payables 158 400 152 550 Income tax 4 000 (Dr) 10 000 (Cr) Shareholder dividends* 28 000 22 000 *Included above in Trade and other receivables and Trade and other payables. C. Total dividends for the year amounted to R60 000 D. New equipment was purchased, and a vehicle was sold during the year, at its carrying value of R17 000 E. Shares to the value of R400 000 were repurchased during the year. This transaction was recorded. REQUIRED a. Prepare the cash flow statement using the direct method CR(8 Marks) b. Prepare the statement of cash flow using the indirect method CR(Marks) c. Explain your finding concerning the performance of the company. AP(4 Marks) [Total: 20 Marks