Q4. (a) A washer manufacturing company produce 48000 bolts when working at normal capacity. During the next 2 months, only 6000 units can be produced and sold. Management plans to close down the factory estimating that the fixed manufacturing cost can be reduced OMR. 2800 for two months. When the plant is operating the fixed overhead costs are incurred at a uniform rate throughout the year. Additional cost of plant shut down for the two months is estimated at OMR 3500. Express your view whether the plant should be shut down for two months, and calculate the shutdown point for two months in units of products. The details of the cost are given in table. (Loss calculation for operation- 1.5 mark, Loss calculation for shutdown-1.5 marks, Decision- Imark, Shutdown point calculation- 1 mark) (6 marks) Particulars for one unit Production cost (PC) Selling Price(SP) Administrative Expenses Direct material cost(DMC) Direct labor cost (DLC) Variable overheads (VOH) Fixed overheads(FOH) Cost in OMR 17 30 3.7 50% of PC 9% of SP 40% of DMC 60% of DMC (b) A car cleaning company has purchased a high pressure compressor unit to reduce the washing time. The useful life of the compressor is 11 years. The company deposit 700 OMR in the bank for doing maintenance activities of the storage unit at the end of the first year, and increase the deposit at a rate of 200 OMR for the remaining life with an interest rate of 9%. Calculate how much amount the company deposited in the bank for maintenance activities at the end of the 114 year. ( Cash Flow diagram-1 mark, Calculation- 2 marks) (3 marks) (c) A company wants to set-up a reserve which will help it to have an annual equivalent amount of 15,00,000 OMR for the next 20 years towards its employees welfare measures. The reserve is assumed to grow at the rate of 15% annually. Find the single-payment that must be made as the reserve amount now. (2 marks) Q4. (a) A washer manufacturing company produce 48000 bolts when working at normal capacity. During the next 2 months, only 6000 units can be produced and sold. Management plans to close down the factory estimating that the fixed manufacturing cost can be reduced OMR. 2800 for two months. When the plant is operating the fixed overhead costs are incurred at a uniform rate throughout the year. Additional cost of plant shut down for the two months is estimated at OMR 3500. Express your view whether the plant should be shut down for two months, and calculate the shutdown point for two months in units of products. The details of the cost are given in table. (Loss calculation for operation- 1.5 mark, Loss calculation for shutdown-1.5 marks, Decision- Imark, Shutdown point calculation- 1 mark) (6 marks) Particulars for one unit Production cost (PC) Selling Price(SP) Administrative Expenses Direct material cost(DMC) Direct labor cost (DLC) Variable overheads (VOH) Fixed overheads(FOH) Cost in OMR 17 30 3.7 50% of PC 9% of SP 40% of DMC 60% of DMC (b) A car cleaning company has purchased a high pressure compressor unit to reduce the washing time. The useful life of the compressor is 11 years. The company deposit 700 OMR in the bank for doing maintenance activities of the storage unit at the end of the first year, and increase the deposit at a rate of 200 OMR for the remaining life with an interest rate of 9%. Calculate how much amount the company deposited in the bank for maintenance activities at the end of the 114 year. ( Cash Flow diagram-1 mark, Calculation- 2 marks) (3 marks) (c) A company wants to set-up a reserve which will help it to have an annual equivalent amount of 15,00,000 OMR for the next 20 years towards its employees welfare measures. The reserve is assumed to grow at the rate of 15% annually. Find the single-payment that must be made as the reserve amount now. (2 marks)
