Question 1: Capital Budgeting and Decision Making

You are the financial manager of a manufacturing company. The company is considering two investment projects: Project A and Project B.

• Project A requires an initial investment of $1,000,000 and is expected to generate cash flows of $300,000 per year for five years.

• Project B requires an initial investment of $800,000 and is expected to generate cash flows of $250,000 per year for six years.

• Both projects have a required rate of return of 10%.

Based on the information provided, analyze and recommend which project the company should choose, considering factors such as net present value (NPV), payback period, and profitability index. Critically evaluate your decision-making under the uncertain business environment.

(25 Marks)

Question 2: Break-even Analysis

You are a consultant advising a startup business. The business plans to sell a new product with a selling price of $50 per unit.

The variable cost per unit is $30, and the fixed costs are $100,000.

Critically evaluate and provide recommendations on the break-even point for the business. Critically appraise the implications of different pricing strategies and cost structures on the break-even point and profitability.

(25 Marks)

Question 3: Job vs Batch Job Costing

You are the manager of a manufacturing company that produces custom-made clothing.

Critically evaluate the advantages and disadvantages of using job costing and batch job costing systems for tracking costs and profitability. Critically judge the circumstances under which each system would be more appropriate and appraise how each system can help in making pricing and production decisions.

(25 Marks)

Question 4: Make or Buy Decisions

You are a purchasing manager in a company that manufactures electronics.

• The company currently produces a component in-house at a cost of $100 per unit.
• An external supplier offers to provide the same component for $80 per unit.

Critically evaluate the factors the company should consider when making the make or buy decision, including financial, operational, and strategic implications.

(25 Marks)

(Total: 100 Marks)