1. Company A manufactures a single product with a selling price of £40 and variable costs of £24 per unit. Fixed overheads are £5,880 per month and the company is currently producing and selling 600 units per month at 100% capacity. A customer has offered to buy 120 units at the standard selling price and the company can either:

 • Reject the offer 

• Buy-in the products from another supplier for £34 per unit 

• Manufacture the products (incremental costs would be £3.43 per unit variable and £720 fixed).

 Required: 

Evaluate above options from financial viewpoint and discuss what would be the best choice for them. 

Question 2. Following financial information are extracted from Company B’s information system. 

Trade Receivables (Debtors) £21,920 

Trade Payables (Creditors) £17,810 

Opening Inventory £9,316 

Average debtors repayment period 29 days 

Average creditors repayment period 32 days 

Average inventory £9,590 Current ratio 2:1 

Required: 

a) Calculate Closing Inventory.

 b) Calculate Sales for the period. 

 c) Calculate purchases for the period.

d) Calculate the balance of Bank account. 

e) Calculate Quick ratio.