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Question 1 Norway (Py) Lid is a divisionalised company, where the divisional managers remuneration packages are inked to the return en inwwstment of their divisions.
Question 1 Norway (Py) Lid is a divisionalised company, where the divisional managers remuneration packages are inked to the return en inwwstment of their divisions. Return on inmestment is based an the net book vakue of assets employed in the division at the beginning of the financial year On average, divisional managers remain in their posts for a three-year period The manager of the amative division is considering two mutually exckrsive ahe proposals for investing in new machinery. These proposals both involve an initial outlay of R250 000, but wit yield dfferent levels of savings over the ife of the machinery. which is estimated at five years, afther which they will have no resitual value. Norway (Pty) Ltd's depreciation, is cakculated on a straight-ine basis. The savings will giwe rise to increased cash flows as folows Year Machine Cash flows Cash flows 60 000 100 000 100 000 Required: 1. Appraise each praject, using a) b) return on investment, as described above net present value, using the company's cost of Captal of 6% 15 marks Based on your results from (1), explain which machine the divisional manager is likely to choose and discuss the potential corfict between performance measurement and investment appraisal Question 2 10 mark8 Mendlan Ltd makes 30 000 units per year of part ASA00, which is used in the range of electrical goods it manufactures The unit costs of this part are as follows Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead 24.70 16.30 2.30 13.40 56.70 Total bj if Merklian accepts the offer to purchase the part from the ouiside supplier, the production factos now being used to make the part coud be used to make 4000 more unts of ite best soing produet, each of which generstes a contribution of RI t T aking into account this additional information, what is the total additional cost or saving of 10 marks o) The easiest way to distinguish between relevant and non-relevant costs is by cost purchasing 30 000 units per year of A5400 rather than making i#? behaviour variable costs are relevant costs and fixed cosis are not Explain briefly why you might agree or disagree with this statement. 9 marks Total 25 marks Question 3 Williams Ltd manufactures and sells a single product. The selling price is R18. The following information relates to its yearly production and cost data. (Assume that there is no change to the stock level of the company) Total Cost R 4000 000 2 800 000 6 600 000 3 900 000 3 200 000 2 100 000 Unit Volume 300 000 150 000 420 000 280 000 230 000 120 000 Year Required: 1. Based on the above cost and volume data, use the high-low method to identify variable cost per unit and annual fixed costs for the company 5 marks 2. On the basis of your answers in part (1) above, calculate the breakeven point of the company in both units and sales revenue tn.Ma leb.." t86..#8 @ R", RAO 2) otel 16 merks Question Boyle Company (Ply) Ltd has fut tog.the, ths towmng dada , order to einsmis uwr operating bukget for the seoond quarter of 2019 Apri May June Judy 6y 300 Sales (units) 3 200 58 90055400 Additional information: Company policy requires 60% of the following month's sales (in units) be in ending inventory This policy was met in March. It takes 2.5 hours of direct labour to produce one unit. The average wage cost is R14 Variable overhead rate is R6 per direct labour hour and fixed overhead is R15 000 per month. Required 1. Prepare a production budget for April, May and June and the quarter in total. Prepare a direct labour budget for Apri, May and June and the quarter in total. 2. 3. Prepare an overhead budget for April, May and June and the quarter in total. Total 14 marks
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