QUESTION 5 (20 Marks)

Information:

A standard quantity of 2kg of material X at a standard price of R4 per kg is allowed for the production of one unit of product Messi. The cost figures for the first quarter of 2020 showed that 4 400 kg of material X was purchased at R4.10 per kg.

2000 units of product Messi were produced using 4 200 kg of material X.

Required:

In respect of material, calculate and briefly comment on the following variances:

5.1 Material Purchase price variance. (5 marks)

5.2 Material Issue price variance. (5 marks)

5.3 Material Quantity variance. (5 marks)

5.4 Total material variance for the 4 200 kg of material issued. (5 marks)

QUESTION 1 (20 Marks) As a financial manager of Limited Enterprises, you are required to analyse two proposed capital investments Projects 1 and 2. Each has a cost of R100 000, and the cost of capital for each project is 12%. Depreciation on each project is estimated at R25 000 per year. The projects' expected profit are as follows: Project 1 Project 2 Year W N - R40 000 R10 000 R5 000 R10 000 R5 000 R10 000 (R15 000) R10 000 Required 1.1 Calculate the payback period for each project (In years, months and days) (8 marks) 1.2 Calculate the NPV for each project (8 marks) 1.3 Which project or projects should be accepted if they are independent? (1 marks) 1.4 Calculate the ARR for project 1