Question No. 1 (Marks 20) A) Prepare the total budgeted sales in dollars for the quarter ended March 31, 2021 using the following data. Jan Feb Mar Apr Quantity of budgeted units for sales 50,000 100,000 70,000 80,000 Expected selling prices of each unit $6 $7 $10 $11 B) What is the Basic Framework of Budgeting and what are the advantages of Budgeting? Question No. 2 (Marks 20) A) Toronto Steel Manufacturing Inc. is considering the purchase of a new machine. Its cost is $30,000; its expected useful life is 10 years (assume no salvage value), and it will be depreciated on a straight-line basis i.e. $3,000 per year. The income before depreciation and taxes is expected to be $15,000 per year. Assuming a 40% tax rate. You are required to compute the (A) payback period and (B) the accounting rate of return. Question No. 3 (Marks 20) A) Ms. Diana wants to take off next three years of work to travel around the world. She estimates her average annual cash need is $15,000. If she needs more funds, she will arrange from alternative ways i.e. taking loans or doing some odd jobs etc. Ms. Diana believes that she can invest her savings at 10% until she depletes her funds. You are required to find out how much she should invest now to fund her future cash flow if she is able invests at 10% annually OR what amount she has to invest if she only earns 7% annually. The relevant factors from table you will need for this calculation are given below. a) Future value interest factor for a one-dollar annuity compounded from the table at 10% is 3.3100 and at 7% is 3.2149 on period#3 b) Present value interest factor for a one-dollar annuity discounted from the table at 10% is 2.4869 and at 7% is 2.6243 on period#3 B) What are the popular methods of capital budgeting? What are the advantages and disadvantages of each? Question No. 4 (Marks20) Following are data from the statements of two companies selling comparable products: Current Year-End Balance Sheets ABC Company XYZ Company Cash................................................................................................. 119.00 180.00 Notes receivable .............................................................................. 77.00 32.00 Accounts receivable, net ................................................................. 420.00 640.00 Merchandise inventory .................................................................... 588.00 877.00 Prepaid expenses ............................................................................. 16.00 55.00 Plant and equipment, net ................................................................. 2,321.00 2,744.00 Total assets ...................................................................................... 3,541.00 4,528.00 Current liabilities ............................................................................ 560.00 800.00 Mortgage payable ............................................................................ 700.00 800.00 Common shares, no-par value ......................................................... 1,400.00 1,600.00 Retained earnings ............................................................................ 881.00 1,328.00 Total liabilities and shareholders' equity ........................................ 3,541.00 4,528.00 Data from the Current Year's Income Statement Sales ................................................................................................ 6,720.00 8,800.00 Cost of goods sold ........................................................................... 5,280.00 6,998.00 Interest expense ............................................................................... 41.00 56.00 Net income ...................................................................................... 233.00 288.00 Beginning-of-Year Data Merchandise inventory .................................................................... 531.00 851.00 Total assets ...................................................................................... 3,458.00 4,431.00 Shareholders' equity ....................................................................... 2,170.00 2,851.00 Required: 1. Calculate current ratios, acid-test ratios, merchandise/Inventory turnovers, and days' sales uncollected for the two companies. Then state which company you think is the better short-term credit risk and why. 2. Calculate the return on total assets employed and return on shareholders' equity. Then, under the assumption that each company's shares can be purchased at book value, explain which company's shares you think is the better investment and why. Question No. 5 (Marks 20) Boston Company use a special part in manufacturing of its finished products. The unit cost this special part is $ 65 and details of its manufacturing cost is as follows. The $50 unit product cost of this part is based on average 25,000 number of parts produced each year. An outside supplier has offered to supply the 25,000 parts at a cost of $65 per part. The special equipment used to manufacture the above part. This equipment can only be used for manufacturing of this part and if not used it has no resale value. The total amount of general factory overhead, which is allocated based on direct labor-hours, would be unaffected by this decision because it is fixed cost. . Suggest the management whether to stop producing internally and buy them from the outside supplier? Description CAD Direct Materials 15 Direct Labor 10 Variable overheads 05 Depreciation of Special Equipment 10 Supervisor's Salary 15 General factory overhead (fixed) 1

Unit product cost 65