Task 1

Matahari Makan Sdn Bhd manufactures and sells wall-mounted ovens to the public. Currently they sell 20,000 ovens per year. One major component in any oven to regulate temperatures is the thermostat. The company has approached you for help in deciding if they should continue to manufacture their own thermostats or if they should outsource this component.

The following are costs associated with the manufacture of 20,000 thermostats.

Direct Materials $17 per thermostat

Direct Labour4x full time employees (1,920 hours each peryear) @ $28/hr

Machining Costs$80,000

Fixed Overheads$160,000

Precisetronics Ltd has offered to supply the thermostats for $32 each plus a delivery fee of $11,000 for each shipment of 20,000. Analysis has found that if the thermostats are outsourced, Matahari Makan would eliminate $35,000 of fixed overheads. They would only need to keep one full-time employee to continue to fit the thermostats into the ovens.

If Matahari Makan decides to outsource the thermostats, how much better-off (Or worse-off) will they be?

You should provide your answer in the following table:

Make

Buy

Task 2

Santana & Co produces widgets. They have a capacity to produce 50,000 widgets/year and currently sell 45,000 widgets/year. They sell these widgets for $200. Each widget costs Santana & Co $80 to make. Their fixed costs are $900,000/year.

Penultimo LLC Have approached Santana & Co and want to order 8,000 widgets. They have offered to buy them for $150 each, however have requested customizations which will increase variable costs by $10/widget. Santana will also need to purchase a new engraving machine costing $30,000 to perform the requested customizations.

a)If Santana & Co accept this special order, what will be the profit/loss from the order?

b)If Penultimo LLC wanted to order 11,000 widgets, what will be the profit/loss from the order?

Task 3

ABC Limited wants to buy a Machine for $15,000, paid immediately.

The machine will last for 8 years and will generate revenue of $3,000/yr

At the end of its life, ABC Ltd will be able to sell the machine for $11,000

The cost of capital is 5%.

a)What is its Net Present Value?

b)What is the Net Present Value Index?

c)What is its payback period?

Task 4

Sleepy Night Inc is a Bedding retailer.

The following relates to their projected sales for the next quarter

April

May

June

Cash Sales

30,000

35,000

65,000

Credit Sales

42,000

39,000

45,000

Purchases

55,000

50,000

45,000

Cost of Sales

35,000

40,000

50,000

Rent

15,000

15,000

15,000

Wages & Salaries

12,000

12,000

12,000

Depreciation

5,000

5,000

5,000

Utilities

2,500

2,500

2,500

Sleepy Night's Credit sales were $30000 in February and $36000 in March. Based on historical experience, Sleepy Night usually receives 50% of their credit sales in the month of purchase, 30% in the month following the purchase and 20% in the second month after purchase. All purchases are on credit and paid for in the month of purchase. In June, the company plans to buy a new computer system for their office for $8000. They will also sell their existing computer for $1000 that month. At the beginning of the quarter, there was an unpaid utilities bill for $300 which will need to be paid in April. At the end of March, Sleepy Night had $20000 in the bank.

a)Prepare the schedule of receipts for Sleepy Night

b)Prepare the Cash Budget for Sleepy Night

Sleepy Night Inc

Cash Budget

For the 3 months ending 30 June 2020

April

May

June

Task 5

Megarock Pty Ltd makes and sells Guitars. Below is a breakdown of their performance from the previous year.

Sales6,500 guitars

Selling Price$650/guitar

Direct Materials$100/guitar

Direct Labour$75/guitar

Sales Commission$35/guitar

Total Fixed Costs$2,600,000

a)Calculate their profits for the year.

b)What is the breakeven point in units and dollars?

Megarock want to start producing drum kits. The estimated sales projections are as follows

GuitarsDrumkits

Estimated Sales6,500 guitars3,250 drumkits

Sales Price$650$1,500

Variable Costs$210$750

Total Fixed Costs$3,400,000

c)What is the Weighted Average Contribution Margin? (Round to the nearest cent)

d)What would be the breakeven units? (In total and per product)

Task 6

TeddyBear Co. Ltd is a subsidiary of Panda Ltd. Panda Ltd is listed on the stock exchange. Seeing the bad position of its subsidiary company, Panda Ltd is looking for ways to gain public confidence back again. The parent company is planning to pay dividends of $20M in total to its shareholders and invest in new assets worth $50M. The company's net cash from operations equals $40M and they plan on borrowing $10M this year. Can they do it? What options can the company consider?