There are TWO (2) Questions. Answer all questions (30 MARKS)

Question 1

ABC is a producer for vehicle parts. The following table shows information on the budgeted sales and production:

uantity/Price

Unit Sales 100 units

Price 350 RM

Units to produce 120 units

Raw Materials Usage per product Cost per Unit in RM

Component 1: 30 1.00

Component 2: 20 2.00

Component 3: 10 3.00

Hours per product unit Rate RM

Direct Labour hours 4.00 8.00

Machine Hours 1.50 2.00

Variable Overhead Allocation Basis Rate RM

Maintenance Machine hours 2.00

Cleaning Direct Labour hours 1.00

Inspection Units produced 25.00

Fixed Overheads RM

Rent 1,000.00

Depreciation 2,000.00

Insurance 2,500.00

Production Manager 5,000.00

Selling and Administration 10,000.00

a. Prepare the Budgeted Income Statement and the Actual Income Statement. Conduct a variance analysis between the budget and the actual statements. (Answer should include highlighting the issues and problems the company have faced).

. The following table are the actual outcome of the operation. Prepare the Actual Total Manufacturing Cost of the Company. Calculate the Actual Total Variable Cost per Unit, Actual Total Fixed Overhead Cost per Unit and Actual Total Manufacturing Cost per unit and prepare a variance analysis.

(32 marks)

uantity/Price

Unit Sales 100 units

Price 350 RM

Units to produce 120 units

Raw Materials Usage per product Cost per Unit in RM

Component 1: 35	1.00
Component 2: 20	2.00
Component 3: 10 Hours per product unit Rate RM	3.00
Direct Labour hours 5.00	6.00
Machine Hours 2.00	2.00
Variable Overhead Allocation Basis	Rate RM
Maintenance Machine hours	3.00
Cleaning Direct Labour hours	0.80
Inspection Units produced	35.00
Fixed Overheads	RM
Rent	1,200.00
Depreciation	2,000.00
Insurance	2,500.00

Production Manager 5,000.00

Selling and Administration 10,000.00

b. The company is also attempting to improve the situation. The following plans are being discussed. Calculate the break-even point in units for each of the plans. Use the actual cost for calculations. Evaluate based on the break-even analysis, the plan that the company should take.

(18 marks)

Plan 1:	Plan 2:
Rent a high technology machine to replace the current machine	Advertise on an online platform.
This will increase the fixed overhead cost and selling and administration by 20%	The cost of the advertisement is RM4,300 and will be added to the selling and administrative cost.
Some workers may need to be retrenched. This will reducel variable cost will by 10%.	Total variable cost will remain as it is.
Selling price will remain fixed.	Selling price will be increased to RM370.00 per unit.

Question 2

CDE is evaluating the financing of a new project. The amount of investment capital required is

RM15,000,000.00. The expected Earnings before interest and Tax (EBIT) is RM4,900,000.00

CDE has an unleveraged beta of 1.2

The corporate tax rate is 30%

Stock market Analyst have forecasted a 20% return from the Stock Market

Risk-free Rate stands at 3%

The following table shows the cost of debt available for each level amount of debt that CDE can obtain from the financial market.

Debt Amount (RM)	Cost of Debt (Rd)
0.00	8.00%
1,500,000.00	8.00%
3,000,000.00	9.00%
4,500,000.00	10.00%
6,000,000.00	12.00%
7,500,000.00	13.00%

Determine whether CDE should accept the project. Acceptance of the project should be based on the lowest Weighted Average Cost of Capital and maximum Economic Value added from the project.

In the light of the answers in part a), the company is seeking to improve the situation by considering both plans using the break even analysis. Give hour suggestions and recommendations on which plan the company should take.

(50 marks)