OUM BUSINESS SCHOOL ASSIGNMENT SUBMISSION AND ASSESSMENT _____________________ ________________________________ ______________________ _____________________ ____________________ ___________________ __________ _
BMAC5203 ACCOUNTING FOR BUSINESS DECISION MAKING MAY 2016 _____________________ ________________________________ ______________________ _____________________ ____________________ ___________________ __________ _
INSTRUCTIONS TO STUDENTS 1. This assignment contains question that is set in English.
2. Answer in English English only.
3. Your assignment should be typed using 12 point Times New Roman font and 1. line spacing.
4. You must submit your hardcopy assignment to your Facilitator according according to the due date.
5. Your assignment should be prepared indi!idually. You should not copy another person"s assignment. You should also not plagiarise another person"s wor# as your own.
EVAUATION
This assignment accounts for !"# of the total mar#s for the course.
ASSIGNMENT $UESTION
TASK 1
Objective
Marks allocated
Maste B!"#et$%# & Cas' ($s$s at a stat !) ( *+)a%, t* )-a% .* )*.$t a%" (*st (*%t*-
To be able to prepare the cash budget, profit statement statement and balance sheet for decision making. 35 marks
Azmi dn. !hd. !hd. "as formed on # $ul% &'#( "ith a paid up share capital of )('','''. )('','''. )&(',''' of this capital "as immediatel% invested into fi*ed assets, leaving )#+',''' cash. The fi*ed assets, it is estimated, estimated, have a ten%ear life, and "ill have no value at the end of ten %ears. %ears. The compan% have decided to depreciate deprecia te these assets using the straightline straightlin e method.
Therefore, the
depreciation charge per %ear "ill be )&(','''-#' %ears )&(,''' or e*pressed in monthl% terms )&(,'''-#& months )&,'''. /rior to starting, business plans have been formulated for the first si* months of the first %ear of operations. These plans are set out out belo"0 ales for the si* months are estimated to be )+,''','''. )+,''','''. 1o"ever, the compan% operates operates in a seasonal market and "ill also be allo"ing some some of its customers to take credit. credit. The compan% anticipates anticipates the follo"ing receipts of cash over the si*month period from sales0
ales 2eceipts ) $ul% August eptember October 4ovember ecember
('',''' 5'',''' 5'',''' '',''' #,&'',''' #,'',''' 5,''','''
6rom this breakdo"n of the anticipated cash received over the si*month period, it is apparent that at the end of the period there "ill be receivables of )+,''',''' 7 )5,''',''' )#'','''. The materials re8uired re8uired to meet the demand demand for sales are estimated estimated to be )&,('','''. )&,('','''. To enable the compan% to maintain an inventor% 9to ensure against an% shortages:, )&,+'',''' )&,+'',''' "orth of materials "ill be purchased in the period. 1o"ever, because of the production production c%cle and the credit that the compan% compan% "ill be obtaining from its suppliers the pattern and amount paid to suppliers "ill be as follo"s0
/a%ment to suppliers for materials ) $ul% August eptember October 4ovember ecember
+'',''' +'',''' &'',''' &'',''' &'',''' &'',''' &,''','''
At the end of the si* month period, the compan% have purchased materials costing )&,+'',''' but have onl% paid )&,''',''' )&,''',''' for them. them. Thus, the compan% compan% "ill have have pa%ables of )+'',''' )+'',''' at the end of ecember &'#(. The estimated labour cost that that "ill be incurred over the si* months months "ill be )#,;'','''. *plain the usefulness of the above statements to management of the compan%. 95 marks:
TASK 2
I%/est+e%t a))a$sa-
Objective
To be able to evaluate and make choices bet"een different projects in "hich to invest.
Marks allocated
35 marks
1asheel ?atering >nterprise dn. !hd. is considering tendering for a local authorit% contract to suppl% school snacks.
=ear
4o. of meals
# & 3 ( 5
3',''' 3&,''' 3&,''' 33,''' 33,'''
+. Transport costs0 )&,''' per %ear. . The compan% uses straightline straightline depreciation and intends to charge )#.5''. ;. The compan%@s cost of capital is #(. B. The compan% e*pects a pa%back "ithin four %ears and its target accounting rate of return is &5.
=ou are re8uired to evaluate the investment using the follo"ing appraisal methods0 net present value, internal rate of return, pa%back period 9undiscounted and discounted: and the accounting rate of return. 6or each appraisal method, state "ith reasons "hether the project should be accepted or rejected. 935 marks:
TASK 3
S'*t te+ "e($s$*% +a$%#
To be able to identif% the relevant and irrelevant costs and benefits Objectives
associated "ith each feasible alternative "ith the greatest overall net benefit to aid decision making.
Marks allocated
3' marks
The Men@s department of Chaki dn. !hd. manufactures a st%le of bermuda shorts that it sold last %ear at )#; a pair. The cost specifications for these shorts "ere as follo"s0
Dariable costs per pair of bermuda shorts Materials Eabour 6i*ed overheads per month
) +.5' 3.5' &+,(''.''
Chaki dn. !hd made a profit of )##,'(' each month. 2e8uired0 a: 1o" man% pairs of bermuda shorts did Chaki dn. !hd. sell each monthF 95 marks: b: Chaki dn. !hd. is no" planning ne*t %ear@s operations. The sales director is proposing to boost sales b% reducing the selling price to )# and spending an additional )3''' per month on advertising. 1e estimates that that these actions "ill "ill enable the compan% compan% to sell 5;'' pairs of bermuda shorts each month. month. >valuate the sales director@s director@s proposals taking into account their their e*pected impact on profits and on the breakeven point. tate an% assumptions %ou need to make. 9#; marks:
c:
