namibia UniVERSITY OF SCIEnCE AnD TECHnOLOGY FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING, ECONOMICS & FINANCE

Transcription

1 namibia UniVERSITY OF SCIEnCE AnD TECHnOLOGY FACULTY OF MANAGEMENT SCIENCES DEPARTMENT OF ACCOUNTING, ECONOMICS & FINANCE QUALIFICATION: BACHELOR OF ECONOMICS AND BACHELOR OF BUSINESS ADMINISTRATION QUALIFICATION CODE: 23BECO & 21BBAD LEVEL: 6 COURSE CODE:BAC212S COURSE NAME: BUSINESS ACCOUNTING 2B SESSION: JANUARY 2017 PAPER: THEORY DURATION: 3 HOURS MARKS: 100 SUPPLEMENTARY OPPORTUNITY EXAMINATION PAPER EXAMINER (S) H. NAMWANDI, S. MUTONGA AND A. KETJINGANDA MODERATOR: D. KAMOTHO INSTRUCTIONS 1. This examination paper is made up of four (4) questions. 2. Answer all the questions and in blue or black ink. 3. Start each question on a new page in your answer sheet & show all your working. 4. Questions relating to this paper may be raised in the initial 30 minutes after the start of the paper. Thereafter, candidates must use their initiative to deal with any perceived error or ambiguities and any assumption made by the candidate should be clearly stated. 5. Pencil work will not be marked. PERMISSIBLE MATERIALS 1. Non-programmable calculator THIS QUESTION PAPER CONSISTS OF 5 PAGES (Including this front page)

2 Question 1 (27 Marks) The following budgeted information regarding the first quarter of 2015 were supplied by Chineke CC: 1. Expected sales: 2. Selling price per unit: January February March units units units N$70 3. Opening and closing inventory of completed goods: January February March Opening inventory units units? Closing inventory? units units 4. Opening and closing inventory of raw materials: Opening inventory Closing inventory January: Type A kg Type B 600 litres March: Type A kg Type B 750 litres 5. Quantities of raw materials required to produce one unit: TypeA Type B 6. Prices raw materials: 4kg 3 litres Type A N$2 per kg Type B N$1 per litre 7. Direct labour required to produce one unit: 8. Category 1 Category 2 Wage rates: 2 hours per unit 1 hour per unit Category 1 N$7 per hour Category 2 N$5 per hour 9. Overheads are absorbed at a predetermined rate of N$6 per direct labour hour 10. Administrative costs: Selling costs: N$ for the quarter N$ for the quarter Prepare the following monthly budgets of Chineke CC for the first quarter (three months) of 2015: 1. Production budget per month and in total. (units) 2. Material purchases budget by type of material. (quantity & value) 3. Direct labour budget by category of labour. (hours & value) 1

3 Question 2 (20 Marks) Chop-Your-Money Ltd manufactures a standard leather boot, the M25. Standard Unit Cost & Profit- M25: N$ Direct material - Leather: 3 units at N$5 per unit 15 Direct labour: 1 ~ hours at N$4 per hour 6 Variable production overheads: 1 ~ hours at N$2 per hour 3 Fixed production overheads: 1 ~ hours at N$6 per hour ~ Standard cost 33 Selling price 45 Standard gross profit 12 Variable and fixed cost varies with direct labour hours. Budget- June 2015 Production and sales for June 2015 were units of M25. Actual Results- June 2015 Production & sales for M25 Sales revenue units N$ Cost incurred: Leather purchased & used Direct labour paid Variable production overheads Fixed production overheads Inventory valuation: Leather at standard cost units hours Work in progress and finished goods at standard full production cost. N$ N$ N$ N$ Calculate the operating variances for June 2015: 1.1 Material price variance 1.2 Material quantity (usage) variance 1.3 Wage rate variance 1.4 Labour efficiency variance 1.5 Variable overhead expenditure variance 1.6 Variable overhead efficiency variance 1. 7 Fixed overheads expenditure variance 1.8 Fixed production overheads volume variance 1.9 Sales price variance 1.10 Sales volume profit variance 2

4 Question 3 (30 Marks) CNC Ltd is currently studying the investment possibilities of a proposed project. The project will be for a period of eight years and will require investment in a specific machine which has a purchase price of N$ The machine has an eight year lifespan, after which it will have an estimated salvage value of N$ The company requires a minimum rate of return of 18% on all new projects. It is further estimated that the project will yield a gross income of N$ per year, calculated as follows: Sales Less Cost of goods sold (excluding depreciation) Gross cash income N$ Compute the following with regard to the project: 3.1 The annual net profit. (3 marks) 3.2 The net present value. Also make a recommendation whether the project is acceptable or not. (7 marks) 3.3 The internal rate of return. Interpolate to one decimal place. (7 marks) 3.4 The payback period. State whether the project is acceptable if the company requires a maximum payback period of three years. (3 marks) 3.5 The discounted payback period. (8 marks) 3.6 The accounting rate of return on average investment. 3

5 Question 4 (23 marks) Savvaki Ltd manufactures and sells a telephone answering machine. The company's statement of profit or loss for the most recent year is given below: TOTAL PER UNIT PERCENT Sales ( units) N$ N$60 100% Less: Variable costs N$ N$45? Marginal income N$ N$15? Less: Fixed costs N$ Net income N$ Management is anxious to improve the company's profit performance and has asked for your assistance. 4.1 Compute the company's contribution ratio. (3 marks) 4.2 Compute the company's break-even point in units and value. (6 marks) 4.3 Assume that sales increase by N$ next year. If cost behaviour patterns remain unchanged, calculate by how much the company's net income will increase. Use the contribution ratio to determine your answer. 4.4 Assume that next year management wants the company to earn a minimum profit of N$ Calculate how many units will have to be sold to meet this target profit. (3 marks) 4.5 Compute the company's margin of safety ratio. (4 marks) 4.6 In an effort to increase sales and profits, management is considering the use of a higher-quality speaker in the answering machine. The higher-quality speaker would increase variable costs by N$3 per unit, but management could eliminate one quality inspector who is paid a salary of N$ per year. The sales manager estimates that the higher-quality speaker would increase annual sales by at least 20%. Assuming that these changes are made: Advice management on how these changes will affect the company's performance. (5 marks) THE END 4

6 Present Value and Futuro Value Tables Table A-3 PresontValuolntorost Factors for One Dollar Discounted atk Percent for n Periods: PVIF.,.= 1 1(1 + k)" Period 1'/o 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 20% 24% 25% 30% Table A-4 Present Value Interest Factors for a One-Dollar Annuity Discounted at k Percent for n Periods: PVIFA = [1-1/(1 + k)"] I k Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 20% 24% 25% 30%