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Financial Math
a) In his study of: “the impact of budgets on people” C Argyris reported the following comment by a financial controller on the practice of participation in setting budgets in his company:
“We bring in the supervisors of budget areas, we tell them that we want their frank opinion, but most of them just sit there and nod their heads. We know they are not coming out with exactly what they feel. I guess budget scares them”.
Explain why managers may be reluctant to participate fully in setting budgets, indicating the negative side effects, which may arise from the imposition of budgets by senior management
“We bring in the supervisors of budget areas, we tell them that we want their frank opinion, but most of them just sit there and nod their heads. We know they are not coming out with exactly what they feel. I guess budget scares them”.
Explain why managers may be reluctant to participate fully in setting budgets, indicating the negative side effects, which may arise from the imposition of budgets by senior management
Financial Math
chem co manufactures a single product product W and have provided you with the following information which relates to the period which has just ended
Standard cost per unit of product W
Materials Price per kilo total
Kilos $ $
F 15 4 60
G 12 3 36
H 8 6 48
35 144
Labour: Rates per hour
Hours $
Department P 4 10 40
Department Q 2 6 12
196
Budgeted sales for the period are 4,500 units at $ 260 per unit There were no budgeted opening or closing inventories of product W.
actual materials and labour used was as follows
Materials price per kilo total
Kilos $ $
F 59,800 4.25 254,154
G 53,500 2.80 149,800
H 33,300 6.40 213,120
Labour hours rate per hour
Department P 20,500 10.60 217,300
Department Q 9.225 5.40 51.660
4,100 units of product were produced and sold for $1,115,800.
Calculate the following variances
Material price
material Mix
Material usage
Standard cost per unit of product W
Materials Price per kilo total
Kilos $ $
F 15 4 60
G 12 3 36
H 8 6 48
35 144
Labour: Rates per hour
Hours $
Department P 4 10 40
Department Q 2 6 12
196
Budgeted sales for the period are 4,500 units at $ 260 per unit There were no budgeted opening or closing inventories of product W.
actual materials and labour used was as follows
Materials price per kilo total
Kilos $ $
F 59,800 4.25 254,154
G 53,500 2.80 149,800
H 33,300 6.40 213,120
Labour hours rate per hour
Department P 20,500 10.60 217,300
Department Q 9.225 5.40 51.660
4,100 units of product were produced and sold for $1,115,800.
Calculate the following variances
Material price
material Mix
Material usage
Financial Math
Dench manufacturing has received a special order from Sands to produce 225components to be incorporated into Sand's product. The components have a high cost,due to the expertise required for their manufacture. Dench produces the components in batches of 15, and as the ones required are to be custom made to Sands' specifications, prototype' batch was manufactured with the following costs:
Materials $
4kg of A, $ 7.50/kg 30
2kg of B, $ 15kg 30
Labour
20 hrs skilled, $ 15/hr 300
5 hrs semi-skilled, $8/hr 40
Variable overhead 100
25 labour hours, $ 4/hr 500
Required
Prepare the cost estimate, assuming an 80% learning rate is experienced. (10 Marks)
Briefly discuss some of the factors that can limit the use of learning curve.
Materials $
4kg of A, $ 7.50/kg 30
2kg of B, $ 15kg 30
Labour
20 hrs skilled, $ 15/hr 300
5 hrs semi-skilled, $8/hr 40
Variable overhead 100
25 labour hours, $ 4/hr 500
Required
Prepare the cost estimate, assuming an 80% learning rate is experienced. (10 Marks)
Briefly discuss some of the factors that can limit the use of learning curve.
Financial Math
chem manufactures a single product product W and have provided you with the following information which relates to the period which has just ended
Standard cost per unit of product W
Materials Price per kilo total
Kilos $ $
F 15 4 60
G 12 3 36
H 8 6 48
35 144
Labour: Rates per hour
Hours $
Department P 4 10 40
Department Q 2 6 12
196
Budgeted sales for the period are 4,500 units at $ 260 per unit There were no budgeted opening or closing inventories of product W.
actual materials and labour used was as follows
Materials price per kilo total
Kilos $ $
F 59,800 4.25 254,154
G 53,500 2.80 149,800
H 33,300 6.40 213,120
Lab our hours rate per hour
Department P 20,500 10.60 217,300
Department Q 9.225 5.40 51.660
4,100 units of product were produced and sold for $1,115,800.
Calculate the following variances
Material price
material Mix
Material usage
Standard cost per unit of product W
Materials Price per kilo total
Kilos $ $
F 15 4 60
G 12 3 36
H 8 6 48
35 144
Labour: Rates per hour
Hours $
Department P 4 10 40
Department Q 2 6 12
196
Budgeted sales for the period are 4,500 units at $ 260 per unit There were no budgeted opening or closing inventories of product W.
actual materials and labour used was as follows
Materials price per kilo total
Kilos $ $
F 59,800 4.25 254,154
G 53,500 2.80 149,800
H 33,300 6.40 213,120
Lab our hours rate per hour
Department P 20,500 10.60 217,300
Department Q 9.225 5.40 51.660
4,100 units of product were produced and sold for $1,115,800.
Calculate the following variances
Material price
material Mix
Material usage
Financial Math
The company has been reporting its profits using absorption costing system. During the financial year ended 30 September 2015, the following summary statement was provided:Currently the company is implementing strategies to improve its profitability, which are to be implemented in two phases; A and B. Each phase will cover a period of six months.The expected production and sales in units for each of the phases are shown:The fixed costs are expected to increase by 20% while the variable costs per unit will remain as they were in the previous period. The selling price per unit will be Shs. 1,500.Required:a) Profit and loss statements for phases A and B using:i)Marginal costing.
ii)Absorption costingb)Briefly explain the differences resulting from the two methods employed in (a) above of reporting profits.c) Reconcile the resulting difference in the reported profit under the two methods.d)Briefly explain which of the two methods is better in estimating profits of a manufacturing enterprise.
ii)Absorption costingb)Briefly explain the differences resulting from the two methods employed in (a) above of reporting profits.c) Reconcile the resulting difference in the reported profit under the two methods.d)Briefly explain which of the two methods is better in estimating profits of a manufacturing enterprise.
Financial Math
The following information relates to process 3, which receives inputs from Process 2, in Mighty Products Limited:
DETAILS Shs. Units
Transfers in from Process 2
Materials added, referred to as material 2
Labour costs:
Direct
Indirect
Overheads 300,000
230,000
50,000
55,600
50,400 10,000
-
40 hrs
60 hrs
-
During the period the above costs were incurred, 7,200 units of finished goods were transferred to stores. Normal loss is expected at 2% of all inputs.
The closing work in progress was 2000 units, which were 60% complete in all the relevant aspects. Material 2 is added at the beginning of the process.
Normal losses are complete in all aspects. They were sold for Sh.6,000.
There was no opening work in progress.
Required:
i) A process account
ii) The production statement
iii) The valuation of the closing work in progress
iv) An abnormal loss account.
DETAILS Shs. Units
Transfers in from Process 2
Materials added, referred to as material 2
Labour costs:
Direct
Indirect
Overheads 300,000
230,000
50,000
55,600
50,400 10,000
-
40 hrs
60 hrs
-
During the period the above costs were incurred, 7,200 units of finished goods were transferred to stores. Normal loss is expected at 2% of all inputs.
The closing work in progress was 2000 units, which were 60% complete in all the relevant aspects. Material 2 is added at the beginning of the process.
Normal losses are complete in all aspects. They were sold for Sh.6,000.
There was no opening work in progress.
Required:
i) A process account
ii) The production statement
iii) The valuation of the closing work in progress
iv) An abnormal loss account.
Financial Math
b) How can the overall goal of wealth maximization be maintained in view of the agency problem?
Financial Math
c) A project has the following cash flows
Year 1 2 3 4
Cash flow 30,000 40,000 40,000 90,000
The cost of the project is Ksh150, 000. Determine whether project is acceptable if the cost of capital is 18% using the IRR method
Year 1 2 3 4
Cash flow 30,000 40,000 40,000 90,000
The cost of the project is Ksh150, 000. Determine whether project is acceptable if the cost of capital is 18% using the IRR method
Financial Math
Trish Hardison deposited $18,680 in a 4-year account paying 4% interest. The bank where she put the money pays a passbook rate of 3.5% compounded daily. She withdrew $2000 after 15 months. Find the interest that she earned on the $2000.
Financial Math
a) An 18 year bond with 6% coupon and a par value of ksh 1000 paying interest semiannually is selling for ksh 700.89. Calculate the yield on the bond.
