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Answer all questions on the question paper itself, using the space provided for each.
Question 1 The following are the financial statements of Minnu Bhd for year 2010:
Balance Sheet (RM in Millions) 2010 Liabilities and Owners' Equity
Current Liabilities Accounts Payable Notes Payable Cost of Goods Sold Administrative Expenses Depreciation Total Current Assets Long-Term Liabilities Long-Term Debt Fixed Assets Property, Plant, and Equipment Less Accumulated Depreciation Net Fixed Assests Earnings Before Interest and Taxes Interest Expense Taxable Income Taxes Net Income
Assets
2010
Total Long-Term Liabilities Owners' Equity Common Stock ($1 Par) Capital Surplus Retained Earnings Total Owners' Equity
Total Assets
a)
2. Quick ratio
3. Profit margin
b) Below is information on Minnu Bhd past performance and the industrys average performance. Ratio 2009 2010 Industry Debt ratio 30% As per calc. above 45% 40%
Based on the information given in the above table, prepare a brief analysis on the companys performance. 1) trend analysis: compare with last years performance, an increase 2)cross industry: compare with industrys average, higher 3) possible causes: (by referring to the ratio formula) - increase in liabilities new loan - decrease in assets payment of debt
Question 2 a) A company manufactures and retails clothing. In the right-hand column, write what type of expense each item is. These can be analysed as to whether they are direct materials (DM), direct labour (DL), manufacturing overhead (MOH), administration expenses (AE), selling and distribution expenses (S&D), Cost (1) Lubricants for sewing machines (2) Market research undertaken prior to a new product launch (3) Interest on bank overdraft (4) Maintenance contract for general office photocopying machine (5) Wages of security guards for factory Cost analysis MOH
S&D
AE
AE
MOH
DM
(7) Cost of advertising products on television (8) Wages of operators in the cutting department (9) Wages of forklift truck drivers who handle raw materials (10) Developing a new product in the laboratory. b) Draw graphs (with clear labels) showing 5
S&D
DL
MOH
AE
iiiiv-
Total costs
Variable cost
Fixed cost
c) Briefly explain what is meant by sunk cost. Give example. Past costs not relevant to decision making because they could not be changed regardless of future actions. Eg.
d) Hantu Limited manufactures a product, which has a selling price of RM14 and a variable cost of RM6 per unit. The company incurs annual fixed costs of RM24,400. Annual sales demand is 8,000 units. New production methods are under consideration, which would cause a 30% increase in fixed costs and a reduction in variable cost to RM5 per unit. Required: Using the contribution margin approach: a) What is the profit earned under the current method? CVP formula Unit sales = ) (Fixed costs + Profit)
per unit
(Selling price
unit
8000 unit sales = RM24400 + profit (RM14-RM6) .: profit = RM 39,600 b) If the change in production methods were to take place, the breakeven output level would be? sales units to breakeven = (RM24400 x 130%) + 0 (RM14 - RM5) .: units to be sold to break-even = 3,525 units