Question 1:
From the following data, CONSTRUCT a Balance Sheet for 30th June 2011
The company had an operating profit (excluding any capital gains or loss) for the 2010/2011 financial year of $64,011.
During the period 11712010 to 30.6/2011, My Engineering Company sold $503,400 of products on credit for which it received 5415,300. It also received payment of $46,400 for product sold in the previous year. As at 30/6/2011, the company had $38,300 of unsold and partly completed product on its premises which was down from $48,700 worth of product twelve months earlier.
During the past year, the company purchased $143,400 of raw material on credit for which it still owes $23,900, It also paid S I 8,100 for material purchased in the previous year. Not all of the material has been used during the past year and there is $20,900 worth of material available for the next year (at the start of the year there was $26,700 worth of material available).
Various consumables such as small hand tools, welding gases and sticks at a cost of $13,391 were bought and paid for during the financial year. These items will have been written off (that is they show as expenditures on the profit and loss statement) and hence have no enduring value.
According to the previous year's Balance Sheet, the company had $7,750 of general office equipment (this was purchased for $11,600 in mid-April 2008). At the beginning of the financial year, the existing computer system was replaced at a cost of $15,000. The company also had $212,300 of processing equipment (plant) on its books at 30/6/2010 original cost $255,0.00).
The owner of the company has a house in his and his wife's name valued at $700,000. He drives a car that is registered in the company's name that cost $48,000 almost two years ago and was valued at $38,800 on last year's balance sheet,
As at 30/6/2011, there is an overdraft of $9,50.0 in the trading account, This was a vast improvement on the position twelve months earlier when the overdraft was $54,000, The company also has a loan of $175„000 from the bank that attracts an interest charge of 15%, which is all the company is paying (i.e. it is not paying back my of the capital at present). Petty cash in the office amounts to $145 (at 30/6/2010 cash on hand was $904).
On the previous year's balance sheet, the company is shown as having accumulated $38,230 in reserves from past profits and $12,060 from the sale of capital equipment. At the start of the 2010/2011 financial year, the old computer system was sold for only $400., which was $1,000 less than its *book value'.
The company now owes $12„630 in company tax for the year 2009.10, but has tax credits from past losses of $16,351 that the owner had accrued from another company he had owned.
There are utility bills totalling $900 due before the end of July 2010 (the invoice is dated 29th June). The remainder of the year's $4,000 of utility charges have already been paid.
There are other miscellaneous trade creditors that the company owed $2,897 at 30th June, 2011.
The company had been bought three years previously from the original owner who had built it up 'from scratch'. The present owners paid S300,000 for it; this was considered to represent the net value at the time of purchase, i.e. there was no "goodwill" component. The purchase price was paid for from the bank loan and money from a redundancy payment
The company does not own its own premises, rather it rents a factory and office space for $2,800/rnonth. It pays its rent on the last day of each month_
Part of the company's product line is made under licence from a multinational for the last two years, The company paid a once only licence fee of $30,000. It may be assumed that this licence has a continuing value to the corn.pany equal to its purchase price.
The direct wages bill for the last year was 5116,300; secretarial and accounta.neyffinancial help was paid for on a casual basis costing $59,000. Overheads associated with salaries amounted to $20,000..
$2,300 of stationery and other supplies were bought from Of iceworks during the year. It can be assumed that these supplies were used during the year and now have no value.
The following prime depreciation rates may be used as required: motor vehicles 22.5%, plant 7.5%, office equipment 15%, electronic equipment 33%, buildings 4%
You should use the prime cost method is used for any depreciation calculations.
The company tax rate is 30% (this is applicable to both net income and capital gains). Ignore any GST considerations
Question 2
Bob's Burgers is considering expanding operations by establishing a delivery business. This will require the purchase of new hot plates, vats and a delivery vehicle that will cost a total of $48,000, including installation. The items will be depreciated using the straight-line method (the company has been decided to work out the effective life itself rather than use an effective life determined by the Commissioner of Taxation). The equipment and vehicle are expected to need replacing in five years, but can be considered to have an effective life of six years for taxation purposes. Other cash
flows associated with the delivery business, allowing for inflation (that is they have been inflated by the expected CPI), are as follows:
|
Item
|
Year 1
|
Year 2
|
Year 3
|
Year 4
|
Year 5
|
|
Sales
|
$64,000
|
$67,800
|
$71,900
|
$76,200
|
$80,000
|
|
Ingredients
|
25,200
|
26,500
|
27,800
|
29,200
|
30,600
|
|
Salaries
|
25,000
|
26,500
|
28,000
|
29,500
|
3 l,000
|
|
Miscellaneous
|
2,200
|
2,400
|
2,600
|
2,800
|
3,000
|
In addition to the above, there are tax consequences related to the new business, and the company's tax rate is 30 percent. The company can borrow the required capital at a rate of 10% on an interest only loan (i.e, they pay interest only for the first four years and pay interest and repay the capital at the end of the 51" year),
Using an appropriate discount cash flow method, DETERMINE whether Bob's Burgers should expand into the delivery business. STATE the method being adopted and clearly SHOW all working.
Ignore any OST implications.
Any tax credits arising from losses in earlier years will be used to offset tax liabilities in later years.
Question 3
(a) Assume that the variable cost of producing electricity in a hydro-electric power plant is
VC(x) - (42x - 0.0001x2)
where x is the yearly electricity output of the power plant measured in megawatt hours and is limited to between 0 and 200,000, The fixed cost of the plant is S2,500,000 per year CALCULATE the total yearly cost of the power plant and the average and marginal costs of electricity produced at the predicted total yearly electricity production of 150,000 MW.hr
(b) If the price of electricity is regulated and fixed at $46 per megawatt hour,
DETERMINE the quantity of electricity produced and sold to give the maximum profit and the profit at this quantity,
Question 4
A consulting engineer is considering two pumps to meet a demand of 50,000 Limin at 4.0 m total dynamic head. The specific gravity of the liquid being pumped is 1.50. Pump A operates at 70% efficiency and costs $8,000; pump B operates at 75% efficiency and costs $12,500. Power costs $0.05 kW.hr. Continuous pumping for 365 days a year is required (i.e. for 24 hours a day). Ignoring the time value of money, and assuming equal salvage values for both pumps, DETERMINE how many years o.spice are required for pump B to be justified eccmomically. COMMENT on the reasonableness of not including the time value of money.
(Note: Dynamic head times litres per minute times specific gravity divided by 6,116.2 gives the number of kilowatts required.)
Question 5
EnviroTech P.IL is seeking to determine the actual costs incurred by each of its three machines last month. While it has accurate figures for the direct costs and usage of these machines last month, at this stage the indirect costs for each machine are to be determined with the assistance of budget estimates for the year.
(a) DETERMINE the allocation rates for each machine if the estimated annual indirect cost budget is $50.,000 per machine and the budget information in the table below is applicable.
Cost Source Allocation Basis Estimated Annual
Activity Level
Machine A Direct labour cost $100,000
Machine B Direct labour hours 2000 hours
Machine C Direct material cost $250,000
(b) Using the allocation rates you determined in (a), CALCULATE the total costs to be attributed to each machine for the last month. The following data may be useful.
|
Cost Source
|
Machine Identifier
|
Actual Cost
|
Actual Hours
|
|
Material
|
A
|
$ 3,800
|
|
|
|
|
19,550
|
|
|
Labour
|
A
|
2,500
|
650
|
|
|
|
3,200
|
750
|
|
|
|
2,800
|
720
|
Question 6
A car enthusiast is considering stalling a company to design and produce body panels for the after-sales car market. He has determined that he will need a well-ventilated factory, and has located one for a monthly rental of $1200.
He also will need to purchase an industrial oven in which to bake the finished panels. Since he does not have the cash to buy an appropriate oven our erstwhile owner has negotiated with the bank for a loan to cover the cost of an oven and its installation. The loan is to be repaid back to the bank at a rate or $1,600 month over three years (if needed for calculations, it may be assumed that interest paid will be $4,200 per annum).
The concept and detailed design of a kit for each car is estimated to take 30 hours of the owner's time (his current salary is $2,300 per fortnight).
The average mould for Laying up the fibreglass malt should take around 10 hours of work by a retired craftsman who will cost $50/hr (including on-costs), and consume about $100 of materials - mostly timber. Each mould is estimated to last 25 panels before needing to be refurbished. Restoration of a mould will require two hours of the craftsman's time.
To make a panel usually takes a semi-skilled worker 2 hours to lay-up and 4 hours in the oven to cure. This is followed by 1/2 hr of manual trimming and finishing. Material for each panel, on average, is estimated to cost $30.
A set of panels fora car consists of two side skirts (one left and one right), a front lip, a rear bar and a spoiler. Our car enthusiast knows that the local market is prepared to pay $2,000 for such a kit.
Utilities, including telephone, are expected to cost $1500 per annum,
(a) DETERMINE how many body panel kits the company will have to sell in each of the first three years to break even,
(b) Briefly, DISCUSS other costs that our would-be owner should take into account in determining whether to go ahead with his venture.
Clearly SHOW your working and STATE and JUSTIFY your assumptions for your calculations.