MASTER OF BUSINESS ADMINISTRATION
INTAKE 28
ACC512 ACCOUTING FOR MANAGERIAL DECISIONS
CANDIDATES ARE REQUIRED TO READ THESE INSTRUCTIONS
Candidates shall be deemed to have been notified of these instructions when they commence a subject.
There are three (3) assessment items: one open book examination and two (2) assignments. To pass the
subject, a candidate is required to obtain at least 50 marks (out of 100) in all assessment items. The official
subject grade is awarded based on total weighted marks out of 100, (see weighting below). The seminars
and exam dates and time, assignment word limits and submission date are as follows:
Seminars
Assessment
Exam
Presentation
Assignment I
Assignment II
Main Seminar:
Sat. & Sun., 16-17 Mar 2019
Date and Time of Exam/
Assignment Submission Date
Weekday evening seminars dates of which to
be confirmed during the main seminar
Duration/
Weighting
Word Limit
Sat., 20 Apr 2019 @ 2:30 p.m.
20%
Date to be confirmed
20%
Mon., 22 Apr 2019
30%
2.5 hours
N/A
30%
The exam will normally be held at HU Exam Centre, 4th Floor, Wisma HELP, Jalan Dungun, Damansara Heights.
The specific exam room will be posted at ELMGS on the day of the exam.
SUBJECT ENROLMENT
Candidates are required to register/enrol online via MyPride account by week 2 from subject
commencement date. Once enrolled, cancellation of subject enrolment after the add/drop period can only
be made in extenuating circumstances and if so, a cancellation fee of RM 1,000 is chargeable. Candidates
who are unable to sit for the scheduled exam must have a valid reason for non–attendance, (usually, only
serious illness -with supporting documentation- will be acceptable). They shall notify ELM in writing of this
either before the exam or latest by the next working day, failing which, their enrolment shall be dropped
with RM1,000 penalty. Candidates with approval for non-attendance shall normally sit for the
supplementary exam (at a nominal fee) with candidates of the next intake. The official grade shall be released
only after the result for this is determined.
ASSIGNMENT SUBMISSION
These shall be comb bound with the STANDARD COVER SHEET at the front of the assignment and shall be
submitted to ELM’s office in person, by post or courier or deposited into the ELM Post Box on the 10 th Floor
by the due date. Submission by fax or e-mail is not acceptable. Assignments shall have full citation of
references and a selected bibliography and FULL Turn-it-in reports. Plagiarism and failure to cite references
will attract penalties.
Two days grace is given for assignment submission. Extensions will not be given unless:
1. there is valid reason supported by documentation (only serious illness and compassionate
circumstances shall normally be considered but work pressure alone is not be acceptable); and
2. the request for extension is made in writing before the scheduled submission date, and ELM approval
obtained.
Unless approved, late submissions shall not be assessed and the candidate may be awarded a “Fail” grade
for the subject.
ELM
Graduate School
Page 1 of 9
MBA Intake 28
ACC512 Accounting for Managerial Decisions
ASSIGNMENT 1
Due date
:
22 Apr 2019
Word limit
:
N/A
Weighting
:
30%
Facilitator
:
Mr M Selvanadan
Email
:
mselvanadan@help.edu.my
Question 1 (20 marks)
Northwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the
motors from Jinx Motors for $1,250 each. Northwestern's plant can manufacture the motors for
the following costs per unit:
Direct materials
Direct manufacturing labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total
$ 500
250
200
350
$1,300
If Northwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead applied will
not be avoided.
Required:
a.
Should the company make or buy the motors? Advise. (10 marks)
b.
What additional factors should Northwestern consider in deciding whether or not to
make or buy the motors? Suggest. (10 marks)
Question 2 (20 marks)
During February the Liverpool Manufacturing Company's costing system reported several variances
that the production manager was surprised to see. Most of the company's monthly variances are
under $125, even though they may be either favorable or unfavorable. The following information is
for the manufacture of garden gates, its only product:
1.
Direct materials price variance, $800 unfavorable.
2.
Direct materials efficiency variance, $1,800 favorable.
3.
Direct manufacturing labor price variance, $4,000 favorable.
4.
Direct manufacturing labor efficiency variance, $600 unfavorable.
Page 2 of 9
You have been directed to assist the production manager to investigate the variances and improve
on the performance of the factory plant. Discuss the probable causes and remedial actions on the
following:
a. Discuss why did the price variances arise and recommend what actions need to be taken to
address the problems. (10 marks)
b. Discuss why did the efficiency variances arise and what actions should be taken to overcome
these issues. (10 marks)
Question 3 (50 marks)
The T. P. Company manufactures and sells a line of exclusive sportswear. The firm’s sales were
$600,000 for the year just ended, and its total assets exceed $400,000. The company was started
by Mr. Jarmon just ten years ago and has been profitable every year since its inception. The chief
financial officer for the firm, Brent Lim, has decided to seek a line of credit from the firm’s bank
totalling $80,000. In the past the company has relied on its suppliers to finance a large part of its
needs for inventory. However,in recent months tight money conditions have led the firm’s suppliers
to offer sizeable cash discounts to speed up payments for purchases. Mr. Lim wants to use the line
of credit to supplant a large portion of the firm’s payables during the festive months, which are the
firm’s peak seasonal sales period.
The firm’s two most recent balance sheets were presented to the bank in support of its loan request.
In addition, the firm’s income statement for the year just ended was provided to support the loan
request. These statements are found below:
T. P. Company Balance Sheets for the years ended 31/12/2017 and 31/12/2018.
Assets
2017
2018
Cash
$15,000
$14,000
Marketable Securities
6,000
6,200
Account Receivables
42,000
33,000
Inventory
51,000
84,000
1,200
1,100
115,200
$138,300
Net plant and equipment
$286,000
$270,000
Total assets
$401,200
$408,300
Prepaid Rent
Total current assets
Page 3 of 9
Liabilities and Equity
2017
2018
Accounts payable
$48,000
$57,000
Notes payable
15,000
13,000
6,000
5,000
69,000
$75,000
Long-term debt
$160,000
$150,000
Equity
$172,200
$183,300
Total liabilities and equity
$401,200
$408,300
Accruals
Total current liabilities
T.P. Company Income Statement for the ended 31/12/2018
Sales
$600,000
Less: Cost of Goods Sold
460,000
Gross Profits
$140,000
Less: Expenses
General and Administrative
$30,000
Interest
10,000
Depreciation
30,000
Total
70,000
Profit before taxes
70,000
Less: Taxes
27,100
Profits after taxes
$42,900
Less: Cash Dividends
31,800
To Retained Earnings
$11,100
Jane Fan, associate credit analyst for the Merchants National Bank, was assigned the task of
analysing T.P. Company’s loan request.
Page 4 of 9
Required :
(a) Calculate the financial ratios for ratios for 2018 corresponding to the industry norms provided
below:
Ratio
Norm Ratio
T.P.’s Evaluation
Current Ratio
1.8 times
Acid-test Ratio
0.9 times
Debt Ratio
0.5
Long-term debt to total capitalisation
0.7
Times interest earned
10 times
Average collection period
20 days
Inventory turnover (based on COGS)
7 times
Return on total assets
8.4%
Gross profit margin
25%
Net profit margin
Operating return on investment
7%
16.8%
Operating profit margin
14%
Total asset turnover
1.2 times
Fixed asset turnover
1.8 times
(15 marks)
(b) Which of the ratios reported above in the industry norms do you feel should be most crucial in
determining whether the bank should extend the line of credit ? What strengths and
weaknesses are apparent from your analysis of T.P.’s financial ratios? Discuss.
(15 marks)
(c) Based on the ratio analysis you performed in part (b), would you recommend approval of the
loan request? Discuss.
(10 marks)
(d) Perform an analysis of T.P.’s earning power, and comment on the results.
(10 marks)
QUESTION 4 (10 marks)
What are the four perspectives used in the balanced scorecard? Discuss the nature of each, and
how the perspectives are linked.
….……….. END ………………
Page 5 of 9
MBA Intake 28
ACC512 Accounting for Managerial Decisions
ASSIGNMENT 2
Due date
:
22 Apr 2019
Word limit
:
N/A
Weighting
:
30%
Facilitator
:
Mr M Selvanadan
Email
:
mselvanadan@help.edu.my
QUESTION 1 - CASE STUDY (60 marks)
Allied Food Products is considering expanding into the fruit juice business with a new fresh lemon juice
product. Assume that you recently hired as assistant to the director of capital budgeting and you must
evaluate the new project.
The lemon juice would be produced in an unused building adjacent to Allied’s plant; Allied
owns the building, which is fully depreciated. The required equipment would cost $200,000, plus an
additional $40,000 for shipping and installation. In addition, inventories would rise by $25,000,
while accounts payable would increase by $5,000. All of these costs would be incurred at t = 0. By a
special ruling, the machinery could be depreciated using the following rates 33%, 45%, 15%, and
7% respectively.
The project is expected to operate for 4 years, at which time it will be terminated. The cash inflows
are assumed to begin 1 year after the project is undertaken, or at t = 1, and to continue out to t = 4. At the
end of the project’s life (t = 4), the equipment is expected to have a salvage value of $25,000.
Unit sales are expected to total 100,000 units per year, and the expected sales price is $2.00
per unit. Cash operating costs for the project (total operating costs less depreciation) are expected
to total 60% of dollar sales. Allied’s tax rate is 40%, and its WACC is 10%. Tentatively, the lemon
juice project is assumed to be of equal risk to Allied’s other assets.
You have been asked to evaluate the project and to make a recommendation as to whether it
should be accepted or rejected. To guide you in your analysis, your boss gave you the following set
of tasks/questions:
Page 6 of 9
Table IA .Allied’s Lemon Juice Project
(Total Cost in Thousands)
End of Year:
0
1
2
3
4
I. Investment Outlay
Equipment cost
200
Installation
40
Increase in inventory
25
Increase in accounts
payable
Total net investment
(5)
260
II. Project Operating
Cash Flows
Unit sales
(thousands)
Price/unit
$ 2.00
Total revenues
$ 200
100
Operating costs,
excluding
depreciation
Depreciation
120
Total costs
79.2
Operating income
before taxes (EBIT)
Taxes on operating
income
After-tax operating
income
Depreciation
Project operating
cash flows
$ 0.0
100
$ 2.00
$200
$120.0
100
100
2.00
2.00
$200
$200.0
120
120
108
36.0
16.8
$199.2
$228.0
156
136.8
0.8
(28)
$ 44.0
0.3
11.2
17.6
0.5
(16.8)
$ 26.4
63.2
25.3
37.9
79.2
108
36.0
16.8.
$ 79.7
91.2
62.4
$ 54.7
Page 7 of 9
III. Project Termination
Cash Flows
Return of net working
capital
Salvage value
Tax on salvage value
20
25
(25 x 40%)
Total project
termination cash
flows
IV. Project Net Cash
Flows
Project net cash flows ($260.0)
(10)
35
79.7
91.2
62.4
$ 89.7
V. Results
NPV =
IRR =
Payback =
Answer ALL questions.
(A)
Allied has a standard form that is used in the capital budgeting process. (See Table IA) Part
of the table has been completed, but you must replace the blanks with the missing numbers.
Complete the table using the information in the case study. (20 marks)
(B)
(a) Allied uses debt in its capital structure, so some of the money used to finance the
project will be debt. Given this fact, should the projected cash flows be revised to
show projected interest charges? Explain.
(5 marks)
(b) Suppose you learned that Allied had spent $50,000 to renovate the building last year,
expensing these costs. Should this cost be reflected in the analysis? Explain.
(5 marks)
(c) Suppose you learned that Allied could lease its building to another party and earn
$25,000 per year. Should that fact be reflected in the analysis? If so, how?
Recommend.
(5 marks)
(d) Assume that the lemon juice project would take profitable sales away from Allied’s
fresh orange juice business. Should that fact be reflected in your analysis? If so, how?
Recommend.
(5 marks)
(C)
Disregard all the assumptions from Question 2, and assume there is no alternative use for
the building over the next 4 years. Now calculate the project’s NPV, IRR, and payback. Do
these indicators suggest that the project should be accepted? Explain.
(20 marks)
Page 8 of 9
Question 2 (20 marks)
(a) Clarrisa Goon, controller, discusses the pricing of a new product with the sales manager, James
Nayan. What major influences must Clarrisa and James consider in pricing the new product?
Discuss each briefly.
(12 marks)
(b) Explain the differences between short-run pricing decisions and long-run pricing decisions.
(8 marks)
Question 3 (20 marks)
Continental Products Corporation participates in a highly competitive industry. In order to meet this
competition and achieve profit goals, the company has chosen the decentralized form of
organization. Each manager of a decentralized investment center is measured on the basis of profit
contribution, market penetration, and return on investment. Failure to meet the objectives
established by corporate management for these measures has not been acceptable and usually has
resulted in demotion or dismissal of an investment center manager.
An anonymous survey of managers in the company revealed that the managers feel the pressure to
compromise their personal ethical standards to achieve the corporate objectives. For example, at
certain plant locations there was pressure to reduce quality control to a level which could not assure
that all unsafe products would be rejected. Also, sales personnel were encouraged to use
questionable sales tactics to obtain orders, including gifts and other incentives to purchasing agents.
The chief executive officer is disturbed by the survey findings. In his opinion, such behavior cannot
be condoned by the company. He concludes that the company should do something about this
problem.
Required
(a) Who are the stakeholders (the affected parties) in this situation? Please explain.
(5 marks)
(b) Identify the ethical implications, conflicts, or dilemmas in the above described situation.
(7 marks)
(c) Suggest what might the company do to reduce the pressures on managers and
decrease the ethical conflicts.
(8 marks)
………………END ………………
Page 9 of 9