Financial Management 2B Take Home Exam
Question 1
Cumulative
production
2
4
8
16
Total Production Time
2 𝑥 4 𝑥 0.81 = 6.4
4 𝑥 4 𝑥 0.82 = 10.24
8 𝑥 4 𝑥 0.83 = 16.384
16 𝑥 4 𝑥 0.84 =
26.2144
Total labour cost
(R)
192
307.2
491.52
786.432
Aver labour per unit
96
76.8
61.44
49.152
Average cost for four sets
30 x 76.8 = R2304
Average cost for sixteen sets
30 x 49.152 = R1474.56
Question 2
Question 3
1.
EV = [(Pr1 x Value1) + (Pr2 x Value2)+….+(Prn x Valuen)]
Project A
Project B
Project C
EV = (0.2 x 450000) + (0.5 x 550000) + (0.3 x 650000)
EV = R560 000
EV = (0.2 x 350000) + (0.5 x 400000) + (0.3 x 450000)
EV = R405 000
EV = (0.2 x 550000) + (0.5 x 500000) + (0.3 x 700000)
EV = R570 000
2.
Discovery
Foschini Group
Famous Brands
Year 1
8 - 0=
0
0.8 – 0.7=
0.1
0.8 – 0.4 =
0.4
Year 2
0.75 - 0.2=
0.55
0.75 – 0 =
0
0.75 – 0.15=
0.6
Year 3
0.75 - 0.1=
0.65
0.75 – 0.55
= 0.2
0.75 – 0 =
0
Max Regret
0.65
0.2
0.6
Therefor the stock that will minimize the maximum regret is the Foschini Group Ltd.
Question 4
1.
Labour hours
required per
unit
Sales volume
Labour hours
C2 General
Body wash
0.2
Shampoo
0.5
Conditioner
0.4
25 000
5000
15 000
7500
10 000
4000
Total
16 500
Available direct labour capacity
Budget exceeds available capacity
16 000
500
2.
Variable Cost (p/u)
Selling price (R)
Contribution
margin (p/u)
Ranking order
Body Wash
(2.5 + 3 + 1) = 6.5
Conditioner
(3.5 +5 +1.5) = 10
15
8.5
Shampoo
(6.5 + 6 + 2) =
14.5
25
10.5
1
3
2
20
10
3.
Body wash
Conditioner
Shampoo
Labour Hours
used
5 000
4 000
7 000
16 000
Labour hours
available
11 000
7 000
0
# Units
25 000
10 000
14 000
R
Contribution
Body Wash
Conditioner
Shampoo
R
156 000
(5000 x 8.5) = 42 500
(4000 x 10) = 40 000
(7000 x 10.5) = 73 500
Question 5
C2 General
5.1.1
= (AC x AQ issued) – (SC x AQ issued)
= (95 x 11 000) – (100 x 11 000)
= 55 000 (U)
Reason is because of inefficiency of purchasing department and better quality
material purchased.
5.1.2
= (AQ -SQ) SC
= (11 000 – (520 x 20)) x 100
= 60 000 (U)
Reason is because of machine breakdowns or poor supervision.
5.1.3
= (AQ x AC) – (SQ x SC)
= (11 000 x 95) – (10 400 x 100)
= 5000
5.1.4
= (AR – SR)AT
= (55 – 50) x 2700
= 13 500 (U)
Reason is because of incorrect standards (standards were set too high) also
because of unexpected wage increases.
5.1.5
= (AT – ST)SR
= (2700 – (520 x 5)) x 50
= (2700 – 2600) x 50
= 5000 (U)
Reason is because the use of poor quality materials as well as strikes and
labour disputes.
5.2)
Question 6
Annuity Depreciation
Year
Annual Repayment
0
1
2
3
0
R416 078.11
R416 078.11
R416 078.11
Interest on
Capital
0
R142 500
R101 463.28
R54 271.06
Capital
Repayment
0
R273 578.11
R314 614.83
R361 861.05
Outstanding
Capital
R950 000
R676 421.89
R361 801.06
NIL
Calculations for interest on capital
R950 000 X 0.15 = R142 500
R676 421.89 X 0.15 = R314 614.83
R361 801.06 X 0.15 = -53.99 (NIL)
Investment at
the start
Net Cash Flow
Less
Depreciation
Net Profit
Capital
employed at the
start of the year
Working capital
Residual
Income
ROCE
Year 1
R 950 000
Year 2
R 676 421.89
Year 3
R 361 801.06
R 1 500 000
R 1 500 000
R 1 500 000
R 273 578.11
R 314 614.83
R 361 801.06
R 1 226 421.89
(R142 500)
R 1 185 385.17
(R101 463.28)
R 1 138 198.94
(R54 271.06)
(R 83 333.33)
(R 83 333.33)
(R 83 333.33)
R 1 000 588.56
R 1 000 588.56
R 1 000 593.65
860.65%
1168.29%
2097.25%
Calculations for Working Capital
R 250 000/3 = 83 333.33
ROCE Calculations
Net profit / Capital Employed
C2 General