Question One
Content Ltd produces four different types of laptop screen. Revenues and costs per laptop are
as follows:
Laptop screen Sales price (£) Variable cost/unit (£) Time to produce (mins.) Demand (units)
L1 26 32 26 480
L2 28 22 30 400
L3 30 14 32 372
L4 34 30 40 320
The available capacity is 30,000 minutes.
Required:
i)Calculate the contribution per unit of each laptop screen 4 marks
ii)Calculate the total time required for the production and the existence of the bottleneck. 9 marks
iii)Calculate the profit-maximising production programme and its contribution under the limiting factor. 37 marks
Total mark 50 marks
Question Two
a) The break-even point is the level of activity (in units of output or sales revenue) at which total costs equals the total sales revenue.
Required
Explain how a manager in an organisation may use break even analysis to aid decision making 8 marks
i)Explain six weaknesses of break-even analysis 12 marks
20 marks
b) AppleLady plc is a sports retail store. It is preparing budgets for the quarter ending June 30.
Budgeted sales for the next five months are:
April 40,000 units
May 100,000 units
June 60,000 units.
July 60,000 units
The management want the closing stock to be equal to 20% of the following month’s budgeted sales in units. The stock available on March 31 is 8,000 units.
Required:
Prepare the production budget for AppleLady plc for the quarter ending June 30 30 marks
Total 50 marks
Question Three
Luxury Ltd is a company that sells bags in its own stores in the UK. The company has been having cash flow problems and is planning to request financing from their bank. The bank has asked the management to present a cash flow budget from September to December to help them make a decision.
The forecast monthly profits and loss accounts for next 6 months are as follows.
Customers pay 10% in the month of sale, 75% in the month after sale, and 15% in thesecond month after sale.
Payments for raw materials and labour are made two months after they are incurred.
General and admin salaries are £27,000 paid in the month in which they are incurred.
Lease payments are £9,000 paid in the month in which they are incurred.
Two tax payments of £63,000 each are due, in September and December,respectively.
In October there is a payment of £200,000 for the expenses incurred in opening a new store. .
Cash in hand on 1st September is £224,000.
Required:
i) Prepare a cash budget from September to December for Luxury Ltd. 45 marks
ii) Basing on the cash budget, explain what the bank should decide regarding the request of new finance from Luxury Ltd. 5 marks
Total 50 marks
