1. The inventor invariably cannot find someone to fund the development of his product but the public company is able to raise all the capital it requires. Why is this so? 

2. What are the main factors that would influence a Japanese car company in its choice of location for a new plant in Britain?

3. (i) List briefly the actions required to form a public limited company.

(ii) List the seven clauses of the Memorandum of Association and give a reason why clause 3 (purpose/objects of the company) exists.

4. Give examples of economies of scale that a company may acquire by merging with or taking over another company, for each of the following:

(i) oil company

(ii) clothing retail company

(iii) steel works.

5. (i) Describe briefly the departments that exist and any design that is performed in the industry in which you work.

OR

(ii) Describe briefly what management and other activities may be necessary for instigating the design of an industrial project (for example, building a new chemical storage tank) from inception to construction start.

6. State briefly what functions an Engineering Services Department in an industry may have.

7. The firm of Rowlands Plc makes pipe flanges and the works has two departments, fabrication and finishing. There exist, as well as tradesmen and labourers, supervisory staff. The following overheads need to be apportioned between its two departments.

(a) From the list shown below complete the column ‘Basis for apportionment’. As an example, Factory Buiding maintenance is apportioned on the basis of factory floor area. • Floor Area • Number of employees • Amount used • Number of job repair cards completed • Number of claims in last 10 years.

(b) The following information is needed to enable the apportionment of overheads:

Floor areas in m2 Number of employees Electricity in kW h Number of maintenance cards Number of insurance claims Fabrication department 10 000 40 42 640 20 2 Finishing dept 4000 20 10 660 8 1

Complete TABLE 1 showing the apportionment of the overheads to each department.

8. (a) State why a ‘What if’ analysis may not be appropriate for a risk analysis.

(b) Complete the following steps in a ‘what if’ analysis for the introduction of a ‘just in time’* form of production materials supply to a car production unit.

Explanation of the Activity • Area of interest • Sub-systems.

(*‘Just in time’ is a method of ordering and delivery of stock parts employed by a company, where the company has delivered on a regular, often daily, basis only enough parts for a short period of production. Thus capital that would otherwise be tied up in large stockpiles of production materials is released and cost of storage is avoided.)

(c) Complete TABLE 2 by the generation of: • ‘What if’ questions • and solutions to potential problems.

(d) State briefly what the analysis shows as a major disadvantage when there is only a sole supplier and what can be done to overcome it.

9. (i) What is the purpose of marginal costing? (ii) Why cannot all of a firm’s production be on a marginal cost basis?

10. A company manufactures a portable electric generator. In a financial year it sold a total of 850 generators at a price of £350 each. The variable costs were £200 per generator and the fixed costs were £60 000. Determine: • total sales revenue • profit obtained • break even point in terms of sales and sales income.

11. Anderson Ltd. manufacture gearboxes for use in cars. At the start of the year, the management of Anderson Ltd. estimated that its costs would be: This was based on the following: 80 employees 2000 hours worked by each employee 40 000 gearboxes manufactured in the year as budgeted production £200 unit selling price. You have recently been employed by the company to establish a standard costing system. At the end of the year you were able to extract the following information: • labour costs £4.40/hour • 32 000 units sold • £210/unit selling price • 160 000 hours were worked • variable production overheads were £640 000 • fixed production overheads were £810 000 • administration costs were £350 000 • raw material prices were 10% higher than expected • total expenditure on raw material was £3.696 M • there were no opening or closing stocks of raw materials.

(a) You are required to prepare an operating statement for the year, using a standard absorption costing system. Calculations should proceed according to the following headings suffixing ‘A’ for Adverse and ‘F’ for Favourable where appropriate. Resulting quantities required for the statement are then entered in the ‘Operating Statement for the Year’ sheet shown on page 6.

(All working must be shown.) (Budgeted) Costs Unit cost £ Direct labour Direct materials Variable overhead Fixed overhead Admin. overhead Total Selling price Standard profit (per unit) Budgeted profit Sales price variance Sales quantity variance (These last three entries are added to the ‘Operating Statement for the Year’ on the final sheet of the calculations.)

Cost Variances Labour Variances Standard hours = Standard cost/hour = Rate variance = Standard time = Actual time = Time variance = Efficiency variance = (Add rate and efficiency variances to ‘Operating Statement for the Year’ on the final sheet of the calculations.)

Material Variances Material price = Material usage – standard = – actual = Material usage variance = (Add price and usage variances to ‘Operating Statement for the Year’ on the final sheet of the calculations.)

Variable overheads Standard cost = Actual cost = Expenditure variance = Efficiency variance = (Add expenditure and efficiency variances to ‘Operating Statement for the Year’ on the final sheet of the calculations.) Fixed overheads Expenditure variance = Volume variance = (Add these variances to ‘Operating Statement for the Year’ on the final sheet of the calculations.) Admin overhead (treat as fixed) Expenditure variance = Volume variance = (Add these variances to ‘Operating Statement for the Year’ on the final sheet of the calculations.)

(b) Give reasons/explanations why the variances in (a) above have occurred for the following: (i) material price (ii) labour efficiency (iii) fixed overhead expenditure.

(c) The accountant suggests that a standard marginal costing system may be more suitable. He asks you to outline the strengths and weaknesses of both systems and recommend the most suitable.

(d) The Board of Anderson Ltd. want to adopt ‘ideal’ standards because they feel it will encourage harder work. You are asked to produce a brief report giving your views.

12. (a) For the following categories of activities assign an appropriate cost driver from the list provided against each activity in TABLE 1. Cost Drivers: • Cost of Inspection/Test • Machine use hours • Direct Labour Hours • Number of Purchase Orders • Number of Production Runs • Material Delivery/Invoices.

(b) TABLE 2 shows the cost drivers, the quantity and unit cost of the cost driver, and total activity cost. For two products A and B it is found that: • The direct labour hours for products A and B are the same. • It takes approximately four times as many machining hours in both cost centres to produce product B as product A. • Product A requires one quarter of the materials purchased for B. • Product A requires one third of the total Delivery notes/invoices. • Product A has issued one third of the total materials issued per production run. • Product A has issued one half of the planning per production run of that required by Product B. • Product B requires twice as many machine set-ups as product A. • The products have the same number of quality control inspections.

If the company produces 50 000 each of products A and B: (i) Complete TABLE 2 to determine the cost driver unit costings in column 5 for the activities of column 1. Show also the product quantity splits in column 4 of each activity for product A and B (e.g. quantity of cost driver Activity Centre 1 is shown as split 100 000 product A and 400 000 product B). (ii) Determine the overhead activity cost allocations to products A and B (using the activity proportions calculated in column 4) by completing TABLE 3. (iii) Determine the total overhead allocations to products A and B. (iv) Find the per unit product overhead cost allocations for each product.

13. (i) The board of a company decides that the strategic objectives of the company should be: • to become established as the best in its field • to be the largest in its market. Comment briefly on what the length of time should be to achieve these objectives. (ii) State how the strategic and sometimes medium term objectives of a company may differ in an important aspect from operational planning. Give some examples of strategic planning activities and operational planning. (iii) State briefly how the type of business a company is engaged in might determine the importance of the type of planning that would be required for: (a) an oil exploration company (b) a clothing retailer.

14. Carling Ltd is a manufacturer of industrial drills. It has £1M earmarked for capital investment in the current year and the Board has identified two projects (each requiring an initial outlay of £1M) from which it will choose. The company's capital structure at present is: The two rival projects have anticipated costs and income flows as follows:

(a) The Board is considering funding the investment by either a £1M shares issue or a £1M 10% debenture issue. You are asked to explain which method you would choose. (b) You are asked to evaluate the two projects using: (i) the payback method (by plotting the data) (ii) the DCF/NPV technique (assume a 12% cost of capital). (c) A Board member asks whether risk and uncertainty should be taken into account. You are asked to write a brief report outlining the arguments for and against the suggestion.

15. Using the data from TABLES 1, 2 and 3 below, plot the following graphs: (i) On one set of axes plot the 2 curves of: • ‘total sales revenue’ against ‘volume of sales’ • ‘total costs’ against ‘volume of sales’. The ‘volume of sales’ should be on the x-axis (values from 20 to 26). (ii) On a second set of axes plot the 3 graphs: • ‘marginal cost’ against ‘volume of sales’ • ‘marginal revenue’ against ‘volume of sales’ • ‘price’ against ‘volume of sales’. Again the ‘volume of sales’ should be on the x-axis (values from 20

(a) From your graphs determine the maximum profit and optimum volume of sales. (b) What do you notice about: • the marginal cost and marginal revenue lines • total cost and total revenue curves at maximum profit.

16.(i) Imagine you are the manager of a pension fund that invests large amounts of money in companies, most of which are listed on the London Stock Exchange. Returns on your investments provide the funds to pay the pension beneficiaries. State the proportions of fixed interest securities (i.e. debentures, preference shares, etc.) and ordinary shares you would choose with a view to minimising the risk to funds and maximising returns. State briefly the reasons for your investment strategy. (ii) State a source from which you would get information on which to base your investment strategy. (iii) State a possible consequence of other fund managers thinking in a similar vein to yourself. (iv) Select 5 listed London Stock Market companies from different sectors (such as Banking, Information Technology, Media, Chemicals, Construction, Retailers, Transport, Mining, Oil & Gas, Pharmaceuticals, Property, etc.) in which you intend to invest substantial amounts of capital with a view to seeking a return on your investment. Briefly give reasons for your selections.

17. Prepare a cash budget for January 2006 to March 2006 with the following information given. Cash balance at 1 January 2006 = £5500 Selling price = £16.00 1/2 received in the production month being considered. 1/2 received two months later (e.g. in January receive 1/2 of January’s plus 1/2 of November’s) Direct labour = £5.00 paid same month of production Direct materials = £5.00 paid the month before production Variable costs = £4.00 1/2 paid in the month before production 1/2 paid in the month of production (e.g. for January, pay 1/2 in December plus 1/2 in January) Fixed costs = £1500 per month. Use the grid below to illustrate your answers

(a) State what factors need to be considered when tendering an estimate for a contract. (b) Before tendering as a contractor supplying materials and equipment specified by the client, state briefly some checks that should be made prior to compiling the tender in order to determine any contract clauses, contingencies or unforeseen circumstances that may affect future profits. (c) Prepare a tender/estimate for the installation of 20 steel street lamps in 5 streets of a small town to replace ageing concrete lamp standards, using the following information. The holes for the lamp standards have to be excavated using manual labour. The old concrete lamps need to be removed using a lorry mounted crane or ‘Hiab’, which also serves as an extendable high platform. The old lamps are first disconnected by the Supply Authority, which does not form part of the contract. Removal of old standards to contractor depot is part to the contract. The new lamp standards consist of the lanterns (lights) complete with the ballast, ignitor, capacitor and lamp already fitted. The main materials then are the column, the lantern, the cable to wire it, a photo-electric cell, tarmas and the concrete. The lamps are supplied by the contractor to the client’s specification. The lamp standards have to be erected then concreted (6 metre columns specified require a 1.3 m buried root depth) then the luminaires/lanterns fixed to the top and connected to the connection box at the base of the column. In order to keep the street lighting disruption to a minimum during lamp standard replacement, arrangements are made with the supply authority to disconnect old standards and connect the ‘tails’ (i.e. loose cable one end of which is connected to the lamp standard to be used to connect to the supply cable) of new standards.

Connection and disconnection by the Supply Authority is not part of the project tender. This means that the new standards have to be wired ready for connection. In order to do this holes have to be excavated adjacent to the old standards to accommodate the new standards and they have to be concreted with tails brought out before connection can take place. When connection is complete, the old concrete standards are removed and temporarily stored for disposal in the contractor’s depot and the holes of both new and old standards reinstated. Generally the new standards can be placed within 2 metres adjacent to the old standards. A mobile crane or ‘Hiab’ lifts the columns and sets them in the holes and is also used as a platform for working at height. The lanterns, which contain an infra-red detector for automatic switch-on are pre-wired by the contractor to avoid damage during installation and are attached at height using the ‘Hiab’ lorry mounted crane to the columns after column installation. Cables and wiring are passed from the lantern and threaded down the column to the connection box at the bottom. The lamp standards have to be connected at the base connection box by cable ‘tails’ to an existing lighting cable run along the pavement. Identification of existing underground cables is performed by the Supply Authority and drawings passed on to the contractor prior to work commencing. Connection, made by the Supply Authority, is arranged by the client. Students may assume that the lamps are delivered to the contractor storage depot and are paid for or enter a cost for purchase and delivery in their tender.

Download:- Q_Assignment II.pdf