financial management 101 - imm
Page 1 of 4
EXAMINATION
:
FINANCIAL MANAGEMENT 101 (FM101)
DATE
:
MAY 2011 PILOT EXAMINATION
TIME ALLOWED
:
3 HOURS
TOTAL MARKS
:
100
INSTRUCTIONS TO CANDIDATES 1. Please refer to the examination rules and regulations as found in the examination answer book. 2. Answer ALL the questions. 3. The use of calculators is permitted. Show ALL calculations. 4. Read all questions carefully to determine exactly what is required before attempting to answer. 5. Set your answers out under appropriate headings and sub-headings. 6. Number your answers clearly. 7. IMPORTANT: Indicate the questions attempted by drawing a circle around the question number provided on the front cover of the answer book. NOTE:
Examination books are the property of the IMM GSM and may not be removed from the examination hall.
Answers to examination questions should not include appendices in the form of personal notes to the examining panel.
© IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
Page 2 of 4
Answer ALL the questions QUESTION 1
[40]
1.1
Discuss the statement: “Good inventory management will contribute to a high profit margin and return on investment”. Illustrate your answer by providing relevant examples. (10)
1.2
The main objective of inventory management is to minimise total costs associated with stock. There are three categories of cost associated with inventory management. Define the concept ‘carrying cost’ and give examples of the different elements thereof. (10)
1.3
Delta Manufacturers produces 20 machines per day. The company works 320 days per year. The cost of carrying the motor for each machine amounts to R15 and the cost of placing an order is R450. Lead time is given as 7 days. You are required to calculate the EOQ for the motors using the formula below. Round off to the nearest whole number. (5)
1.4
Metro Ltd had the following transactions regarding a particular stock item for the month of February. 1 Opening stock 160 units at R3.50 each 2 Purchased 500 units at R4.20 each 6 Sold 300 units 16 Purchased 180 units at R2.25 each 20 Sold 370 units Calculate the following: a) The value of the closing stock for the month of February using the FIFO method (12) b)
The amount of gross profit if the firm applies a mark-up of 30% on cost price. (3)
QUESTION 2 2.1
[20]
Distinguish between direct and indirect labour. Illustrate your answer by giving examples in each case. (5)
© IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
Page 3 of 4
2.2
Axle Manufacturers uses a job costing system. The following are the budgeted figures for all jobs processed during the current year.
Direct material costs Direct labour costs Manufacturing overhead costs Direct labour hours Machine hours
R290,000 R150,000 R320,000 300,000 200,000
The actual information relating to Job 755 during the year was as follows: Direct material cost R18,000 Direct labour cost R16,000 Machine hours 2,000 The firm applies manufacturing overheads to jobs performed on the basis of machine hours and adds a mark-up of 25% on cost price. You are required to: a) Calculate the total cost of Job 755. (9) b) Determine if the overheads were under or over applied if the actual overheads were R3,500. (3) c) Calculate the invoice price relating to Job 755. (3) Where necessary round off to two decimal places. QUESTION 3 3.1
[40]
Sauce Manufacturers produces a single product. Production varies widely due to seasonal factors, but the normal production level is 4000 units. The following data is available: Cost budget for production of 4,000 units Cost Cost behaviour Direct labour Variable: R2.00 per unit Direct materials Variable: R9.00 per unit Production overheads Mixed (R60,000 fixed and R2.00 variable per unit) Administrative Fixed overheads Total budgeted costs
Budget (R) R 8,000 R36,000 R68,000 R32,000 R144,000
The actual level of production for the month was 4,300 units and the actual costs were as follows: Direct labour R9,000 Direct materials R37,000 Production overheads R72,400 Administrative overheads R32,800 © IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
Page 4 of 4
You are required to: a) Prepare a flexible budget for 3,500 and 4,500 units. (10) b) Produce a performance report for the month indicating clearly whether the variances are favourable or unfavourable. (15) 3.2
The transactions for Empire Traders for the months of January to April are reflected below. Summary of transactions for Empire Traders January February March April 60 000 75 000 90 000 72 000 Sales (75% on credit) 37 500 46 875 50 000 40 000 Purchases (90% on credit) 12 000 18 000 27 000 21 000 Salaries and wages 800 800 800 800 Rental 3 500 3 800 4 600 3 200 General expenses
Additional information: 1. The opening cash balance for March is R7,500. 2. Credit sales are collected as follows: 40% in the month of the sale 30% in the first month after the sale 28% in the second month after the sale 2% irrecoverable. 3. Credit purchases are paid in the month of purchase to obtain 2% discount for early payment. 4. All other expenses are paid in cash. You are required to prepare a cash budget for the months of March and April, taking the additional information into consideration. Show your calculation of cash receipts from sales on credit separately. (15)
EXAM TOTAL: 100
© IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
EXAMINATION
:
FINANCIAL MANAGEMENT 101 (FM101)
DATE
:
MAY 2011 PILOT EXAMINATION
TIME ALLOWED
:
3 HOURS
TOTAL MARKS
:
100
INSTRUCTIONS TO CANDIDATES 1. Please refer to the examination rules and regulations as found in the examination answer book. 2. Answer ALL the questions. 3. The use of calculators is permitted. Show ALL calculations. 4. Read all questions carefully to determine exactly what is required before attempting to answer. 5. Set your answers out under appropriate headings and sub-headings. 6. Number your answers clearly. 7. IMPORTANT: Indicate the questions attempted by drawing a circle around the question number provided on the front cover of the answer book. NOTE:
Examination books are the property of the IMM GSM and may not be removed from the examination hall.
Answers to examination questions should not include appendices in the form of personal notes to the examining panel.
© IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
Page 2 of 4
Answer ALL the questions QUESTION 1
[40]
1.1
Discuss the statement: “Good inventory management will contribute to a high profit margin and return on investment”. Illustrate your answer by providing relevant examples. (10)
1.2
The main objective of inventory management is to minimise total costs associated with stock. There are three categories of cost associated with inventory management. Define the concept ‘carrying cost’ and give examples of the different elements thereof. (10)
1.3
Delta Manufacturers produces 20 machines per day. The company works 320 days per year. The cost of carrying the motor for each machine amounts to R15 and the cost of placing an order is R450. Lead time is given as 7 days. You are required to calculate the EOQ for the motors using the formula below. Round off to the nearest whole number. (5)
1.4
Metro Ltd had the following transactions regarding a particular stock item for the month of February. 1 Opening stock 160 units at R3.50 each 2 Purchased 500 units at R4.20 each 6 Sold 300 units 16 Purchased 180 units at R2.25 each 20 Sold 370 units Calculate the following: a) The value of the closing stock for the month of February using the FIFO method (12) b)
The amount of gross profit if the firm applies a mark-up of 30% on cost price. (3)
QUESTION 2 2.1
[20]
Distinguish between direct and indirect labour. Illustrate your answer by giving examples in each case. (5)
© IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
Page 3 of 4
2.2
Axle Manufacturers uses a job costing system. The following are the budgeted figures for all jobs processed during the current year.
Direct material costs Direct labour costs Manufacturing overhead costs Direct labour hours Machine hours
R290,000 R150,000 R320,000 300,000 200,000
The actual information relating to Job 755 during the year was as follows: Direct material cost R18,000 Direct labour cost R16,000 Machine hours 2,000 The firm applies manufacturing overheads to jobs performed on the basis of machine hours and adds a mark-up of 25% on cost price. You are required to: a) Calculate the total cost of Job 755. (9) b) Determine if the overheads were under or over applied if the actual overheads were R3,500. (3) c) Calculate the invoice price relating to Job 755. (3) Where necessary round off to two decimal places. QUESTION 3 3.1
[40]
Sauce Manufacturers produces a single product. Production varies widely due to seasonal factors, but the normal production level is 4000 units. The following data is available: Cost budget for production of 4,000 units Cost Cost behaviour Direct labour Variable: R2.00 per unit Direct materials Variable: R9.00 per unit Production overheads Mixed (R60,000 fixed and R2.00 variable per unit) Administrative Fixed overheads Total budgeted costs
Budget (R) R 8,000 R36,000 R68,000 R32,000 R144,000
The actual level of production for the month was 4,300 units and the actual costs were as follows: Direct labour R9,000 Direct materials R37,000 Production overheads R72,400 Administrative overheads R32,800 © IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
Page 4 of 4
You are required to: a) Prepare a flexible budget for 3,500 and 4,500 units. (10) b) Produce a performance report for the month indicating clearly whether the variances are favourable or unfavourable. (15) 3.2
The transactions for Empire Traders for the months of January to April are reflected below. Summary of transactions for Empire Traders January February March April 60 000 75 000 90 000 72 000 Sales (75% on credit) 37 500 46 875 50 000 40 000 Purchases (90% on credit) 12 000 18 000 27 000 21 000 Salaries and wages 800 800 800 800 Rental 3 500 3 800 4 600 3 200 General expenses
Additional information: 1. The opening cash balance for March is R7,500. 2. Credit sales are collected as follows: 40% in the month of the sale 30% in the first month after the sale 28% in the second month after the sale 2% irrecoverable. 3. Credit purchases are paid in the month of purchase to obtain 2% discount for early payment. 4. All other expenses are paid in cash. You are required to prepare a cash budget for the months of March and April, taking the additional information into consideration. Show your calculation of cash receipts from sales on credit separately. (15)
EXAM TOTAL: 100
© IMM Graduate School of Marketing May 2011 Pilot Examination
FM101
