College of Administration and Finance SciencesAssignment (2)
Deadline: Saturday 3/6/2023 @ 23:59
Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, copying from students or other resources without proper referencing
will result in ZERO marks. No exceptions.
• All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
Assignment Question(s):
(Marks 15)
Q1. Why do corporations use variance analysis? Explain how managers compute
material variance and labor variance.
Q2. Assume that you are preparing a Master Budget for a reputed corporation. Bring
out numerical examples on the complete master budget of the corporation.
Answers:
1
College of Administration and Finance Sciences
Q3. XYZ Company is considering purchasing new equipment costing SAR 250,000.
The company’s management has estimated that the equipment will generate cash
flows as follows (SAR):
Yea
r
1
2
3
4
Net Cash Flow
90,000
75,000
85,000
75,000
PV @10%
0.9091
0.8264
0.7513
0.6830
The company’s required rate of return is 10%. Calculate the net present value and give
reasons on whether the project should be accepted or rejected.
Answer:
Q4a. Assume a company manufactures cars and currently uses only 50% of its
manufacturing facility 20,000 cars). The company could utilize more of its facility by
producing its own tires. It currently purchases tires at SAR 30 per set of four. If the
company would incur SAR12 per set for direct materials, SAR10 for direct labor, and
SAR 6 for overhead (variable) to produce the tires.
Required: Compute why the company should, make or buy the tires, in any scenario
give your decision why?
Answer:
Q4b. The cost to produce one unit of the product is:
Material
SAR 13.00
Labor
8.00
Variable cost
7.00
Fixed expenses
18.00
Total fixed expenses: $ 500,000
2
College of Administration and Finance Sciences
The company has received a special order for 20,000 units for a price of SAR 36 per
unit from a foreign customer.
Required: Advice the manufacturer on whether the order should be accepted.
Answer:
3
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
