INDIVIDUAL HOME EXAM Course code: ØKB2101 Course name: Financial Management Date: Submission in Wiseflow - June 2 at 13:00 Examination form: Individual home examination Examination time: 4 hours - 9:00 - 13:00 Number of exam assignments: 2 assignments - both assignments must be answered Number of pages (including this one): 5 (not including attachments) Number of attachments: Excel form - 2 files / 3 forms Permitted aids: All aids allowed Course coordinator: Tone Merete Brekke Phone number course coordinator: 9099 7353   Notes : Source references must be provided

Subject:EconomicsPrice: Bought3

Share With

INDIVIDUAL HOME EXAM

Course code: ØKB2101 Course name: Financial Management

Date: Submission in Wiseflow - June 2 at 13:00

Examination form: Individual home examination Examination time: 4 hours - 9:00 - 13:00

Number of exam assignments: 2 assignments - both assignments must be answered Number of pages (including this one): 5 (not including attachments)

Number of attachments: Excel form - 2 files / 3 forms Permitted aids: All aids allowed Course coordinator: Tone Merete Brekke Phone number course coordinator: 9099 7353

 

Notes : Source references must be provided.

Submission is made as a pdf file.

Note that this is an individual home exam and communication, collaboration or dialogue between students during the exam period is not allowed. Contact the exam office for any questions.

 

 

 

 

 

Individual home examination - ØKB 2101 Financial management

 

Exercise 1 (50%)

 

KANTENE AS is an industrial company that manufactures the product DIVOC. In March, the company has budgeted that per unit DIVOC will incur a consumption of direct materials of 22.5 kg with an acquisition cost of NOK 225 finished imported. On the basis of time studies, a standard time of 10 hours per unit DIVOC has been prepared. The current tariff requires NOK 300 per hour. The indirect costs are calculated according to standard rates.

 

 

KANTENE AS has 3 departments. The following figures have been budgeted for the departments:

 

 

 

	Materialavd.	Tilvirk.avd.	Sales and CEO
Avd. Variable indirect costs in March:	120,000	80 000	75 000
Annual fixed costs:	1 080 000	600 000	1 740 000

 

Activity goals: 18 000 kg 8 000 hours Budgeted tilvirk.kost.                                          

 

 

Capacity and budgeted sales in March: 800 units DIVOC. Budgeted sales price is NOK 9,500 per unit. The fixed costs are considered to accrue evenly and to be operationally independent.

80% of the materials are added at the start of production, while the remaining materials are added towards the end of production. Work is running smoothly. Goods are registered as work in progress (VIA) when they are considered to have arrived halfway through the manufacturing process. The fixed costs accrue evenly and are considered to be operationally independent.

 

 

a) Calculate the standard rates and set up the standard calculation for one unit DIVOC according to the cost principle and the contribution principle      

 

b) Set up the standard calculation for one item in work for the product DIVOC according to the cost principle and the contribution principle.      

 

c) A potential customer proposes a delivery agreement for the entire batch with 800 units of DIVOC in March for a total of NOK 7,000,000. The agreement can be extended. Should the company accept the offer? Justify the answer.       

 

The company chose to enter into the agreement with the customer and thus secured a sale of 800 units of DIVOC for a total of NOK 7,000,000. During March, an epidemic breaks out and a number of infection control rules are adopted by the authorities. KANTENE AS is granted that the authorities cover large parts of the company's fixed costs (included in the figures below). The accounts show the following real figures:

 

 

 

Direct material:	kr 4 258 500	(16 700 kg)
Direct salary:	kr 2,550,000	(8,500 hours)

 

 

 

Variable indirect costs	Materialavd. kr 125 600	Tilvirk.avd. kr 71 400	Sales and CEO dept. kr 82 200
Fixed indirect costs	kr 19 800	kr 11,000	kr 31,900
Total indirect costs	kr 145 400	kr 82 400	kr 114 100

 

 

780 DIVOC units were completed during the period.

IB for goods in work was 50 units, while UB for goods in work shows 10 units.

 

 

d) Calculate the inventory changes for work in progress and finished goods of the product DIVOC      

 

e) Calculate the standard amount for March.      

 

f) Calculate the standard time for March.        

 

g) Before the standard cost accounts for the month of March according to the cost principle. Use the attached form (Appendix 1).      

 

 

h) Analyze the discrepancies in the direct costs and discuss what may be the reason for these and what the company should consider to improve the situation.      

 

 

Exercise 2 (50%)

You are employed in an accounting firm and have a corporate customer who has set up a profit budget for June 2020. The customer has budgeted a solid profit for June, but knows from previous experience that June is a month with large payments that puts pressure on liquidity in the company. The customer therefore asks you to perform the following tasks:

1) Prepare liquidity budget for June 2020      

2) Prepare budgeted balance as of 30 June 2020      

3) The company currently has an approved overdraft loan from the bank of NOK 1,000,000, of which they have used NOK 800,000. Will the company need to increase the overdraft facility based on the liquidity budget for June, and possibly by how much? Justify your answer (feel free to round up to the nearest 100,000).      

4) The company is a group with two divisions; division East and division West. Division West wants to buy 5,000 units of the product that Division East manufactures. Division West can choose to either buy the product from Division East or in the external market. Division East sells the product for NOK 175 per unit and has a variable unit cost of NOK. 125.      

a. What should the transfer price of the product be if the East division has full capacity utilization?       

b. What should the transfer price for the product be if the East division has spare capacity?       

 

 

Performance budget	June 2020
Sales revenue	2,400,000
Cost of goods	900 000
Wage costs	120,000
Depreciation	225 000
Other operating expenses	450 000
Operating profit	705 000
Interest expense	10,000
Ordinary profit before tax	695 000
Balance pr. May 31, 2020
Assets	31.05.2020
Total fixed assets	1,750,000
Warehouse	2,600,000
Accounts receivable	1,600,000
Total current assets	4,200,000
Total Assets	5,950,000

 

Equity and debt	31.05.2020
Share capital	200,000
Other equity	600 000
Total equity	800 000
Long term debt	1,600,000
Overdraft	800 000
Accounts payable	650 000
Due holiday pay	1,200,000
Due and accrued employer's contribution	100,000
VAT due	550 000
Debt due	250 000
Total short-term debt	3,550,000
Total equity and debt	5,950,000

 

You have also received the following information for June in order to set up a liquidity budget and balance sheet budget:

• Sales revenues are budgeted at NOK 2,500,000. Sales are distributed evenly throughout the month and the average credit period is 15 days. All sales are in Norway.

• Items in order are a total of NOK 1,000,000 excl. VAT, the goods are delivered evenly through June. The average credit period is 15 days.

• The inventory is estimated at 2,700,000 as of 30 June 2020.

• VAT is 25%, employer's tax is 14.1% and holiday pay is 12%. Payable VAT for the 3rd term is due for payment on 10 June 2020. Payable employer's tax for

The third term is due for payment on 15 July 2020. Holiday pay is paid in June.

• Since the holiday pay is paid in June, no ordinary salary is paid except for holiday substitutes. Salary costs for the holiday substitutes in June are budgeted at NOK 120,000. All salaries are paid in the same month as accrued.

• Linear depreciation for June will be NOK 225,000 .

• Other operating costs for June are budgeted at NOK 450,000 excl. VAT. Due for payment the same month as accrued.

• Interest and installments totaling NOK 25,000 on long-term debt are due for payment on 15 June. The installment amounts to NOK 15,000.

• The company will invest in a new IT system for NOK 100,000 excl. VAT Payment to the IT supplier will take place on 5 June.

• At the general meeting held in May, it was decided that NOK 250,000 of last year's profit will be paid as a dividend in June 2020.

• Prerequisite: any liquidity surplus / deficit must be used to reduce / increase the overdraft facility. Also ignore taxes.