Question No: 2 10 Marks
Case (a) The National Ferries Company in Oman purchased a new ferry at a cost of OMR 320,000. The facilities
available in that ferry were modern and long lasting. The useful life of the ferry was estimated for 20 years. At the
end of the 8th year the ferry’s wireless and navigation system requires replacement. The company felt that the
maintenance cost of the wireless and navigation system was very high and they decided to replace that wireless and
navigation system immediately. Except the wireless and navigation system, the ferry’s technical parts and other
facilities are sail worthy and are expected to function for the next 6 years without any problem. The National
Ferries Company inquired about the price with the producer of wireless and navigation system and they are ready to
deliver the wireless and navigation system at a price of OMR 85,000.
Case (b) A land was acquired by a manufacturing corporation and the purpose of this acquisition was to construct a
factory building. The corporation wishes to obtain permission from the government authorities. For this purpose,
the corporation needs certificate from the government regarding environment clearance and change of classification
of land etc. The estimated cost for such permission and clearance was OMR 42, 200. The corporation wishes to
capitalize such cost of getting permission from the government and it should be included capitalized under cost of
construction of factory building.
According to the standards of IAS 16 the cost of an item of property, plant and equipment will be provided
if and only if it is probable that asset must provide future economic benefits. And the cost of permission and
clearance must also have to be measured reliably. Further as per the standards of IAS 16 the recognition of the cost
of permission and clearance will be made at the time when it is incurred. As per the principle of recognition, the
corporation has capitalized the cost of obtaining permission and clearance.
Required:
Case (a)
i. On the role of a financial analyst provide your information about whether the cost of the new wireless
and navigation system can be recognized as an asset?
ii. By considering the replacement cost of the wireless and navigation system, what amount would be
reported as an asset? And How would treat this asset in the company’s financial statements?

Case (b)
i. On the role of a financial analyst justify by your explanation about the decision of capitalizing the cost
of obtaining permission and clearance from the government is correct or not.
ii. If it is correct, how would you treat this cost in the cost in the corporation’s financial statements? 300 word

Purpose Ltd manufactures and sells plastic storage containers through associated retail outlets throughout Australia. To compete more effectively it has recently introduced a budgetary control system to assist with planning and control of operations. Detailed below is the original static budget set at the start of the month, actual performance figures and the flexed budget for their most popular storage container sold for the month of December 2018,

BUDGET (static)                      ACTUAL                     FLEXED

Output (production and sales)    3000 Units                               4,500 Units                  4,500 Units

                                                $                                              $                                  $

Sales                                        $45,000                                    $65,250                        $67,500

                                                3000 @ $15                             4500 @ $14.50             4,500@ $15

Raw Materials                          ($18,000)                                 ($25,200)                     ($27,000)

36,000 units                             56000 units                  54,000 units     @50c p u                                    @45c p u                     @50c p u

Labor                                       ($6000)                                    ($8280)                        ($9,000)

                                                300 hours                                 460 hours                     450 hours

                                                @$20 ph                                  @18 ph                        @$20 ph

Fixed Overheads                      ($5,000)                                   ($6,900)                       ($5000)

Operating Profit                        $16,000                                    $24,870                        $26,500

REQUIRED:

1. Describe the purpose and benefits of the flexed budget in identifying deviations from planned performance. (limit 80 words)

2. Based on information above , reconcile the operating profit under a static budget to the actual operating profit breaking down the reconciliation and identifying the following favorable and unfavorable variances:

• Sales Volume Variance
• Sales Price Variance
• Materials Usage Variance
• Materials Price Variance
• Labor Usage Variance
• Labor Rate Variance
• Fixed Overhead Spend Variance

Show full workings as to how you calculated each of the above variances

3. Assuming that the budgets above were all accurately set in terms of labor times and rates and material usage and price, suggest one feasible cause for each variance you have identified in (b) from what you know about the company and appreciating the business has produced and sold 50 percent more than initially anticipated under the static budget. As part of your answer focus on explaining why a favorable variance in one area might explain an unfavorable variance in another area – interrelationships and the possible tradeoff between variances in attempting to meet budgeted targets.(140 word limit)   

Precis 3

To complete this assignment, follow the instructions below.

You will have two arguments to address from both Chapter 8 and Chapter 9.

From Chapter 8, Exercise 8.9, write a precis on passages 4 and 5.

4: If the Copernican and Darwinian theories are reasonable representatives of scientific revolutions, Sigmund Freud’s theory of psychology is a candidate for a revolution in thought. Thus, because both the Copernican and Darwinian theories are reasonable representatives of scientific revolutions, Freud’s theory is a candidate for a revolution in thought.- Friedel Wienert, Copernicus, Darwin, and Freud.

5: Infants can recognize human voices as early as 7 months of age. Researchers studied brain activity in 32 infants, half of whom were 4 months of age and the other half 7 months old. Researchers played different sounds, including human voices speaking nonsense languages, and brain activity suggested that the 7 month-olds could distinguish the human voice from the other sounds and the 4 month olds could not.- Neuron

Be sure to identify the type of argument, if appropriate, and discuss the strength of any possible inductive generalizations.

Work to justify your analysis.

No diagram is necessary.

From Chapter 9, Exercise 9.12, write a precis on passages 1 and 4.

Be sure to identify the type of argument, if appropriate, and discuss the strength of any possible analogical arguments.

Work to justify your analysis.

No diagram is necessary.

(1) Plants are a lot like animals, because they both transfer energy of one kind to energy of another. Since most plants get their energy directly or indirectly from sunlight, animals, too, must get their energy from sunlight.-Tom Garrison, Oceanography.

(4) When studying the frontal lobe, the part of the brain that considers the consequences of actions, we made an insightful discovery about the adolescent brain. A major reason why adolescents often make poor decisions is because the nerve cells that connect their frontal lobes with the rest of their brains are sluggish.- Neuroscientist Frances Jensen.

This assignment should be submitted as a double-spaced Microsoft Word document. Please use the naming protocol Precis3_Lastname. For example, if your name is Jane Smith, the document would be saved as Precis3_Smith.

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

The following selected transactions occurred during the year:

Purpose Ltd manufactures and sells plastic storage containers through associated retail outlets throughout Australia. To compete more effectively it has recently introduced a budgetary control system to assist with planning and control of operations. Detailed below is the original static budget set at the start of the month, actual performance figures and the flexed budget for their most popular storage container sold for the month of December 2018,

BUDGET (static) ACTUAL FLEXED

Output (production and sales) 3000 Units 4,500 Units 4,500 Units $ $ $

Sales $45,000 $65,250                        $67,500

                                                3000 @ $15                              4500 @ $14.50             4,500@ $15

Raw Materials. ($18,000)                                  ($25,200)                      ($27,000)

36,000 units                              56000 units                   54,000 units    

  @50c p u                                  @45c p u                      @50c p u

Labor ($6000)                                    ($8280)                        ($9,000)

                                                300 hours                                 460 hours                     450 hours

                                                @$20 ph                                   @18 ph                        @$20 ph

Fixed Overheads ($5,000)                                   ($6,900) ($5000)

Operating Profit $16,000 $24,870 $26,500

REQUIRED:

(a) Describe the purpose and benefits of the flexed budget in identifying deviations from planned performance. (limit 80 words)

(b) Based on information above , reconcile the operating profit under a static budget to the actual operating profit breaking down the reconciliation and identifying the following favorable and unfavorable variances:

• Sales Volume Variance

• Sales Price Variance

• Materials Usage Variance

• Materials Price Variance

• Labor Usage Variance

• Labor Rate Variance

• Fixed Overhead Spend Variance

Show full workings as to how you calculated each of the above variances

(c) Assuming that the budgets above were all accurately set in terms of labor times and rates and material usage and price, suggest one feasible cause for each variance you have identified in (b) from what you know about the company and appreciating the business has produced and sold 50 percent more than initially anticipated under the static budget. As part of your answer focus on explaining why a favorable variance in one area might explain an unfavorable variance in another area – interrelationships and the possible tradeoff between variances in attempting to meet budgeted targets.(140 word limit)

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

The following selected transactions occurred during the year:

Complete Case Incident 1, Questions 9-28, 9-29, and 9-30 on page 316 in textbook. Explain how you can relate the assigned scripture reading to this exercise. Your responses should be submitted in a minimum 375-word essay.

CASE INCIDENT 1 The Calamities of Consensus

When it is time for groups to reach a decision, many turn to consensus. Consensus, a situation of agreement, seems like a good idea. To achieve consensus, groups must cooperate and collaborate, which ultimately produces higher levels of camaraderie and trust. In addition, if everyone agrees, the prevailing wisdom says that everyone will be more committed to the decision.

However, the need for consensus can sometimes be detrimental to group functioning. Consider the “fiscal cliff” faced by the U.S. government toward the end of 2012. The White House and Congress needed to reach a deal that would reduce the swelling budget deficit. However, many Republicans and Democrats stuck to their party lines, refusing to compromise. Many viewed the end product that achieved consensus as a less-than-optimal solution. The public gave Congress an approval rating of only 13 percent, expressing frustration with the lack of compromise, but the group may not have been able to function well partly because of the need for consensus in the face of partisanship.

If consensus is reached, does that mean the decision is the right one? Critics of consensus-based methods argue that any decisions ultimately reached are inferior to decisions using other methods such as voting or having team members provide input to their leader, who then makes the final decision. Critics also argue that, because of pressures to conform, groupthink is much more likely, and decisions reached through consensus are simply those everyone dislikes the least.

Questions

9-28. Is consensus a good way for groups to make decisions? Why or why not?

9-29. Can you think of a time when a group of which you were a part relied on consensus? How do you think the decision turned out?

9-30. Martin Luther King Jr. once proclaimed, “A genuine leader is not a seeker of consensus but a modeler of consensus.” What do you think he meant by that statement? Do you agree with it? Why or why not?