1. a) DERIVE THE "COST OF EQUITY" USING THE GORDON DIVIDEND MODEL FOR THE STOCK PRICE OF    £386, GROWTH IN DIVIDEND OF 3%, AND DIVIDEND OF £36.

THEN INDICATE WHETHER IS RETURN ON EQUITY IS A GOOD RETURN RELATIVE TO CURRENT YEAR 2012 RETURNS ON EQUITY WHICH HAVE BEEN RUNNING FROM 4 % TO 7 % FOR THRIVING MANUFACTURING CONGLOMERATES AND EVEN HIGHER FOR SOME VENTURE CAPITAL AND PRIVATE EQUITY FIRMS UPWARD TO OVER 10 %.

b) IS THE DISCOUNTING OF INVESTMENT VENTURE CASH FLOWS DEEPER WITH THE RATE YOU HAVE DERIVED, OR LESS THAN

LOVE Enterprise is a seller of cupcakes. The variable cost is RM4 per unit and the fixed cost is RM800 for a month. A cupcake is sold at RM12.

Required:

(a) Briefly explain the importance of cost-volume-profit analysis for a business. (7    marks)

(b) Calculate the contribution margin for a unit of cupcake. (3    marks)

(c) Determine the number of cupcakes need to be sold to achieve break-even point. (3    marks)

(d) Determine the number of cupcakes that need to be sold to achieve the target profit of RM2,000 for a month. (3    marks)

(e) Determine the number of cupcakes that need to be sold to achieve break-even point, if the selling price is reduced by RM1. (3    marks)

(f) Determine the number of cupcakes that need to be sold to achieve break-even point, if the fixed cost increases by RM200. Assume the selling price is at RM12 and variable cost is at RM4 per cupcake. (3    marks)

(g) Determine the number of cupcakes that need to be sold to achieve break-even point, if the variable cost decreases by RM1. Assume the selling price is at RM12 and fixed cost is at RM800.

A machine with an original cost of $120,000 and no salvage value had an estimated useful life of 6 years, but after 2 complete years, management decided that the orignal estimate of useful life should have been 8 years.

Using a T-Chart template, prepare the following entries:

A. Depreciation for Year 1

B. Depreciation for Year 2

C. Depreciation for Year 3

When activity based costing is implemented, the initial outcome is normally that:

A. The cost of all products will be higher.

B. The cost of all products will be lower

C. The cost of low volume products will be higher and the cost of high volume products will be lower

D. The cost of low volume products will be lower and the cost of high volume products will be higher.

Question 1

"A manufacturing company is considering a new investment in a machine that will cost $142,000 and has a maintenance cost of $6,600 that occurs every 2 years starting at the end of year 2. Assuming that this equipment will last infinitely under these conditions, what is the capitalized equivalent cost of this investment at the rate of 13.3%?

The Earland Corporation purchased equipment at the beginning of 20x7 and capitalized a cost of $2,000,000. This cost included the following expenditures:

Purchase price $1,850,000

Freight charges 30,000

Installation charges 20,000

Annual maintenance charge 100,000

Total=$2,000,000

The company equipment is being depreciated at a diminishing balance rate of 15% with no residual value. In 20x9, after the 20x8 financial statements were issued, the company decided to switch to the straight-line method of depreciation to reflect a change in the expected use of the equipment. At the time, the company’s controller also noticed the error made in 20x7. The company estimates that the total useful life of the equipment is 10 years with no residual value. The company’s tax rate is 35% and the equipment belongs to a UCC class having a 30% CCA rate.

Required –

(a) Prepare the journal entry at the beginning of 20x9 to adjust for the error.

(b) What is the 20x9 depreciation expense?

Why is it important to identify the most appropriate cost drivers for a particular product?

A) so managers can identify the activities necessary to manufacture a product

B) so managers can control product costs better

C) so managers can predict product costs better and make better decisions

D) B and C

Answer:

Cost drivers are ________.

A) the different functions in the value chain

B) different types of functional areas in the firm

C) measures of activities that require the use of resources and thereby cause costs

D) different types of cost calculations

Answer:

Within the relevant range, the total amount of ________ cost changes in direct proportion to changes in the cost driver. Within the relevant range, the total amount of ________ cost does not change in direct proportion to changes in the cost driver.

A) fixed; variable

B) variable; fixed

C) step; mixed

D) mixed; step

Answer:

What happens when the cost-driver level increases within the relevant range?

A) Total fixed costs remain unchanged.

B) Fixed costs per unit of cost driver increase.

C) Total variable costs decrease.

D) Variable costs per unit of cost driver increase.

Answer:

Which of the following costs is a fixed cost?

A) cost of dairy ingredients used to produce ice cream

B) depreciation expense on factory building

C) fuel used by delivery trucks

D) labor wages of workers who mix dairy ingredients to make ice cream

Highlander Corporation is a manufacturer that uses the average cost method to account for costs of production. Highlander manufactures a product that is produced in three separate departments : Molding, Assembling and Finishing. The following information was obtained for the assembling department for the month of June: Work in process, June 1, 4,000 units composed of the following" Transferred in from the molding department amount $ 60,000, percent of completion 100%. cost added by the assembling department: direct materiasl $ 0. percent of completion 0%, direct labor $ 12,300, percent of completion 60%, factory overhead applied $ 17,000, work in proces , june 1 $ 77.000. The following activity occured during the month of June: (1) 20,000 units were transferred in from the molding department at a cost of $ 300,000. (2) Cost were added by the assembling department as follows: Direct materials $ 93,000. Direct labor $ 43,200, factory overhead $ 19,420 total $ 156,220. (3) Materials added at the end of the process. (4) 18,000 units were completed and transferred to the finishing department. At June 30, 6000 units were still in process. The degree of completion of work in process at June 30 follows: Driect labor 70%, Factory overhead 35%. Required Prepare in good form a cost of production report for the assembling department for the month of june. Show supporting computations in good form. The repor should include: a) Equivalent units of productions, b) total manufacturing costs, c) cost per equivalent unit.e) dollar amount of inventory cost transferred cost.