section bquestion 2two companies juk ltd and roop

Question

SECTION B

QUESTION 2:

Two companies Juk Ltd and Roop Ltd operate in the tourism sector. Financial forecasts are provided below:

Income Statement for year ended 31st December 2012	Juk Ltd Rs000	Roop Ltd Rs000
Sales
	5,000	8,000
Cost of sales	-3,000	-4,000
	--------	---------
Gross profit	2,000	4,000
Less distribution cost	-250	-350
Less administrative expenses	-450	-150
	--------	---------
Operating profit	1,300	3,500
Interest charge	-300	-400
	---------	---------
Profit before tax	1,000	3,100
Tax on profits (20%)	-200	-620
	--------	--------
Profit after tax	800	2,480
Ordinary Dividends paid	-200	-600
	------	--------
Retained profit for the year	600	1,880
	====	=====

 

Statement of financial position as at 31 December 2012	Juk Ltd Rs000	Roop Ltd Rs000
Non-Current Assets	4,000	6,500
	--------	--------
Current Assets
Inventories	250	500
Debtors	650	1500
Bank and Cash	100	150
	-------	-------
	1,000	2,150
Less Creditors within 1 year
Trade creditors	-400	-800
	--------	-------
Net current assets	600	1,350
	-------	--------
Total assets less current liabilities	4,600	7,850
Non-Current Liabilities
Long term loan	-1,500	-2,400
	---------	----------
	3,100	5,450
	=====	=====

 

Financed by:
Ordinary share capital of Re1 each fully paid	2,500	3,570
Profit and loss account	600	1,880
	--------	--------
	3,100	5,450
	=====	=====

(a)   Required:

Calculate the following ratios for both companies:

• Gross profit margin
• Net profit margin
• Current ratio and Quick Asset ratio
• Gearing and Interest
• ROCE
• Earnings per share
  

(b)   

• Based   on   your   answer   above,   compare   the performance of the two companies.
• List four limitations of ratio analysis.

QUESTION 3

(a)   Thon Ltd makes two products, Amix and Benix.

Unit variable costs are:

	Amix	Benix
	Rs	Rs
Direct materials (Re2 per litre)	4	6
Direct labour (Rs3 per hour)	6	3
Variable overhead	1	4
	---	---
	11	13
	==	==

The sales price per unit is Rs20 per Amix and Rs23 per Benix. During July 2013, the available   direct labour will be limited to 14,000 hours. Suppliers for materials will provide up to a maximum of30,000 kilos of  materials for the month of July 2013.

Quantity demanded in  July 2013 is expected to be:

Amix              6,000 units

Benix             5,000 units

Required:

• Determine the binding constraint.
• Calculate the contribution per unit of the limiting factor for each product and rank them accordingly.
• Determine  the  optimum  production  mix  and  calculate  the resulting profit, assuming that fixed overheads per month are Rs25,000.

(b)

• List and briefly describe three distinctions between a relevant cost and an irrelevant cost in decision making, using appropriate examples.
• List five assumptions of the break-even chart.

QUESTION 4:

Part A:

On 1st April 2013, a company held 500 units of finished goods in stock. These were valued at  Rs12  each.  During April  2013  three  batches of  finished goods were received into store from the production department, as follows:

Date	Units received	Production cost per unit
10th April	400	Rs13
20th April	400	Rs14
25th April	50	RS15

Goods sold out of stock during April were as follows:

Date	Units sold	Sale price per unit
14th April	500	Rs20
21st April	500	Rs20
26th April	100	Rs20

Required:

What were the stock balance after each transaction if the firm uses:

1. FIFO
2. LIFO
3. AVCO

Part B:

In preparing the financial statements of Sir Gent, you find that the accounts officer has raised a suspense account with a debit balance of Rs18,800. Whilst investigating, you ascertain that this balance consist of the following errors:

(a)      Proceeds  from  the  issue  of  shares  (at  nominal  value)  during  the  year amounting to Rs20,000. It was not recorded in the books.

(b)      A  purchases return  of  Rs2,100  has  been  debited  to    purchases return account.

(c)      Purchases have been over added by3 Rs2,100.

(d)      Cash  received from a  debtor,  Espay,  amounting to  Rs1,250, which  was incorrectly debited to her account.

(e)      Munna, a supplier to Sir Gent, granted a cash discount of Rs5000. The latter was recorded to the debit side of discount allowed account.

Required:

(i)       Clear  the  suspense  account  showing  the  transfers  to  the  correct  ledger accounts.                                                                                          

(ii)      Prepare appropriate journal entries to correct the above errors.