FACULTY OF COMMERCE & LAW

DEPARTMENT OF ACCOUNTING & AUDITING

BACC207: MANAGEMENT ACCOUNTING
ASSIGNMENT 2
JANUARY – JUNE 2021
Instructions
1. All assignments must be typed using New Times Roman font size 12, 1.5 line spaced,
referenced using 6th Edition APA Guidelines, justified both sides, include a standardized
cover page and uploaded as a SINGLE PDF file.
2. It is the responsibility of the student to upload their assignments in time to avoid
inconveniences due to internet failure, system failure, power outages or any other
unforeseen circumstances. NO submission extensions will be granted by the Department
after the deadline.
3. All queries for this assignment must be directed to the Course Leader whose contact
details are on the List of Course Leaders available on MyVista.
4. Plagiarism is a serious academic offence. Credit will be given for well written and
referenced assignments. Please refer to the Tutorial Letter and other resources for more
information on academic writing.

Answer ALL Questions

Assignment 2
Question 1
(a) Explain the terms ‘Cost Centre’ and ‘Cost unit’. (6 marks)

(b) A company manufactures a product from a raw material, which is purchased at $54 per
kg. The company incurs a handling cost of $350 plus freight costs of $400 per order. The
incremental carrying cost of raw material inventory is $0.50 per kg per month. In addition,
the cost of working capital finance on the investment in raw material inventory is $8 per
kg per annum. The annual production of the product is 94,500 units and 2 units are
obtained from one kg of raw material.

Required:
(i) Calculate the economic order quantity of raw materials.
 (ii) Advise, how frequently should orders for procurement be placed.

(iii) If the company proposes to rationalize placement of orders on quarterly basis, what
percentage of discount in the price of raw materials should be negotiated?

(c) A large consignment of materials of various types of makes was purchased for $ 40,000.

Later on these were sorted into the following categories:

Category A 6,000 units Market price $ 4 per unit
Category B 4,000 units Market price $ 3 per unit
Category C 7,000 units Market price $ 2 per unit

You are required to calculate the purchase price for each of the materials presuming that
percentage of profit in each case is the same.

Question 2
• A project requires an initial investment of $300,000.
The following cash inflows have been estimated for the life of the project:
Year $
1 50,000
2 120,000
3 200,000
Using a discount rate of 8%, calculate the following:
a) Payback period
b) NPV
Should the project be undertaken, given that the cost of capital is 8% (17 marks)
• A balanced scorecard measures performance from four perspectives: customer
satisfaction, growth, financial success and process efficiency.
Required:
Briefly explain the four perspectives above (8 marks)
Question 3
Chimusoro Co sells mobile telephones. It supplies its customers with telephones and wireless
telephone connections. Customers pay an annual fee plus a monthly charge based on calls made.
The company has recently employed a consultant to install a balanced scorecard system of
performance measurement and to benchmark the results against those of Nicholson Co’s
competitors. Unfortunately, the consultant was called away before the work was finished. You
have been asked to complete the work. The following data is available.
Chimusoro Co
Operating data for the year ended 30 November 2021
Sales revenue $480 million
Sales attributable to new products $8 million
Average capital employed $192 million
Profit before interest and tax $48 million
Average numbers of customers 1,960,000
Average number of telephones returned for repair each year 10,000
Number of bill queries 12,000
Number of customer complaints 21,600
Number of customers lost 117,600
Average number of telephones unrepaired at the end of each day 804

Required:
Calculate the following ratios and other statistics for Chimusoro Co for the year ended 30
November 2021.
(a) Return on capital employed;
(b) Return on sales (operating margin);
(c) Asset turnover;
(d) Average wait for telephone repair (in days);
(e) Percentage of customers lost per annum;
(f) Percentage of sales attributable to new products. (25)