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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Resources of Local Government Authorities are very often limited. Therefore, there is the need for the limited resources to be efficiently allocated in order that a greater output is achieved from the limited resources.
Required:
Identify FOUR policies that would influence the allocation of resources in a Local Government Authority. (4 marks)
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Blasius Ltd is a leading manufacturer of furniture in Ghana. The company manufactures these three garden furniture products – chair, bench, and table. The budgeted unit cost and resource requirements of each of these items are detailed below:
| Product | Chair (GH¢) | Bench (GH¢) | Table (GH¢) |
|---|---|---|---|
| Timber cost | 5.00 | 15.00 | 10.00 |
| Direct labour cost | 4.00 | 10.00 | 8.00 |
| Variable overhead cost | 3.00 | 7.50 | 6.00 |
| Fixed overhead cost | 4.50 | 11.25 | 9.00 |
| Total Cost | 16.50 | 43.75 | 33.00 |
Budgeted volumes per annum:
| Product | Quantity |
|---|---|
| Chair | 3,500 |
| Bench | 1,900 |
| Table | 1,350 |
These volumes are believed to equal the market demand for these products. Fixed overhead costs are attributed to the three products on the basis of direct labour hours. The cost of the timber is GH¢2.00 per square metre.
The products are made from a specialized timber. A memo from the purchasing manager advises you that because of a problem with the supplier, this specialized timber is limited in supply to 20,000 square metres per annum.
The sales director has already accepted an order for 500 chairs, 100 benches, and 150 tables which, if not supplied, would incur a financial penalty of GH¢2,000. These quantities are NOT included in the market demand estimates above.
The selling prices of the three products are:
| Product | Selling Price (GH¢) |
|---|---|
| Chair | 20.00 |
| Bench | 50.00 |
| Table | 40.00 |
Required:
a) Determine the optimum production plan and state the total contribution that this would yield. (10 marks)
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Zero-based budgeting attempts to improve upon incremental type of budgeting, which is perceived to carry over inefficiencies from previous periods. It allows for budget reductions and permits the re-allocation of resources from low to high priority programs. Critics are of the opinion that such an approach or process of budgeting can be cumbersome in its execution.
Required:
Identify and explain THREE steps in the preparation of Zero-Based Budget. (6 marks)
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At a recent board meeting of a multinational company, there was a heated debate on whether the company should continue to invest resources in strategic planning processes. A section of the board members believed that it is worth investing, whilst the other section opposed that decision because they considered such an activity as a waste of resources.
Your task is to state:
a) FIVE reasons why you think the company must continue to invest in the strategic planning process. (10 marks)
b) FIVE reasons why it might not be necessary for the company to invest in the strategic planning process. (10 marks)
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Bonus Oil Plantation is a listed company on the Ghana Stock Exchange. For a company with a large portfolio, it is important to assess its product lines regularly to see which products are profitable, which ones are making losses, and which ones need improvement. This practice will help the company to allocate its resources accordingly in order to function more efficiently.
While there are many practices and tools available to accomplish this mission, the CEO has suggested to the Board the BCG Matrix developed by the Boston Consulting Group as a standard.
Required:
At the CEO’s request, explain the concept of the BCG Matrix. (10 marks)
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As the Senior Audit Manager in MNO & Co, a firm of Chartered Accountants, you have
just had a meeting with a Senior Partner at the firm, in which he informed you that you
have to carry out an investigation requested by the Management of ECO Ltd.
i) One of ECO Ltd’s subsidiaries, PQR Ltd, has been making losses for the past year. ECO Ltd’s management is concerned about the accuracy of PQR’s most recent quarter’s management accounts. The summarised statements of profit or loss for the last three quarters are as follows:
| Quarter to 31-Mar 2018
GH¢’000 |
Quarter to 31-Dec 2017
GH¢’000 |
Quarter to 30-Sep 2017
GH¢’000 |
|
|---|---|---|---|
| Revenue | 429 | 334 | 343 |
| Opening inventory | 180 | 163 | 203 |
| Materials | 318 | 251 | 200 |
| Direct wages | 62 | 54 | 74 |
| 560 | 468 | 477 | |
| Less closing inventory | (162) | (180) | (163) |
| Cost of goods sold | 398 | 288 | 314 |
| Gross profit | 31 | 46 | 29 |
| Less overheads | (63) | (75) | (82) |
| Net loss | (32) | (29) | (53) |
| Gross profit (%) | 7.2% | 13.8% | 8.5% |
| Materials (% of revenue) | 78.3% | 70.1% | 70.0% |
| Labour (% of revenue) | 14.5% | 16.2% | 21.6% |
ii) ECO Ltd’s management board believes that the high material consumption as a percentage of revenue for the quarter to 31 March 2018 is due to one or more of the following factors:
iii) PQR Ltd has a small number of large customers and manufactures its products to each customer’s specification. The selling price of the product is determined by:
iv) The estimated costs are not compared with actual costs. Although it is possible to analyse purchase invoices for materials between customers’ orders, this analysis has not been done.
v) A physical inventory count is carried out at the end of each quarter. Items of inventory are entered on inventory sheets and valued manually. The company does not maintain perpetual inventory records and a full physical count is to be carried out at the financial year end, 30 June 2018.
vi) The direct labour cost included in the inventory valuation is small and should be assumed to be constant at the end of each quarter.
vii) Historically, the cost of materials consumed has been about 70% of revenue. The management accounts to 31 March 2018 are to be assumed to be correct.
Required:
a) Identify and describe the matters that you should consider and the procedures you should carry out in order to plan an investigation of PQR Ltd.’s losses. (10 marks)
b) Explain the matters you should consider to determine whether closing inventory at 31 March 2018 is undervalued. (3 marks)
c) Describe the tests you should plan to perform to quantify the amount of any undervaluation. (3 marks)
d) Identify and explain the possible reasons for the apparent high materials consumption in the quarter ended 31 March 2018. (2 marks)
e) Describe the tests you should plan to perform to determine whether materials consumption, as shown in the management accounts, is correct. (2 marks)
(Total: 20 marks)
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The Finance Minister at a recent public forum on Public Financial Management (PFM) Reforms indicated in his address that the wave of PFM reforms in Ghana has continued throughout the last three decades. The PFM reforms have helped Ghana to attain notable PFM capabilities over the periods, including stronger legislative base and external oversight function. This is evidenced by the country’s improved performance in the 2018 Public Expenditure and Financial Accountability (PEFA) scores in these dimensions.
Required:
As the Head of Finance of your entry;
i) Explain the THREE (3) key outcomes of the PEFA framework. (3 marks)
ii) State TWO (2) limitations with respect to the scope of the PEFA framework. (3 marks)
iii) Discuss FOUR (4) of the broad activity areas (pillars) of the PEFA framework used in assessing the quality of Public Financial Management Systems. (4 marks)
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