scrap value – NBC Institute

MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

Question

MAPUTO NIGERIA LIMITED manufactures its product through three processes. The following data relates to Process 2 and Process 3 for the month of October:

100,000 units at N10 each were transferred from Process 1 to Process 2.

Cost Components	Process 2 (N)	Process 3 (N)
Direct Materials	100,000	114,000
Direct Labour	135,000	100,000
Variable Expenses	30,000	53,500
Production Overhead	250,000	200,000

Normal output: 90% for Process 2 and 80% for Process 3
Actual output: 85,000 units for Process 2 and 70,000 units for Process 3
Scrap value of loss: N3 per unit for Process 2 and N2 per unit for Process 3

Required:
a. Prepare Process 2 and Process 3 accounts (16 Marks)
b. Prepare the Normal Loss account (2 Marks)
c. Prepare the Abnormal Gain account (2 Marks)

Answer

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Tags: Abnormal Gain, Manufacturing Costs, Normal Loss, Process Costing, scrap value
Level: Level 1

Topic: Process Costing
Series: MAY 2015

MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow

Assess the financial desirability of producing designer ceramic tiles by calculating the net present value in real terms.

Question

Mawuena Ltd, a manufacturer of building materials, has recently suffered falling demand due to economic recession, and thus has unutilised capacity. Management has identified an opportunity to produce designer ceramic tiles for the home improvement market. It has already paid GH¢1.5 million for development expenditure, market research, and feasibility studies.

A new machine, with a useful life of four years, could be bought at GH¢6.5 million, payable immediately. The scrap value of the machine is expected to be 5% of the cost, recoverable a year after the end of the project.

The research and development division has prepared the following demand forecast:

Year	1	2	3	4
Demand (units)	110,000	130,000	150,000	145,000

The selling price is GH¢50 per box (at today’s price). Estimated operating costs, largely based on experience, are as follows:

Cost per box of tiles (at today’s price)	GH¢
Materials cost	12.00
Direct labour	5.00
Variable overhead	2.50
Fixed overhead (allocated)	3.50
Distribution (Variable)	5.50

In addition to the initial cost of machinery, investment in working capital of GH¢0.2 million will be required in year two. Mawuena Ltd pays tax one year in arrears at an annual rate of 30% on returns from the project. Mawuena Ltd shareholders require a nominal return of 14% per annum after tax, which includes allowance for generally expected inflation of 5.55% per annum. (Ignore Capital Allowance).

Required:
Assess the financial desirability of this venture in real terms, computing the net present value offered by the project. (14 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Budgeting, Net Present Value, real terms analysis, scrap value, Tax implications
Level: Level 2

Topic: Discounted cash flow
Series: NOV 2018

MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

Question

MAPUTO NIGERIA LIMITED manufactures its product through three processes. The following data relates to Process 2 and Process 3 for the month of October:

100,000 units at N10 each were transferred from Process 1 to Process 2.

Cost Components	Process 2 (N)	Process 3 (N)
Direct Materials	100,000	114,000
Direct Labour	135,000	100,000
Variable Expenses	30,000	53,500
Production Overhead	250,000	200,000

Normal output: 90% for Process 2 and 80% for Process 3
Actual output: 85,000 units for Process 2 and 70,000 units for Process 3
Scrap value of loss: N3 per unit for Process 2 and N2 per unit for Process 3

Required:
a. Prepare Process 2 and Process 3 accounts (16 Marks)
b. Prepare the Normal Loss account (2 Marks)
c. Prepare the Abnormal Gain account (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Abnormal Gain, Manufacturing Costs, Normal Loss, Process Costing, scrap value
Level: Level 1

Topic: Process Costing
Series: MAY 2015

MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow

Assess the financial desirability of producing designer ceramic tiles by calculating the net present value in real terms.

Question

The research and development division has prepared the following demand forecast:

Year	1	2	3	4
Demand (units)	110,000	130,000	150,000	145,000

The selling price is GH¢50 per box (at today’s price). Estimated operating costs, largely based on experience, are as follows:

Cost per box of tiles (at today’s price)	GH¢
Materials cost	12.00
Direct labour	5.00
Variable overhead	2.50
Fixed overhead (allocated)	3.50
Distribution (Variable)	5.50

Required:
Assess the financial desirability of this venture in real terms, computing the net present value offered by the project. (14 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Budgeting, Net Present Value, real terms analysis, scrap value, Tax implications
Level: Level 2

Topic: Discounted cash flow
Series: NOV 2018

Question Tag: scrap value

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MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow

Assess the financial desirability of producing designer ceramic tiles by calculating the net present value in real terms.

MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow

Assess the financial desirability of producing designer ceramic tiles by calculating the net present value in real terms.

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MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

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MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow

Assess the financial desirability of producing designer ceramic tiles by calculating the net present value in real terms.

You're reporting an error for "MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow"

MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

You're reporting an error for "MI – May 2015 – L1 – SB – Q2 – Costing Methods"

MA – Nov 2018 – L2 – Q1a – Discounted Cash Flow

Assess the financial desirability of producing designer ceramic tiles by calculating the net present value in real terms.

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