FINAL EXAMINATION COVER SHEET
TRIMESTER 3 - 2020
STUDENT INFORMATION
NAME Course Title
ID NUMBER Signature and Date
EXAMINATION INFORMATION
SUBJECT IBA102 – Introduction to Business Accounting
NO. OF PAGES INCLUDING COVER SHEET AND BLANK PAGE 6
TOTAL MARKS IN EXAM 100 % OF FINAL GRADE 50%
EXAMINATION STRUCTURE
Section s Weighting Marks
1. Calculation Questions 2 compulsory questions 50%
2. Short Answer and Calculations 2 compulsory questions 50%
TOTAL 100%
INSTRUCTIONS
1. This is a Take-home exam. Text books, dictionaries and notes are allowed in the exam.
2. This is an individual exam. You must not speak to other students or look at others work.
3. Create a new word document and on top of the first page type your StudentID_First Name_Last
Name_Lecturer’s Name_T3 2020.
4. Do NOT rewrite the question in your exam answers. Just write the number of the question.
5. The typed answers must need to be submitted in Turnitin in Moodle within the 24 hours of the given timeframe.
Section 1: Short Answer and Calculations
You are required to attempt the questions below. This section is worth 50 marks and it is compulsory
Question 1 – Costing & Pricing (20 marks)
Anja’s T-shirt business uses a costing system for all customers who get a custom T-shirt made. The business uses a pre-determined indirect cost rate for allocating indirect costs/overheads to individual customers, with operating hours used as the cost driver. In August, the business had a budgeted allocation base of 600 operating hours. The budgeted business indirect overhead costs for August were $25,000. Customer Linda wanted to acquire a new custom shirt and visited the store for three hours during August. Other direct costs related to the three-hour session include $34 for the used materials, 30$ per hour for labour, and $10 for other supplies.
Required:
1. Calculate the pre-determined indirect cost rate (PICR) the business used for August. (show your calculations) (4 marks)
2. Calculate the total cost to the business for these sessions. (show your calculations) (6 marks)
3. Assume the business applies a cost-based pricing model to set prices to customers, adding a markup of 20%. What price should Anja’s T-shirt business charge customer Linda for her session and Tshirt? Explain your answer and show your calculations. (4 marks)
4. Variances arise when there is a difference between estimated and actual costs in the indirect cost allocation to cost objects. Discuss why is a variance analysis is useful for the decision-making process in a business. (6 marks)
Question 2 – Capital Investment Decisions (30 marks)
Riyanna’s business sells takeaway lamb shawarma and related products. The manager, Hayustus, considers to acquire a new multi cooker that helps to prepare the lamb shawarma faster. The cost of the new cooker is $10,000. It is estimated that the cooker will have a useful life of 4 years and will attract annual cash flows of $2,000 in year 1; $4,000 in year 2; $3,000 in year 3; and $2,000 in year 4.
It is estimated the machine will be sold for $1,000 at the end of its useful life (scrap value).
Riyanna has a cost of capital equal to 10% and management prefer projects with a payback period of less than 3 years.
1. Calculate the Net Present Value (NPV) of the project. (8 marks)
2. Calculate the Payback Period (PP) of the project. (8 marks)
3. Based on your calculations of NPV and PP, should the management of Riyanna proceed with the purchase of the cooker? Explain shortly why (or why not)? (4 marks)
4. Does the internal rate of return (IRR) equal the cost of capital in this example. Explain shortly why (or why not)? (2 marks).
5. If the cost of capital would be 20%, what is the project’s net present value (NPV) assuming that the costs and the annual cash flows remain the same. Given the analysis you have completed in question 1, which of the 2 projects would you prefer? Explain why. (8 marks)

Section 2: Calculations
You are required to attempt the questions below. This section is worth 50 marks and it is compulsory
Question 3: (Budgeting) (35 Marks)
Part A (15 marks)
Nadia’s fastfood restaurant has provided the following estimates relating to the first quarter of the financial year beginning 1st July 2020:
Cash Sales $140,000
Credit Sales $200,200
Receipts from Debtors $210,000
Wages paid $150,000
Restaurant furniture purchased $37,000
Utilities paid $20,800
Administration paid $11,500
Depreciation of furniture $1000
Receipt of loan payment $45,000
Credit purchases $100,000
The cash balance at 1 July 2020 is expected to be $70,000.
Required
Prepare a cash budget for the quarter ending 30 September 2020.
Nadia’s Fastfood Restaurant Cash Budget For the quarter ended 30 September 2020
Part B (20 marks)
Johnson’s Scooter business produces scooters which currently sell for $1500. The business has developed its web page and is trying to expand its customer reach to this form of medium. Sales in dollars for each quarter of 2020 were expected to be as follows:
Quarter Ending $
31 March $250,000
30 June $110,000
30 September $200,000
31 December $250,000
Due to the change in sales strategy and other operating conditions, Johnson’s experienced the following changes to sales volumes (units) from budget for 2020:
Quarter Ending Expected Change
31 March Decreased by 10%
30 June Increased by 10%
30 September Increased by 5%
31 December Increased by 15%
Johnson’s also increased the selling price to $1600 for the last two quarters of 2020.
Required
Prepare the actual sales record for 2020 and indicate whether there was a Favourable or Unfavourable Variation between Sales Budget and Actual Sales:
Johnsons’s Scooter Shop Actual Sales For the year ended 31 December 2020
March June September December
Selling price
($)
Sales (Units)
Sales Revenue
($)
Question 4 – Cost Volume Profit Analysis (15 marks)
Georg’s shop sells and repairs mobile phones. The “hot seller” in the shop is the phone model called “3310”. Data relating to this product for 2020 is below:
Selling price per unit $1,000
Variable manufacturing costs per unit $700
Variable marketing and distribution costs per unit $250
Fixed manufacturing costs per year $500,000
Fixed non-manufacturing costs per year $200,000
Required:
1. Explain the difference between fixed costs and variable costs using smartphones as an example.
(5 marks)
2. Calculate the contribution margin per unit (show your calculations). (3 mark)
3. Calculate the break-even point in units (show your calculations). (3 marks)
4. How many units of the 3310 phone would Georg’s shop need to sell to earn a target profit of
$150,000? (show your calculations) (4 marks)
END OF EXAM