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    MFA Test 1 Solution

    Uploaded by

    Muhammad Imran
    The budgeted profit or loss statement for Multan Stars for the year ending 31 August 2023 projects a net profit of Rs. 35.77 million. Sales are budgeted at Rs. 132.05 million from production and sale of K-100 and K-50 units. Cost of goods sold is budgeted at Rs. 93.13 million, including material costs of Rs. 45.94 million, labor costs of Rs. 30.45 million, and manufacturing overheads of Rs. 11.34 million. Selling and administrative expenses are budgeted at Rs. 3.15 million, resulting in the projected profit of Rs. 35.77 million.

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    MFA Test 1 Solution

    Uploaded by

    Muhammad Imran
    36 views4 pages
    The budgeted profit or loss statement for Multan Stars for the year ending 31 August 2023 projects a net profit of Rs. 35.77 million. Sales are budgeted at Rs. 132.05 million from production and sale of K-100 and K-50 units. Cost of goods sold is budgeted at Rs. 93.13 million, including material costs of Rs. 45.94 million, labor costs of Rs. 30.45 million, and manufacturing overheads of Rs. 11.34 million. Selling and administrative expenses are budgeted at Rs. 3.15 million, resulting in the projected profit of Rs. 35.77 million.

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    The budgeted profit or loss statement for Multan Stars for the year ending 31 August 2023 projects a net profit of Rs. 35.77 million. Sales are budgeted at Rs. 132.05 million from production and sale of K-100 and K-50 units. Cost of goods sold is budgeted at Rs. 93.13 million, including material costs of Rs. 45.94 million, labor costs of Rs. 30.45 million, and manufacturing overheads of Rs. 11.34 million. Selling and administrative expenses are budgeted at Rs. 3.15 million, resulting in the projected profit of Rs. 35.77 million.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    36 views4 pages

    MFA Test 1 Solution

    Uploaded by

    Muhammad Imran
    The budgeted profit or loss statement for Multan Stars for the year ending 31 August 2023 projects a net profit of Rs. 35.77 million. Sales are budgeted at Rs. 132.05 million from production and sale of K-100 and K-50 units. Cost of goods sold is budgeted at Rs. 93.13 million, including material costs of Rs. 45.94 million, labor costs of Rs. 30.45 million, and manufacturing overheads of Rs. 11.34 million. Selling and administrative expenses are budgeted at Rs. 3.15 million, resulting in the projected profit of Rs. 35.77 million.

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    © All Rights Reserved
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    of 4

    Answer-1

    Islamabad Universe
    0 1 2 3 4 5
    Sales in units A 10,000 9,000 7,650 7,650 7,650

    ------------------- Inflation @ 8% per annum -------------------


    Sales price/unit B 1,600 1,728 1,866 2,016 2,177 2,351

    Variable cost of sales/unit C 750 810 875 945 1,020 1,102

    Variable operating cost/unit D 100 108 117 126 136 147

    ----------------------------- Rs. in '000 -----------------------------


    Sales A×B - 17,280 16,794 15,422 16,654 17,985
    Cost of goods sold A×C - (8,100) (7,875) (7,229) (7,803) (8,430)
    Operating costs – Variable A×D - (1,080) (1,053) (964) (1,040) (1,125)
    Operating costs – Fixed - (1,080) (1,166) (1,260) (1,360) (1,469)
    Accounting Cashflow before tax 7,020 6,700 5,969 6,451 6,961

    Less: Tax @ 30% (W-1) - (231) (604) (736) (908) (1,211)


    Machine (25000) - - - - 7,347
    (W-1)
    Overhauling cost - - - (3,149) - -
    Cash flows (25,000) 6,789 6,096 2,084 5,543 13,097
    Discount factor @ 12% 1.000 0.893 0.797 0.712 0.636 0.568
    Present value of cash flows (25,000) 6,063 4,859 1,484 3,525 7,439
    Net present value (1,630)

    Discount factor @ 9% 1.000 0.917 0.841 0.772 0.708 0.650


    Present value of cash flows (25,000) 6,226 5,127 1,609 3,924 8,513
    Net present value 399

    NPVA
    IRR = A% + ( ) × (B − A)%
    NPVA−NPVB
    399
    IRR = 0.09 +( ) × (0.12 − 0.09) = 𝟗. 𝟓𝟗%
    399+1630

    Conclusion: At 9.59%, the launching of Gladiator would be financially feasible.

    W-1 : TAX:
    Y1 Y2 Y3 Y4 Y5
    ---------------------- Rs. in '000 ---------------------
    Accounting Cash Flows 7,020 6,700 5,969 6,451 6,961
    Depreciation (6,250) (4,688) (3,516) (3,424) (2,569)

    (2637+787) (1978+591)
    TAX Loss on Disposal (357)
    770 2,012 2,453 3,027 4,035
    Tax @ 30% 231 604 736 908 1,211
    W-2 : Depreciation & Loss of sale of machine
    Machine Overhauling Total
    Depreciation Depreciation
    cost NBV cost NBV NBV
    ----------------------------- Rs. in '000 -----------------------------
    Cost of machine - 25,000 - - 25,000
    Year 1 6,250 18,750 - - 18,750
    Year 2 4,688 14,063 - - 14,063
    Year 3 3,516 10,547 - - 10,547
    Overhauling cost 2.5m×(1.08)3 - 10,547 - 3,149 13,696
    Year 4 2,637 7,910 787 2,362 10,272
    Year 5 1,978 5,933 591 1,771 7,704
    Less: Scrap value 5m×(1.08)5 - - - - (7,347)
    Loss on sale of machine 357
    Answer:2

    Multan Stars
    Budgeted Profit or Loss Statement
    For the year ending 31August
    2023
    Rs. in '000
    Sales (W-1) 132,050
    Cost of goods sold
    Material (W-3) (45,938)
    Labour (W-4) (30,450)
    Manufacturing overheads (W-5) (11,340)
    Purchase from market [4,500(W-2)×1200] (5,400)
    (93,128)
    Gross profit 38,922
    Less: Selling & admin. [2,500,000×1.2×1.05] 3,150
    Profit 35,772

    W-1: Sales Rate Quantity Rs. in '000


    - K-100 [90,000,000/72,000]×1.12 1,400 72,000 100,800
    - K-100 (New Cont.) [90,000,000/72,000] 1,250 10,000 12,500
    - K-50 750 25,000 18,750
    132,050

    W-2: Production K-100 K-50


    Demand (72,000+10,000) Units 82,000 25,000
    Machine hours required Hours 3.00 1.50
    Total required Hours 246,000 37,500 283,500
    Available [72,000×3/0.8] Hours 270,000
    Shortfall Hours 13,500
    K-100 to be purchased from outside
    [13,500/3] Units 4,500
    To be manufactured internally:
    - K-100 [72000+10000–4500] Units 77,500
    - K-50 Units 25,000

    W-3: Material Kgs


    - K-100 [77,500(W-2)×2.5×200×1.05]→[36,000,000÷(72000×2.5)] 40,688
    - K-50 [25,000×1×200×1.05] 5,250
    45,938

    W-4: Labour Hrs


    - K-100 [77,500(W-2)×3] 232,500
    - K-50 [25,000×1.5] 37,500
    Required 270,000
    Available 250,000
    Overtime 20,000

    Cost Rs. in '000


    - Normal [25,000,000×1.05] 26,250
    - Overtime [20,000×(25,000,000/250,000)×2×1.05] 4,200
    30,450

    W-5: Manufacturing Overheads


    Machine hour rate [9,000,000×0.80 / 216,000(72,000×3)] = 33.33×1.05 35

    Rs. in '000
    Variable overheads
    - K-100 [77,500(W-2)×3×35] 8,138
    - K-50 [25,000×1.5×35] 1,312
    9,450
    Fixed overheads [9,000,000×0.2×1.05] 1,890
    11,340

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