GSFM7514 Accounting and Finance for Decision Making

Assignment 1 Accounting Report 40% of marks

This is a group assignment comprising 5 members (or as advised by your lecturer) and it
carries 40% of your carry marks.
Deadline: Sunday of Week 5

Assignment Requirements
a) Prepare a 5-to-8-page report (excluding the assignment cover, the assignment
question, tables and the reference page).
Type your response/findings/ answers using Microsoft Word.Answers with verbatim
quotations from references will not be accepted.
b) You can use Excel for your workings (calculation parts) but you need to copy and paste
it initially in Microsoft Word. All assignments will need to be converted to PDF before
submission. b) Any font type will do but make sure that the font size is 12 with 1.5
spacing.
c) The cover page should include the assignment title, course code, course name, your
name, and matric number for every group member.
d) Reference/s should be clearly spelt out (on ONE separate page at the end of your
answer).

Assignment Question
BGV the maker of industrial liquidating agents is preparing the budget for 2023.
The sales department has indicated annual sales of 40,000 units and the
selling price to be set at RM 90 per unit.
The selling price of the product for 2022 was RM 85 per unit.

For the
1st Quarter sales will be 10% of annual sales
2nd Quarter sales will be 30% of annual sales
3rd Quarater sales will be 40% of annual sales
respectively while for remaining will be 20% in the 4th Quarter

It is expected customers always pay 100% of their purchases within

the same quarter.
However, in the 3rd quarter, 90% will be collected in the quarter and the
remaining amount in the next quarter.
For the 4th Quarter, 85% will be collected in the quarter and the
remaining amount in the next quarter.

The company intends to have an inventory of finished products of 1,500 units

at the end of the budget year. Each quarter will also require an ending finished inventory
in order not to be in a situation of a stock out.

Each product requires 3 kg of raw materials and

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 GSFM7514 Accounting and Finance for Decision Making

Assignment 1 Accounting Report 40% of marks

4 hours of labour time to complete.

The raw material is RM 10 per kg and workers are paid RM 7 per hour.
The production department intends to have 5,000 kg of raw materials at the end of
the budget year.
Each quarter will also require an ending inventory as a precaution against any shortages in
the supply of raw materials. The production requires variable overheads that is set based on
direct labour hours. The predetermined rate is RM 1.50 per direct labour hour.

Annual Fixed Overhead expensesin RM are as follows: -

a. Factory Rent 120,000
b. Depreciation for machines 30,000
c. Factory Maintenance and Cleaning 60,000

Other non-manufacturing expenses annually are as follows:-

a. Advertising 150,000
b. Salaries 360,000
c. Office Expenses 30,000
d. Depreciation for office equipment is 40,000
e. Rent of the administration building is 60,000

Additional information
a. The company will be paying the 2022 tax payable in the 2nd Quarter of 2023.
b. An equipment will be purchased in the 1st Quarter at a cost of RM 250,000.00
c. Principal payment to reduce the Non-Current Liabilities will be made at every quarter. The
amount is RM 12,500 every quarter.
The interest payment of RM 12,000 will also be paid every
d. Interest rate for any short-term loans will be 8% and the loan must be settled
within the same year that it is made. Any extension of payment will need further
negotiation with the bank.
e. Dividends will be paid on the 4th Quarter. It was suggested that dividend amount is
RM 70,000.00
f. The number of ordinary shares is 1,000,000 units
In 2022, the average share price is RM 1.20
The average industry PE ratio is 6.00 times.
g. The cost of capital for the company is 12%

INCOME STATEMENT 2022

Sales 2,500,000
Cost of Goods Sold 1,650,000
Gross Margin 850,000
Selling and Administration Expense 540,000
EBITDA 310,000
Depreciation 25,000
EBIT 285,000
Interest Expense 48,000
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 GSFM7514 Accounting and Finance for Decision Making

Assignment 1 Accounting Report 40% of marks

Earning Before Tax 237,000
Corporate Tax 25% 59,250
Net Income 177,750

Previous Retain Earnings 207,250

add: Net Income 177,750
less: Dividends 50,000
New Retained Earnings 335,000

BALANCE SHEET 2022

Current Assets
Cash 49,250
Trades Receivables 70,000
Raw Materials 80,000
Inventories 200,000
Total Current Assets 399,250
Land 1,000,000
Plant and Machines 1,645,000
Accumulated Depreciation 900,000
Plant and Machines Net 745,000
Total ASSETS 2,144,250

Current Liabilities
Trade Payables 150,000
Taxes Payable 59,250
Total Current Liablilities 209,250

Non Current Liabilities 600,000

Stockholders Equity
Common Stock 1,000,000
Retained Earnings 335,000
Total Equity 1,335,000
Total LIABLITIES AND EQUITY 2,144,250

Required:
a) Prepare a complete Master Budget for 2023
b) Clarify the assumptions and decisions that you have made in preparing the budget
c) Prepare a performance analysis on the budget which include financial ratio
analysis, economic value-added analysis and the market value analysis, between
2022 and the budget

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