SAC services provide Air Conditioner maintenance throughout Selangor. The company bases its budget overhead costs on the following data: Budget Price
QUESTION 1
SAC services provide Air Conditioner maintenance throughout Selangor. The company bases its
budget overhead costs on the following data:
Budget Price and Expenses
Price of Services RM150 per Service
Variable overhead costs:
Cleaning 30 per Service
Maintenance 10 per Service
Outdoor Expense 20 per Service
Fixed overhead costs:
Salaries and wages 15,000 per month
Depreciation 3,000 per month
Utilities 2,000 per month
Premise Rent 5,000 per month
In January, the following actual costs were incurred for 250 services provided:
Cleaning 5,500
Maintenance 2,500
Outdoor Expenses 6,000
Salaries and wages 12,000
Depreciation 3,500
Utilities 1,650
Rent 5,000
Competition in the market has forced SAC Services to reduce the price charged to customers to
RM120 for each service.
a. Prepare the Net Operating Income for the Budget and the Actual services.
(10 Marks)
b. Prepare a variance analysis report for SAC Services for the month of January.
(10 Marks)
c. To improve situation, SAC Services is considering 2 proposals. The first proposal is to
relocate the business and pay less rent to RM2,000. Salaries and wages are to be reduce
to RM11,000. This however will increase the actual outdoor expenses to RM26 per
service. The second proposal is by terminating workers and to reduce salaries and wages
to RM8,000. This will increase maintenance to RM12 per service. The price of the service
will remain at RM120. Evaluate using break even analysis and comment which proposal
is best for the company.
(10 Marks)
CONFIDENTIAL
Accounting and Finance for Decision Making (GSFM7514)
May 2025 Final Assessment
QUESTION 2
MEMC Company has just completed the second draft of their master budget. The cash budget
summary shows a negative cash balance in Quarter 1, 3 and 4. The company is considering
financing the deficits with a combination of long term and short-term loans. Short term borrowing
will incur a 6% interest rate while a long-term loan interest rate will be 10%. Another plan is to
negotiate a favorable term of credit from suppliers.
The Cash budget summary, the budget Income statement and the budget Balance Sheet are
shown below.
Evaluate the cash budget situation and suggest actions that can be taken to prepare the company
for the next period of operations. Prepare a new revised Cash Budget, revised Income Statement
and revised Balance Sheet. Do not include any taxes in your calculations. Include liquidity,
profitability, and debt management analysis in your evaluation.
MEMC for Budget Year 2025: Cash Budget
Quarter
1
2
Cash Balance Beginning
3
32,500 -38,000 32,000
ADD: Receipts -18,000
450,000 500,000 500,000 500,000
Total Cash Available
LESS: Disbursements
482,500 462,000 532,000 482,000
520,500 430,000 550,000 500,000
Excess (Deficits) of Cash -38,000
MEMC for Budget Year 2025: Income Statement
32,000 -18,000
Sales
Cost of Goods Sold
2,000,000
1,300,000
Gross Margin
Selling and Administration Expense
700,000
576,000
Net Operating Income
Interest Expense
124,000
1,200
Net Income
Previous Retain Earnings
Add: Net Income
449,900
122,800
Less: Dividends
New Retain Earnings
20,000
552,700
3
(30 Marks)
4 -18,000
122,800
Accounting and Finance for Decision Making (GSFM7514) CONFIDENTIAL
May 2025 Final Assessment
4
MEMC for Budget Year 2025: Balance Sheet
Current Assets
Cash -18,000
Account Receivables 150,000
Raw Materials 38,200
Inventories 34,000
Total Current Assets 204,200
Land 100,000
Plant and Machines 830,000
Less: Accumulated Depreciation 392,000
Plant and Machines Net 438,000
TOTAL ASSETS 742,200
Current Liabilities
Accounts Payable 14,500
Total Current Liabilities 14,500
Stockholders’ Equity
Common Stock 175,000
Retained Earnings 552,700
Total Equity 727,700
TOTAL LIABILITIES AND EQUITY 742,200
QUESTION 3
CCID plans to embark on a new investment in 2025 and will require RM15,000,000. The
investment is expected to provide a return on invested capital (ROIC) of 16%. As of 31st December
2024, the Net Income stood at RM15,000,000. The company intends to pay Dividends amounting
to RM4,500,000 and retained the balance. The number of shares is 10 million units. The expected
growth rate of the dividends is 3.13%. The share price is currently RM1.55. The company is
currently financed with 50% Debt. The current Beta of the company at this 50% level of debt is
1.2. The risk-free rate is 3% and investment analysts have estimated the Market Return is 18%.
The corporate tax rate is 30%.
The company intends to reduce the use of debt and will finance the new project with 30% debt
and 70% equity. The FTU Bank has indicated that any loans from the bank will incur a 15%
interest rate.
The cost of issuing new shares will be 3% and will be added to the cost of equity.
Evaluate the situation and determine whether the company should go ahead with their plan