[vee]

I understand you better regarding them treating the profit as cash…

Could they have asked us to work out npv from what they have given us???

I am doing my degree in accounting but they get these questions from past ACCA and CIMA exams….

[vee]

I have worked out the payback and got the same answer of 4yrs and four months just over the required year.

However I’m puzzled how was I to know the cash savings were AFTER depre???

[vee]

Hey john

I think your last explanation was the correct one…. But I don’t understand how you got 1.9????

Ok I think you added the cash savings/ 5, instead off – the investment of 8.5???

Because the answer in the book was just ARR = 45% &

Payback 4years 4 months.

I’m Confused

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Sorry Ahmed I didn’t look at who was replying my apologies

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What I did was initial investment/ average profit x 100

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Good morning john I agree with you but there is no scrap value or disposal in the question! That’s why I am lost

[vee]

Hi John,

im just going through past questions and saw this question.

“All of our output is currently produced in Europe, but competitive pressures are forcing us to reduce costs and we propose to make a large investment in a manufacturing plant in China. The initial investment would be $8.5m. Costs/savings from the project are forecast as follows:
Year 1 2 3 4 5
Net (costs)/savings ($2m) $2.5m $4m $3.5m $1.5m

Stem Products will need to raise a bank loan to support the investment at a cost of capital at 10% per annum. Under normal circumstances we would expect to make an accounting rate of return of 15% on our investments, or look for a payback period of about 4 years”.

Required:
Draft an email to the CEO of Stem Products in which you:
(a) State (i) the Accounting Rate of Return and (ii) the payback period for the project.

i am not getting this, i know the formula for ARR and have added up all the cost savings and divided it but not getting the correct answer, do you mind to help please…

Thank you

[vee]

HI JOHN

I AM A STUDENT AND NEED HELP WITH MIX ANDVYIELD BUT YOU HAVE NOT ANSWERED TO ME.

I WOULD KINDLY SPPRECIATE IF YOU CAN PLEASE DO EXPLAIN THIS QUESTION TO ME PLEASE.

(b) You learn that the wood used to manufacture the trellis sets comprises three types: pine, balsa and redwood. Calculate and comment on the materials mix and yield variances using the information in the table below.
(8 marks)

Budget per unit – Nov 2012 Std cost Actual – Nov 2012
Materials Wood – 25kg @ £3.20/kg 80.00 80,000kgs
Comprising:

Pine – 15kg @ £3.00/kg
Balsa – 2kg @ £1.50/kg
Redwood – 8 kg @ £4/kg

STANRD COST

PINE- 45.00
BALSA- 3.00
REDWOOD-32.00

ACTUAL

Pine – 48,000kgs
Balsa – 6,400kgs
Redwood – 25,600kgs

PLEASE PLEASE PLEASE… AND THANK YOU

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(b) You learn that the wood used to manufacture the trellis sets comprises three types: pine, balsa and redwood. Calculate and comment on the materials mix and yield variances using the information in the table below.
(8 marks)

Budget per unit – Nov 2012 Std cost Actual – Nov 2012
Materials Wood – 25kg @ £3.20/kg 80.00 80,000kgs
Comprising: Pine – 15kg @ £3.00/kg
Balsa – 2kg @ £1.50/kg
Redwood – 8 kg @ £4/kg 45.00
3.00
32.00 Pine – 48,000kgs
Balsa – 6,400kgs
Redwood – 25,600kgs

[vee]

Oh knylam thanks a lot for replying yes I have but don’t know how to upload it!!! Do you have an email address?? Or can you tell me how to upload it

[Author]

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