ICAN 2021 Performance Management | Mixed

{ "label": "Original source transcript — review required", "content": "QUESTION 1 \r\n \r\n The Managing Director of NTAMS Manufacturing Company Limited located in Lagos \r\n attended a seminar titled “optimising scarce resource utility in a manufacturing setting \r\n with particular reference to linear programming”. On his return after three days of the \r\n programme, he called for a management meeting to discuss his experiences at the \r\n seminar in view of the board decision to produce two major products in the coming \r\n years. \r\n \r\n The following information are made from the work of a research team earlier conducted \r\n by a group of external research experts. \r\n \r\n The expected products are “Biggi” and “smalli”. The expected costs statistics are as \r\n follows: \r\n Biggis N Smallis N \r\n Material costs (5kg @ N50\/kg) 250 (3kg @ N50\/kg) 150 \r\n Labour costs: \r\n Machining time (4 hours@ N15\/Hr) 60 (2hours @ N15\/Hr) 30 \r\n Other Processing Time (4hours @ N10\/Hr) 40 (5 hours @ N10\/Hr) 50 \r\n \r\n The company expects to maintain a pricing policy that is hinged on total cost of \r\n production plus 20% mark up on cost. The Company further expects to incur annual \r\n period overhead of N10,000,000 with normal production expectation of 200,000 units \r\n of Biggis and 100,000 units of Smallis absorbing the overhead on 3 to 2 basis \r\n respectively. \r\n \r\n It is expected that in the forth coming year, the company will have the following \r\n resources available \r\n 56 \r\n \r\n\n\n[PDF PAGE 2]\n Materials 1,800,000kgs \r\n Machine time 800,000 hours \r\n Other Process time 1,400,000 hours \r\n \r\n You are required: \r\n As the management accountant \r\n a. Explain briefly the concept of linear programming and usefulness of the model \r\n (5 Marks) \r\n b. Compute the Prices that will be adopted by the company for the two products using \r\n the company pricing policy (5 Marks) \r\n \r\n c. Advise the company on the output that needs to be produced to maximise its total \r\n profit, supporting your answer with full financial analysis (10 Marks) \r\n \r\n d. i. Explain the meaning of „shadow prices‟ and comment on the \r\n usefulness of it and its limitation (5 Marks) \r\n ii. Calculate the shadow prices of the constraints (7 Marks) \r\n e. Assuming the company‟s position in (c) is maintained for three years with an \r\n investment cost of N45,000,000 on the day of the commencement of \r\n manufacturing business, using a cost of capital of 15%: \r\n i. Can this venture be justified for the period? (4 Marks) \r\n ii. What is the breakeven discount factor for this project? (4 Marks) \r\n (Total 40 Marks)\n[VISUAL TABLES FOR QUESTION 1 FROM PDF PAGE 1; VERIFY AGAINST ORIGINAL]\n| | Biggis | Smallis |\n|----------------|--------|---------|\n| Material costs | 250 | 150 |\n| Labour costs: | | |\n| Machining time | 60 | 30 |\n| Other Processing Time | 40 | 50 |\n[END VISUAL TABLES]\n" }

{ "label": "Supporting information 1", "content": "| | Product A | Product B | Product C |\n|-------------|-----------|-----------|-----------|\n| Direct materials (50k per kg) | 2.00 | 3.50 | 7.00 |\n| Direct labour | 3.00 | 5.00 | 7.40 |\n| Variable overhead | 1.50 | 2.50 | 3.70 |\n| | 6.50 | 11.00 | 18.10 |" }

{ "label": "Supporting information 2", "content": "| | Forecast 1 | Forecast 2 |\n|----------|-------------------|-------------------|\n| | Price | Quantity | Price | Quantity |\n| Product A| 10.00 | 500 | 15.00 | 350 |\n| Product B| 20.00 | 800 | 25.00 | 700 |\n| Product C| 30.00 | 2,200 | 40.00 | 1,000 |" }

{ "label": "Supporting information", "content": "| Year | Quarter | Trend point | Sales (Cartons) |\n|------|---------|-------------|-----------------|\n| 2016 | 3rd | 1 | 10,000 |\n| 2016 | 4th | 2 | 10,760 |\n| 2017 | 1st | 3 | 10,920 |\n| 2017 | 2nd | 4 | 11,000 |\n| 2017 | 3rd | 5 | 11,050 |\n| 2017 | 4th | 6 | 11,080 |\n| 2018 | 1st | 7 | 11,085 |\n| 2018 | 2nd | 8 | 11,095 |\n| 2018 | 3rd | 9 | 11,120 |\n| 2018 | 4th | 10 | 11,130 |" }

{ "label": "Supporting information", "content": "| Results of last five periods' observations: |\n|-------------------------------------------|\n| Σy = 555.10 |\n| Σx² = 330 |\n| Σy² = 61,627.40 |\n| Σxy = 4,442.15 |" }

{ "label": "Supporting information", "content": "| Probability | No of pupils joining late |\n|------------|--------------------------|\n| 0.2 | 80 |\n| 0.3 | 30 |\n| 0.5 | 52 |" }