- You are provided with the following information for Murray Ltd.

Total £

Sales (7,500 units) 1,575,000

Materials 450,000

Variable labour costs 225,000

Variable overheads 150,000

Fixed overheads 180,000

Profit 570,000

REQUIRED

Calculate the following figures (working to one decimal
place), in each case explaining your method and the usefulness of
your results:

a) Calculate total contribution and contribution per unit.

b) Calculate break-even point in units and pounds.

c) Calculate the margin of safety in units and percentage of
sales.

d) Calculate how many units would need to be sold to make
£235,000 profit.

e) Use contribution per unit to calculate how much profit
would be made if 8,500 units were sold.

(2 marks for each part for calculation and 2 marks for each
part for comments. About 250 words, total 20 marks)

- As marketing manager for Jockuvich Ltd you have been asked to
devise and evaluate a marketing campaign for a new product. You
have identified two possible projects, both of which would run for
four years, and now need to prepare a presentation for the board of
directors. The company’s cost of capital is 8% and payback is
normally required within three years.

The following figures have been identified:

Project A

Year 0

£000 Year 1

£000 Year 2

£000 Year 3

£000 Year 4

£000

Initial investment 360

Net Cash flow 180 120 80 40

Project B

Year 0

£000 Year 1

£000 Year 2

£000 Year 3

£000 Year 4

£000

Initial investment 380

Net Cash flow 200 140 60 40

REQUIRED

a) Calculate payback and net present value for each option.
You should work in £000 to 2 decimal places. Make a recommendation
as to which of the two options should be selected. (20 marks)

b) Evaluate the advantages and disadvantages of the
investment appraisal techniques used. (About 250 words, 10
marks).

- Explain the importance and practice of working capital management (25 marks, about 500 words)
- Incremental budgeting is the best method of applying budgets. Discuss (25 marks, about 500 words).

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