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Q3:
Select a company of your choice from FTSE 500 or similar (ensure that the company is
large and reports are readily available online) and address the following points (20
marks):
3.1 Conduct the overview of this business in general (product ranges sold, financial
summary, unique selling points, industry overview, nature of the competition and
challenges faced by the company) (5 marks)
3.2 Critically assess the company’s Sustainability or ESG (Environment,
Sustainability and Governance) report and decide whether you find the company’s
claims of sustainability convincing. Pick at least 2 claims each for Environment,
Sustainability and Governance aspects. Identify key issues in terms transparency, validity
of the claims made (green washing, social washing, cherry picking good information and
more) (10 marks).
3.3 Based on the above analysis, recommend measures to address key challenges with
current reporting practices of ESG factors from your viewpoint (5 marks).
Note: It is expected that students actively use external sources such as latest annual
report of a company, company website, academic and business articles, books, news
etc. Minimum 12 sources for this question.
Q7:
PART 1: (4 MARKS)
Inventory Historic cost
(£/unit)
Sales value
(£/unit)
Replacement
cost (£/unit)
Component A 16 14 18
Component B 15 10 16
Component C 47 15 40
Component D 35 – 50
Component A is constant use in business. We currently have 700 units of Component
A.
Component B was bought several years ago and there are 200 units in stock which
has no current use in business.
Component C was bought specifically for Project “Delta” which was abandoned and
there is no other use. We have 400 units. Its scrap value is £8 per unit.
Alternatively, it can be used as a substitute for other Component R which is currently
used by the business. It will require further processing cost of £ 4 per unit. Component
R’s purchase price is £13 per unit.
Component D is very toxic and, if it is not used for this particular job, the whole of the
inventories which is 400 units will have to be disposed of safely at a cost of £300 (i.e
to be paid for being collected).
For a New Project 1, we need 1,200 units of Component A, 800 units of Component
B, 600 of Component C and 700 units of Component D.
Calculate the total relevant cost to be included for Components A-D for this New
Project 1 and briefly explain the rationale for your choice.
PART 2: (8 MARKS)
1. Falcon Engineering Ltd is tendering for a contract that will require the use of 840 units
of Component KX. This component is not normally used by the business, however, 450
units are currently held as inventories following a cancelled order. These units cost the
business £86 each. The business has no other use for these units and so it is considering
selling them for £24 each. The current replacement cost of the units is £88 each.
What is the total relevant cost of Component KX for the purposes of the contract
tender?
2. Fury Limited is an engineering company that owns a non-working machine, which it
wants to sell. The machine needs a replacement part before it can be sold. It is possible
to buy the part for £2,550
This would take 32 hours to fit by one of the company’s engineers who is paid £35 an
hour. At present the company is very busy and all engineers are fully employed on work
forcustomers, which is charged out at £80 per hour. The company paid £14,000 to buy
the machine and without the part it could be sold for an estimated £9,200.
What is the minimum price at which the company should sell the machine with the
necessary part fitted?
3. Shark Ltd is a small specialist manufacturer of components used in the manufacture
of engines. Shark Ltd has been asked to supply 900 identical components to one of its
major customers over the next year and is deciding whether to accept the order. Each
component uses 11kg of nickel.
Shark Ltd currently has inventories of 11,000kg of nickel, which were bought at a cost of
£7 per kg. The current replacement cost of nickel is £12 per kg. Inventories of nickel have
not been used for several years. Its scrap value is £4.60 per kg. The only foreseeable
alternative use is as a substitute for zinc (in constant use) but this would involve further
processing costs of £3.1 per kg. The current cost of zinc is £9.4 per kg.
At what price should the nickel be included in calculations of the relevant costs of
accepting the order?
4. Thornbury Ltd holds the following chemicals in inventories:
V20 V40
No. of litres held 180 250
Purchase cost per unit £10 £12
Net realisable value per unit – £7
Replacement cost per unit £14 £16
The business has been asked to tender for a contract that requires 400 litres of V20 and
500 litres of V40. V20 is very toxic and, if it is not used for this particular job, the whole
of the inventories will have to be disposed of safely at a cost of £450.The business no
longer uses V40.
What is the relevant cost of the materials for the purpose of pricing the contract?
5. Dragon (Boat builders) Ltd has been asked to refit a boat for a customer. Skilled labour
costing £22 per hour will be required for the refit. The workers will have to be taken off the
production of canoes for resale for a total of 6,000 hours. The canoes are sold
for £550 each and take 15 hours of skilled labour. The material cost of each canoe is £80.
What is the relevant cost when assessing the viability of the refit contract?
6.Marine Engineers Ltd owns a cruiser yacht that is in need of repair. The cruiser yacht
was taken in lieu of payment for an unpaid bill for £7,200. The company is working to full
capacity but is considering refurbishing the yacht for resale. Workers who are paid £16
per hour will carry out the refurbishment and it is estimated that 160 hours of work is
required. The normal labour charge for customers is £70 per hour. The company believes
that the cruiser yacht could be sold for £ 5,300 in its current condition. Materials costing
£2,150 would be required to carry out the refurbishment. These materials are currently in
inventories as they are frequently used by the business.
What is the minimum resale price that the business would have to charge to justify
therefurbishment?
ONLY QUESTIONS “Q3” AND “Q7” ARE NEEDED TO BE DONE FROM THE FILES ATTACHED
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