Assignment Question(s):
Q1. Define in Your words
- Cost Centre [0.5 mark]
- Profit Centre [0.5 mark]
- Investment Centre [0.5 mark]
Q2. Hamed Company is preparing budgets for the quarter ending June 30, 2019.
Budgeted sales in units for the next five months are:
| April | May | June | July |
| 20,000 | 50,000 | 30,000 | 25,000 |
Required:
- Prepare Sales budget for April, May & June assuming selling price per unit is SR 15.
- Prepare production budget for April, May & June if the company wishes ending inventory as 10 % of next month sales units.
Q3. Karim Corporation is considering two alternatives that are code-named A and B. Costs associated with the alternatives are listed below:
| Alternative A | Alternative B | |
| Supplies costs | SAR 33 000 | SAR 33 000 |
| Assembly costs | SAR 48 000 | SAR 51 000 |
| Power costs | SAR 32 000 | SAR 22 000 |
| Inspection costs | SAR 11 000 | SAR 27 000 |
Required:
- Which costs are relevant and which are not relevant in the choice between these two alternatives?
- What is the differential cost between the two alternatives?
Q.4 Karim Industries is a division of a major corporation. Last year the division had total sales of SAR 43,380,000, net operating income of SAR 4,828,980, and average operating assets of SAR 9,000,000. The company’s minimum required rate of return is 12%.
Required:
- What is the division’s margin?
- What is the division’s turnover?
- What is the division’s return on investment (ROI)?
Q5. Karim Corporation is considering investing in a new piece of equipment for SAR 100,000 that will provide annual cash flows of SAR 20,000 per year for seven years. Calculate the cash payback period.
