Please ensure that you write down both student ID numbers on the front cover sheet. The learning outcomes covered by this assessment are:

Please ensure that you write down both student ID numbers on the front cover sheet.
The learning outcomes covered by this assessment are:
(1) Identify purpose and scope of Management Accounting and Finance.
(2) To calculate the cost of a product or service using traditional and
Modern techniques such as Activity Based Costing.
(3) To be able to Apply techniques of resource allocation where there may
be a limiting factor
(4) To differentiate between processes that does add value and those that
Do not.
(5) To understand the purpose and scope of budgeting and control via use of variances.
(6) Identify and recommend available sources of finance to an
Organisation.
(7) Apply basic investment appraisal techniques that are available to an organisation.
Question 1. Financial Statement Analysis
Below you find the balance sheet and the income statement of Apple Inc. from 2017.
Calculate the following ratios:
(a) Current Ratio
(b) Quick Ratio
(c) Net working capital to sales ratio
(d) Gross Profit margin
(e) Operating Profit margin
(f) Total debt to assets ratio
(g) Return on assets
(h) Return on equity
and analyse the financial health of Apple Inc. by using the calculated ratios.
Briefly explain the limitations of your analysis.
Balance Sheet
Current Assets (values in 000’s)
Cash and cash equivalents $20,289,000
Short-Term Investments $53,892,000
Inventory $4,855,00
Net Receivables $35,673,000
Other Current Assets $13,936,000
Total Current Assets $128,645,000
Long-Term Assets
Long-Term Investments $194,714,000
Fixed Assets $33,783,000
Goodwill $5,717,000
Intangible Assets $2,298,000
Other Assets $10,162,000
Total Assets $375,319,000
Current Liabilites
Accounts Payable $74,793,000
Short-Term Debt/ Current Portion of Long-Term Debt $18,473,000
Other Current Liablities $7,548,000
Total Current Liabilities $100,814,000
Long-Term Debt $97,207,000
Other Liabilites $40,415,000
Deferred Liability Charges $2,836,000
Total Liabilities $241,272,000
Stock Holders Equity
Common Stocks $35,867,000
Retained Earnings $98,330,000
Other Equity (150,000 $)
Total Equity $134,047,000
Total Liabilities & Equity $375,319,000
Income Statement
Total Revenue (Sales) $229,234,000
Cost of Revenue $141,048,000
Gross Profit $88,186,000
Operating Expenses
Research and Development $11,581,000
Sales, General and Admin $15,261,000
Operating Income $61,344,000
Add’l income/expense items $2,745,000
Earnings Before Interest and Taxes $64,089,000
Interest expense $0,000,000
Earnings Before Tax $64,089,000
Income Tax $15,738,000
Net Income-Cont. Operations $48,351,000
Net Income $48,351,000
Net Income Applicable to Common Shareholders $48,351,000
Dividend for the year $2.4600,0000
Earnings per Share 9.21
Market price per share $142.60 0000
Operating Cash Flow $63,598,000
Shareholders’ Equity $134,047,000
Question 2. Budgeting
A client of your company operates a small courier service on the east region of Canada. She is keen to expand the business in the future and has just attended a seminar on the usefulness of management accounting in small companies. She is aware that management accounting is common in manufacturing industries but is unsure of its relevance to service industries such as her own courier company.
The client has asked you to write a report addressing her concerns as follows:
(a) Outline the main objectives of budgeting.
(b) Outline two areas of difference between management accounting and financial accounting.
(c) Explain the difference between fixed budgeting and flexible budgeting.
(d) Advise your client on specific uses of variances within budgetary control.
Report format and bibliography. Marks will be awarded for structure and presentation. (This includes the appropriate use of appendices, clarity of explanation and ability to summarise your findings)
Question 3. Overheads Accounting and Activity Based Costing
A company manufactures three different products.
The company has a total overheads of £400,000, which are currently allocated on a plant-wide basis using direct labour hours as the absorption base. The manager of the company is considering implementing Activity Based Costing (ABC) system and has recently identified various cost drivers and assigned costs to related activity cost pools as follows:
Activity Cost Driver Cost Pool
Material Quality Control Material Quantity 400,000 £
Product Packaging Production [units] 200,000 £
Machine Maintenance Machine Hours 400,000 £
Additional information
Products X Y Z
Production (Units) 16,000 12,000 8,000
Prime Cost [£] 52,000 48,000 24,000
Machine hours 2,000 8,000 4,000
Raw materials (kg) 80,000 16,000 40,000
Labour hours 24,000 40,000 28,000
Answer the following:
(a) Using the traditional approach to accounting for overheads, calculate the product cost per unit for each of the three products.
(b) Using the principles of Activity Based Costing, calculate the product cost per unit for each of the three products.
(c) Explain the difference in your answers to (a) and (b) and the potential implications for decision making in the company.
Question 4. Capital Investment Appraisal Techniques
A company is planning to purchase a new machine to fulfill its future production plans. They have details of two similar machines, from which they will purchase one.
The “Premier“ model costs £120,000, and the “Standard“ model costs £100,000. Both have to be paid immediately. Both machines have no expected scrap value at the end of their expected working lives of 4 years.
The forecast operating net cash flow before depreciation for the two machines are
1 2 3 4
Premier 20,000 80,000 40,000 20,000
Standard 40,000 40,000 40,000 40,000
The appropriate discount rate for both machines is believed to be 11%.
Calculate and explain, for both the standard and deluxe machine, which model should be bought under
(a) accounting rate of return per annum
(b) net present value using 11% and 15%.
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