Tax adjustment – Knowsia

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

Question

a) i)
Moree Engineers LTD (MEL) makes electrically-driven disability scooters aimed at elderly and/or disabled customers. At present, wheels and tyres are bought from external suppliers but all other parts are manufactured in-house. The scooters have a strong reputation due mainly to innovative designs, special power units that can be recharged at home and seats that enable easy access for a wide range of disabilities. MEL also sells power units to other firms.
Current monthly costs are as follows:

	Seating Department	Power Unit Department
Costs	GH¢	GH¢
Direct Materials	9,300	4,140
Direct Labour	12,600	9,450
Apportioned overheads	26,700	17,200
	48,600	30,790
Production level	60 units	90 units

The power unit department currently produces 90 units a month, 60 units are used in MEL’s own scooters while 30 units are sold externally at GH¢376 each.
A contract has been won to supply an additional 10 scooters per month. However, the directors are considering how best to meet the additional demand.
Sufficient capacity exists for the company to increase its monthly production to 70 scooters, except that making an extra 10 seating assemblies would require reallocation of labour and other resources from the power unit to the seating department. This would cut power unit output by 20 units per month.
The alternative course would be to buy 10 seating assemblies from an outside supplier and fit the 10 power units from the present production of 90 units. The cheapest quote for seating assemblies is GH¢610 per assembly.

Required:
Based on the figures given, show whether Moree Engineers LTD should make or buy the extra seats.

a) ii) Discuss FOUR other factors that should be considered before a final decision is taken to make or to buy the extra seats.

b) i). Bambo LTD produces three medical products namely, gloves, bandages and syringes. The budgeted sales in the coming year for the three products is GH¢4,530,000. The company accordingly projected GH¢750,000 post-tax profit on the three products for the period.
Detailed budgeted Cost and sales data for the coming year are as follows:

	Gloves	Bandages	Syringes
Sales Volume (%)	40%	25%	35%
Variable cost to Sales ratio	60%	67.5%	54.5%

The fixed cost for Bambo LTD amounted to GH¢1,330,000.
Other information:
Corporate tax rate is 25%

Required:
Calculate margin of safety in percentage (%) terms.

b) ii) Calculate post-tax revenue to achieve the projected profit.

Answer

Find Related Questions by Tags, levels, etc.

Tags: CVP Analysis, Multi-product, Post-tax revenue, Profit Calculation, Tax adjustment
Level: Level 2

Topic: Cost-Volume-Profit (CVP) Analysis
Series: MAR 2025

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

Question

Raposa Nigeria Limited, a company located in Sambisa Forest, Kutunwegi State of Nigeria, commenced operations on November 1, 2017. The accounting year-end was September 30. Due to government policy restricting rice importation, the business’s going concern was threatened, leading the Board of Directors to decide to cease operations on December 31, 2022.

The adjusted profits for the relevant periods are as follows:

Period	Adjusted Profit (N)
Period to September 30, 2019	2,100,000
Year ended September 30, 2020	2,400,000
Year ended September 30, 2021	3,640,000
Year ended September 30, 2022	6,300,000
Period to December 31, 2022	500,000

Additional Information:

A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
N20,000 was spent to recover this debt.
An expenditure of N350,000 incurred in the 2020 assessment year was accounted for in the profit or loss but was not paid until August 2022.

Upon cessation, the revenue authority planned a back-duty investigation and informed the taxpayer accordingly. As a tax consultant, you are invited to determine the assessable profits for the relevant periods from the commencement of trade to business cessation.

Required: a. State THREE reasons why a business may cease trading. (3 Marks)
b. Compute net terminal adjusted profit. (6 Marks)
c. Compute assessable profits for all the relevant years of assessment. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profits, Back-Duty Investigation, Business Cessation, Tax adjustment, Terminal Profit
Level: Level 2

Topic: Tax Administration and Enforcement

FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation

Calculating the tax expense to be charged to the statement of profit or loss based on given tax information.

Question

A company’s tax liability at the beginning of the year was N420,000. Current tax for the year was N850,000. The tax charged for the previous year was underestimated by N14,200. During the year, a tax of N428,000 was paid by the company. How much tax should be charged to the statement of profit or loss for the year?

A. N413,800

B. N422,200

C. N835,800

D. N856,200

E. N864,200

Answer

Find Related Questions by Tags, levels, etc.

Tags: Income Tax, Profit or Loss, Tax adjustment
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2023

AT – July 2023 – L3 – Q2c – Anti-avoidance measures

Explaining the effectiveness of the Transactional Net Margin Method in combating pricing abuse.

Question

Transactional Net Margin Method under transfer pricing has proven useful in combating abuse and manipulation in the invoicing regime in the commercial world.

Required:
What makes the Transactional Net Margin Method very effective?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Anti-Avoidance, Tax adjustment, Transactional Net Margin Method, Transfer Pricing
Level: Level 3

Series: JULY 2023

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

Question

	Seating Department	Power Unit Department
Costs	GH¢	GH¢
Direct Materials	9,300	4,140
Direct Labour	12,600	9,450
Apportioned overheads	26,700	17,200
	48,600	30,790
Production level	60 units	90 units

Required:
Based on the figures given, show whether Moree Engineers LTD should make or buy the extra seats.

a) ii) Discuss FOUR other factors that should be considered before a final decision is taken to make or to buy the extra seats.

	Gloves	Bandages	Syringes
Sales Volume (%)	40%	25%	35%
Variable cost to Sales ratio	60%	67.5%	54.5%

The fixed cost for Bambo LTD amounted to GH¢1,330,000.
Other information:
Corporate tax rate is 25%

Required:
Calculate margin of safety in percentage (%) terms.

b) ii) Calculate post-tax revenue to achieve the projected profit.

Answer

Find Related Questions by Tags, levels, etc.

Tags: CVP Analysis, Multi-product, Post-tax revenue, Profit Calculation, Tax adjustment
Level: Level 2

Topic: Cost-Volume-Profit (CVP) Analysis
Series: MAR 2025

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

Question

The adjusted profits for the relevant periods are as follows:

Period	Adjusted Profit (N)
Period to September 30, 2019	2,100,000
Year ended September 30, 2020	2,400,000
Year ended September 30, 2021	3,640,000
Year ended September 30, 2022	6,300,000
Period to December 31, 2022	500,000

Additional Information:

A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
N20,000 was spent to recover this debt.
An expenditure of N350,000 incurred in the 2020 assessment year was accounted for in the profit or loss but was not paid until August 2022.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assessable Profits, Back-Duty Investigation, Business Cessation, Tax adjustment, Terminal Profit
Level: Level 2

Topic: Tax Administration and Enforcement

FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation

Calculating the tax expense to be charged to the statement of profit or loss based on given tax information.

Question

A. N413,800

B. N422,200

C. N835,800

D. N856,200

E. N864,200

Answer

Find Related Questions by Tags, levels, etc.

Tags: Income Tax, Profit or Loss, Tax adjustment
Level: Level 1

Topic: Financial Statements Preparation
Series: MAY 2023

AT – July 2023 – L3 – Q2c – Anti-avoidance measures

Explaining the effectiveness of the Transactional Net Margin Method in combating pricing abuse.

Question

Transactional Net Margin Method under transfer pricing has proven useful in combating abuse and manipulation in the invoicing regime in the commercial world.

Required:
What makes the Transactional Net Margin Method very effective?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Anti-Avoidance, Tax adjustment, Transactional Net Margin Method, Transfer Pricing
Level: Level 3

Series: JULY 2023

Question Tag: Tax adjustment

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation

Calculating the tax expense to be charged to the statement of profit or loss based on given tax information.

AT – July 2023 – L3 – Q2c – Anti-avoidance measures

Explaining the effectiveness of the Transactional Net Margin Method in combating pricing abuse.

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation

Calculating the tax expense to be charged to the statement of profit or loss based on given tax information.

AT – July 2023 – L3 – Q2c – Anti-avoidance measures

Explaining the effectiveness of the Transactional Net Margin Method in combating pricing abuse.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: Tax adjustment

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

You're reporting an error for "MA – Mar 2025 – L2 – Q5 – Decision making techniques"

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

You're reporting an error for "TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement"

FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation

Calculating the tax expense to be charged to the statement of profit or loss based on given tax information.

You're reporting an error for "FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation"

AT – July 2023 – L3 – Q2c – Anti-avoidance measures

Explaining the effectiveness of the Transactional Net Margin Method in combating pricing abuse.

You're reporting an error for "AT – July 2023 – L3 – Q2c – Anti-avoidance measures"

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

You're reporting an error for "MA – Mar 2025 – L2 – Q5 – Decision making techniques"

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

You're reporting an error for "TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement"

FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation

Calculating the tax expense to be charged to the statement of profit or loss based on given tax information.

You're reporting an error for "FA – May 2023 – L1 – SA – Q19 – Financial Statements Preparation"

AT – July 2023 – L3 – Q2c – Anti-avoidance measures

Explaining the effectiveness of the Transactional Net Margin Method in combating pricing abuse.

You're reporting an error for "AT – July 2023 – L3 – Q2c – Anti-avoidance measures"

Our offerings

Contact Info

Customer

Get In Touch

admin

Pick a Form