Series: MAY 2019

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 15 Marks

CSME – May 2019 – L2 – Q7 – Corporate Culture and Strategy

Advise management trainees on the role of culture in organizations and analyze stakeholder theory with underpinning considerations.

a) In an attempt to establish the link between culture and ethics as well as between culture and social responsibility, advise a set of management trainees on:
i. The role of culture in an organization or company. (2 Marks)
ii. Outline any FOUR of the SIX inter-related elements of culture suggested by Johnson and Scholes in their idea of the cultural context of ethics. (8 Marks)

b) Since business entities operate within society, the professional accountant is required to know the theories on the responsibilities of a business entity towards the society in which it operates.
Analyse the stakeholder theory of corporate governance and advise on any TWO considerations underpinning this theory. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q7 – Corporate Culture and Strategy"

  • 15 Marks

CSME – May 2019 – L2 – Q6 – Corporate Governance

Advise on the importance of transparency and disclosure in corporate governance and explain the principles for a new board member.

The need for transparency and disclosure in financial markets is recognised in codes and statements of principles of corporate governance.

a) Advise the Board of a company on the importance of ‘Transparency and Disclosure’ in corporate governance. (5 Marks)

b) Present the principles of disclosure and communication of information in Corporate Governance in a lucid manner that will be comprehensible to a new Board member. (10 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q6 – Corporate Governance"

  • 15 Marks

CSME – May 2019 – L2 – Q5 – Corporate Strategy Formulation

Explain diversification strategy and advise Shacks Limited on factors favoring concentric diversification.

Shacks Limited is a company involved in the production of radio cassettes and photographic films. In the past two decades, the company had the greatest share of the market for these products. However, technological advancements resulting in the development of DVDs and digital photographs have greatly eroded the competitiveness of the company. To reposition Shacks Limited and make it more competitive, the management is considering concentric diversification as the strategy to pursue.

(a) Explain the term ‘diversification strategy’. (5 Marks)

(b) From the given scenario, advise the management of Shacks Limited on the key factors that indicate preference for concentric diversification strategy. (10 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q5 – Corporate Strategy Formulation"

  • 20 Marks

CSME – May 2019 – L2 – Q4 – Ethics in Business

Advise on the nature of a corporate code of ethics, reasons for developing it, and provisions for employees and customers.

Drewal and Taiwo jointly established a plastic company after a long period of economic recession. The Board of Directors is in the process of drawing out the corporate code of ethics for the company. Advise it on:
a) The nature of a corporate code of ethics. (2 Marks)
b) THREE basic reasons for developing a company’s code of ethics. (6 Marks)
c) Any FIVE general provisions that a corporate code of ethics should specify. (5 Marks)
d) FOUR provisions or statements the corporate code of ethics should have in respect of employees and any THREE in respect of customers. (7 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q4 – Ethics in Business"

  • 15 Marks

CSME – May 2019 – L2 – Q3b – Corporate Social Responsibility (CSR)

Draft CSR implementation steps and highlight the importance of sustainable development to society.

i) Draft a recommendation on the steps to be taken by a company in the implementation of a Corporate Social Responsibility (CSR) policy. (12 Marks)
ii) Present ‘Sustainable Development’ in a way that highlights its importance to society. (3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q3b – Corporate Social Responsibility (CSR)"

  • 5 Marks

CSME – May 2019 – L2 – Q3a – Risk Management and Corporate Strategy

Distinguish five types of risk that a Risk Manager is expected to oversee.

Distinguish FIVE (5) types of risk that a Risk Manager is expected to oversee.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q3a – Risk Management and Corporate Strategy"

  • 20 Marks

CSME – May 2019 – L2 – Q2 – Risk Management and Corporate Strategy

Discuss the elements of a risk management system, Board committee functions in risk management, and six categories of business risks from the Turnbull Report.

The Code of Corporate Governance in Nigeria states that “the Board of Directors may establish a Risk Management Committee to review the adequacy and effectiveness of risk management and controls at least annually and the Board has responsibility to report on the effectiveness of the controls to shareholders.”

a) In line with the requirements above, discuss the elements of a risk management system. (8 Marks)

b)
(i) Advise an executive director on the functions of the Board Committee in relation to enterprise risk management. (6 Marks)
(ii) Extract from the Turnbull Report, the six (6) categories of risk common to business. (6 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q2 – Risk Management and Corporate Strategy"

  • 30 Marks

CSME – May 2019 – L2 – Q1 – Environmental Analysis

Prepare a business environment and competitive analysis for UBC Plc's intended investment in GSM phone manufacturing using SWOT, PESTEL, Porter’s Five Forces, and Kant’s categorical imperative.

a. You have just been contracted by UBC Plc to prepare a business plan on the company’s intended investment in the manufacture of GSM phones in the country. The following is a summary of the brief given to you and your own research:

  • UBC Plc is a multinational conglomerate involved in the manufacture and distribution of computer hardware accessories, networking hardware and allied products. With experience spanning four decades in the industry, the company’s products enjoy a lion’s share of the market. As part of its diversification strategy aimed at sustaining its competitive advantage, the company intends to start the production of GSM phones, targeting the mass market in the country.
  • The company plans to control at least 40% of the low-end GSM phone market in the country in the next five years.
  • UBC Plc possesses the requisite human resources and physical facilities necessary for the successful takeoff and growth of the new venture. The company also intends to leverage its extensive distribution network for its IT products covering major cities within the West African sub-region to distribute its new GSM phones.
  • The company also has modern equipment which can easily be converted into the production of GSM phones at little cost without significantly affecting the current production levels of other products. When this is done, the equipment will be able to produce more than 5 million GSM phones per annum.
  • While the company intends to expand its production capacity radically within the first few years of manufacturing GSM phones, it is still struggling to cope with the country’s incessant electric power failure which has made the company rely almost exclusively on the use of generators to power its equipment. This constitutes the bulk of its overhead costs.
  • The firm has signed a Memorandum of Understanding with a group of reputable firms abroad, which guarantees a steady supply of all required components and inputs.
  • The current value of the annual GSM phone demand in the country is estimated at N520 billion. Estimated demand growth rate is put at 5%. There is currently no local producer, as all of the GSM phones in the market are imported. However, there is currently a large number of local firms that act as distributors to foreign producers.
  • Except for regulations aimed at ensuring that only high-quality products are manufactured, there are currently no legal restrictions on local production of GSM phones. Furthermore, to encourage manufacturing, the government offers tax holidays to all manufacturers in the first five years of operation.
  • The estimated cost per unit of GSM phones designed for the mass market in the country is put at N8,000 while the current average price stands at N10,000.

Required:
a.
(i) A business environment analysis using SWOT and PESTEL analyses. (10 Marks)
(ii) A competitive analysis using the Porter’s Five Forces Model. (15 Marks)

b. Advise on Kant’s categorical imperative. (5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CSME – May 2019 – L2 – Q1 – Environmental Analysis"

  • 15 Marks

PSAF – MAY 2019 – L2 – Q7 – Performance Measurement in the Public Sector

Compare NPV and IRR methods, state decision rules, and apply NPV to evaluate two investment projects for selection.

a. Distinguish between net present value (NPV) and internal rate of return (IRR) and state the decision rule under both criteria. (8 Marks)

b. Two projects A and B have initial capital investment of N900,000 each. The cash inflows of the two projects are as follows:

Required:
i. As a financial analyst, calculate the net present value (NPV) of the two projects given a cost of capital of 12%. (6 Marks)
ii. Based on the results obtained in (i), which of the projects should be chosen? (1 Mark)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – MAY 2019 – L2 – Q7 – Performance Measurement in the Public Sector"

  • 15 Marks

PSAF – MAY 2019 – L2 – Q5 – Performance Measurement in the Public Sector

Explain cost-benefit analysis, its evaluation methods, and justify its preference as a public project appraisal technique.

The cost-benefit analysis (CBA) has been described as the most popular technique for investment project appraisal in the public sector, especially in the developing world.

Required:

a. Describe the term cost-benefit analysis (CBA). (5 Marks)

b. Identify and explain the two methods usually adopted in the evaluation of projects under CBA. (4 Marks)

c. Justify the preference for CBA as a public project appraisal technique. (6 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – MAY 2019 – L2 – Q5 – Performance Measurement in the Public Sector"

  • 20 Marks

PSAF – MAY 2019 – L2 – Q4 – Public Procurement and Contract Management

Discuss bidding documents, principles of public procurement, and methods for special and emergency procurement as outlined in the Public Procurement Act 2007.

An anonymous group believed to be members of staff of a Reserve Centre wrote a petition to the Economic and Financial Crimes Commission (EFCC) against Mr. Lagbaja Temedu, the chief executive officer (CEO) of the Maximum Food Reserve Storage Centre. He was alleged to have violated the procurement rules in the award of contract to X-Bar Limited for the supply of twenty (20) SUV vehicles for N210million to his department. On getting hint of the petition, the chief executive officer called a meeting of senior members of staff and educated them on contracts awarded by the department. He said that the contract was awarded by a tender‟s board of the department of which he was the chairman. As for contracts awarded, including the present contract, invitations were published in national newspapers inviting contractors to tender for such supplies. Provision to procure the vehicles was made in the budget approved for the year. He further stated that all laid down procedures had been followed in the award of and payment for this contract.

You are required to:

a. State five documents that a contractor should possess and forward in bidding for a contract. (5 Marks)

b. Identify five basic fundamental principles of procurement in the award of contract in a government department in accordance with Public Procurement Act 2007. (5 Marks)

c. Explain briefly the basic steps to follow as outlined in the Public Procurement Act 2007 for: i. Special and restricted methods of procurement (6 Marks) ii. Emergency procurement (4 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – MAY 2019 – L2 – Q4 – Public Procurement and Contract Management"

  • 20 Marks

PSAF – MAY 2019 – L2 – Q3 – Accounting for Government Assets and Liabilities

Record transactions and prepare financial statements for a college loan fund, including ledger accounts, trial balance, and statement of changes.

The following balances were extracted from the ledger of YOHAFI College of Technology in respect of Senator Momeed Memorial Loan Fund (MMLF) as at31 December 2017

The following transactions took place in 2018:

(i.) Investment costing N30,800,000 were sold for N31,900,000; (ii.) N30,700,000 cash was received as the repayment of loans; (iii.) N2,500,000 was received from the family of a former student in full payment of a loan which had earlier been written off; (iv) N41,800,000 was given out as loan during the year; (v.) A loan of N750,000 was written-off as uncollectible; and (vi.) A sum of N3,000,000 cash was received as a gift from a former borrower.

You are required to:

a. Open necessary ledger accounts to record above transactions. (13 Marks)

b. Extract a trial balance as at the end of the period. (4 Marks)

c. Prepare a statement of changes in the fund balance. (3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – MAY 2019 – L2 – Q3 – Accounting for Government Assets and Liabilities"

  • 20 Marks

PSAF – May 2019 – L2 – Q2 – Pension Accounting in the Public Sector

Discuss the objectives of the Pension Reform Act and roles of pension administrators and custodians.

In compliance with the extant directive of the Federal Government that all retiring employees should be documented in the year prior to that in which they are to retire, Hajia Muslima Ladipo applied to be registered in 2016.

She was employed as a junior officer on Grade Level 04 in the Ministry of Goods Exchange & Exhibition on July 1, 1981. She rose through the rank and was finally promoted to chief exhibition officer on salary grade level 14 on January 1, 2016.

The result and letter of her promotion were released in mid-2016. For documentation, national officers are posted to the nearest cities to their places of work/residence for the exercise. Hajia was therefore documented in Ibadan being the nearest centre to Lagos where her office was situated.

Retiring officers are to produce evidence of employment and retirement at the documentation centre and also be present physically for a biometric process.

Hajia retired from service with effect from June 30, 2017. She complained that she had not received any gratuity and her name was not in the pension register.

Required:
a. Identify four main objectives of the Pension Reform Act 2014, as it relates to employees. (8 Marks)

b. Explain three roles/functions of each of the Pension Fund Administrators and the Pension Fund Custodians. (6 Marks)

c. State whether any of the objectives of the Pension Reform Act has been breached in the case of Hajia Muslima Ladipo. (2 Marks)

d. Identify four documents required for proper documentation of a retiring officer under the guidelines issued by the Federal Government. (2 Marks)

e. Identify two categories of officers specifically exempted by Section 5 of the Pension Reform Act. (2 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – May 2019 – L2 – Q2 – Pension Accounting in the Public Sector"

  • 30 Marks

PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements

Analyze financial ratios for a hotel transitioning to a public-private partnership.

National Hotel, an investment unit of the Ministry of Tourism and Environment, is fifty (50) years old. It has recently been restructured from a wholly-owned government hotel to a private/government partnership. However, being the largest hotel in the country and for security reasons, the government still retains 55% of its equity.

The board of directors has decided to reposition the hotel for better performance, needing external finances amounting to N180 million, consisting of a N100 million loan over ten years and an N80 million bank overdraft. All necessary supports have been provided by the government and private equity holders.

The summarized results for the last two financial years are as follows:

Income Statement

Year ended 30 September 2013 (N’000) 2014 (N’000)
Turnover 200,000 240,000
Cost of Sales (150,000) (184,000)
Gross Profit 50,000 56,000
Overhead Expenses (10,000) (12,000)
Profit before Tax 40,000 44,000

Statement of Financial Position

You have been engaged as a consultant to assist the hotel in preparing necessary documents and reports to achieve its objectives.

Required:
a. Calculate six relevant accounting ratios covering each of the two years: 2013 and 2014 in a tabular form. (12 Marks)

b. Interpret the result of the ratios calculated in (a) above to show the financial performance and position of the entity. (12 Marks)

c. Highlight four unfavorable factors about the hotel as revealed by your interpretation. (6 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PSAF – May 2019 – L2 – Q1 – Public Sector Financial Statements"

  • 15 Marks

PM – May 2019 – L2 – Q7 – Pricing Decisions

Evaluates various pricing methods for a new product and calculates prices based on different strategies.

Tetpack Nigerian Limited (TNL) produces various types of packaging products for the food industry. TNL has just introduced a new type of pack, and its marketing manager is considering how to penetrate the market with the pack. The following pricing strategies have been suggested:

i. Market skimming price
ii. Market penetration price
iii. Full cost plus price
iv. Return on investment price
v. Marginal cost plus price

The management accountant has provided the following data about the pack:

  • Non-current assets needed for the production of the pack: N2,000,000
  • Working capital requirements: N400,000
  • Expected annual sales volume: 40,000 units
  • Variable production costs: N60 per unit
  • Fixed production costs: N300,000 each year
  • Annual non-production costs: N100,000
  • Markup:
    • Full cost plus price: 25%
    • Marginal cost plus price: 40%
    • Target return on investment: 10% per year

Required:
a. Discuss the above pricing methods and advise when each could be used. (10 Marks)

b. Calculate what the price of the pack should be if its price is based on:
i. Full cost plus pricing (1½ Marks)
ii. Marginal cost plus pricing (1½ Marks)
iii. Return on investment pricing (2 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2019 – L2 – Q7 – Pricing Decisions"

  • 15 Marks

PM – May 2019 – L2 – Q6 – Strategic Management Accounting

Discusses the essential qualities needed for management accounting information to be useful for decision-making.

“The purpose of management accounting is to provide relevant and reliable information so that managers can make well-informed decisions. The value of management accounting, therefore, depends on the quality of the information provided and whether this information helps managers to make better decisions.” Therefore, before management accounting information can be useful to managers, it must possess some qualities.

Required:
Discuss the essential qualities of good management accounting information.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2019 – L2 – Q6 – Strategic Management Accounting"

  • 15 Marks

PM – May 2019 – L2 – Q5 – Transfer Pricing

Profitability analysis for two divisions, including transfer pricing and external supplier impacts.

TK is a company that produces toy television sets targeting children of the elite. The company has two divisions, Division S and Division B. Division S manufactures components for the televisions and sells components to Division B and to external customers. Division B uses five of the components in each of the toy television sets that it manufactures and sells television sets directly to external customers.

Division S
Budgeted variable manufacturing cost per component (N):

  • Direct material: 140
  • Direct labour: 180
  • Variable overhead: 120

Additional Information:

  • Fixed costs: N5,600,000
  • Production capacity: 175,000 components
  • External demand: 150,000 components
  • Potential demand from Division B: 80,000 components
  • Anticipated external market price for a component: N500

Division B

  • Sales price: N4,500
  • Budgeted variable manufacturing cost per television (N):
    • Direct material: 400
    • Direct labour: 620
    • Variable overhead: 160

Each toy television set produced needs five components. Fixed costs are budgeted to be N14,600,000 for next year. Annual sales of the toy television sets are expected to be 16,000 units.

Transfer Pricing Policy:

  • Transfer prices are set at opportunity cost.
  • Division S must satisfy the demand of Division B before selling components externally.
  • Division B is allowed to purchase components from Division S or from external suppliers.

Required:
a. Assuming that Division B buys all the components it requires from Division S:
Prepare a profit statement for each division detailing sales and costs, showing external sales and internal company transfers separately where appropriate. (6 Marks)

b. A specialist external supplier has approached Division B and offered to supply 80,000 components at a price of N420 each. The components fulfil the same function as those manufactured by Division S. The manager of Division B has accepted the offer and agreed to buy all the components it requires from this supplier:
i. Produce a revised profit statement for each division and for the total TK company.
ii. Division S has just received an enquiry from a new customer for the production of 25,000 components. The manager of Division S requires a total profit for the year for the division of N4,500,000.

  • Calculate the minimum price per component to sell the 25,000 components to the new customer that would enable the manager of Division S to meet the profit target. (4 Marks)

Note: This order will have no effect on the divisional fixed costs and no impact on the 150,000 components Division S sells to its existing external customers at N500 per component. Division B will continue to purchase the 80,000 components it requires from the specialist external supplier.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2019 – L2 – Q5 – Transfer Pricing"

  • 2 Marks

BMIS – Nov 2019 – L1 – Q2bi – Extrinsic Rewards

Explain extrinsic rewards in relation to employee motivation.

Explain the following in relation to the motivation of employees:
i) Extrinsic rewards (2 Marks)

 

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "BMIS – Nov 2019 – L1 – Q2bi – Extrinsic Rewards"

  • 20 Marks

PM – May 2019 – L2 – Q4 – Balanced Scorecard

Analyze BOK's financial performance and evaluate its balanced scorecard metrics for decision-making.

BOK is an autonomous division of Large Plc. BOK carries out large engineering jobs to individual customer specifications. The manager of the division will retire within next year, and Henry Femi, the CEO of Large Plc., has used a recruitment agency to identify a suitable successor, Mary Tako. Henry believes that Mary has excellent relevant experience in another company in the country and has offered her a 4-year contract position at BOK. The terms of the offer include a generous compensation package linked to the profit earned by BOK during the 4 years. Henry believes that BOK has been a very successful division and that a high-calibre manager, such as Mary, has great potential to continue to expand that success. In order to impress Mary on the recent success of BOK, Henry provided her with the following comparative financial data about the recent performance of the division (Table 1):

Table 1: Comparative Financial Data

2018 2017
Turnover 27,000,000 26,000,000
Net profit 5,600,000 5,200,000
Bad debts 132,000 130,000

It can be assumed that the inflation rate in each of the two years was 3% per annum.

Mary indicated that she would need some additional information before deciding on whether to accept the employment offer. The following is an extract from a balanced scorecard (Table 2) which was prepared at Mary’s request:

Table 2: Balanced Scorecard Data

Theme 2018 2017
Customer theme:
Number of customers 120 100
Average revenue per customer (₦) 225,000 260,000
Market share 9% 8%
Internal process theme:
Percentage of jobs completed with errors 3% 4%
Average job completion time (days) 5.5 7
Learning & growth themes:
Staff turnover rate 10% 5%
Training expenditure (₦) 1,000,000 1,000,000

Required:

a. i. Analyze the change in the financial performance of BOK between 2017 and 2018 using the information provided in Table 1. (3 Marks)

ii. Evaluate the change in the performance of BOK between 2017 and 2018, using the information contained in the balanced scorecard (Table 2). In addition, discuss the significant reasons why this analysis may be more relevant than your answer to part (ai) in helping Mary to decide whether or not to accept the offer. (13 Marks)

b. Mary has indicated that she would only be willing to accept the employment offer if she can be convinced about the potential for growth in the division. As the outgoing manager, you are required to provide her with an analysis of BOK’s competitive position and growth prospects based on the information provided. (4 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2019 – L2 – Q4 – Balanced Scorecard"

  • 20 Marks

PM – May 2019 – L2 – Q3 – Divisional Performance Measurement

Calculate and analyze ROCE for Peterpan's subsidiaries and discuss performance excluding intra-group transactions.

Peterpan Nigeria Limited is a holding company with two subsidiaries manufacturing similar products in different regions of the country. These are Peterpan (Eastern) Nigeria Limited and Peterpan (Western) Nigeria Limited. Return on capital employed (ROCE) is used as the group’s performance measure and is also used to determine divisional managers’ bonuses. The results of the two companies and of the holding company for the year ended 31 December, 2018, and the statement of financial position as at that date are as follows:

Item Western (₦000) Eastern (₦000) Peterpan (₦000)
Revenue 400,000 440,000 792,941
Cost of sales (340,000) (330,000) (630,000)
Gross profit 60,000 110,000 162,941
Administrative costs (20,000) (60,000) (80,000)
Interest payable (20,000) – (20,000)
Pre-tax profit 20,000 60,000 62,941

Non-current assets:

Item
Original cost 2,000,000 300,000 3,000,000
Accumulated depreciation (1,180,800) (320,000) (2,213,568)
Net book value 819,200 120,000 786,432
Net current assets 100,000 120,000 906,432
Total assets 919,200 906,432 1,825,632
Non-current borrowings 300,000 – 300,000
Shareholders’ fund 619,200 786,432 1,525,632
Capital employed 919,200 906,432 1,825,632

Additional Information:

  1. During the year, Eastern Limited sold goods to Western Limited that had cost Eastern Limited ₦20,000,000. The transactions relating to this sale have been eliminated from the holding company’s results stated above.
  2. Both companies use the same depreciation policy of 20% per annum on a reducing balance basis for their non-current assets. Neither company made any additions or disposals of non-current assets during the year.
  3. During the last board meeting of the holding company, it was decided that the holding company should impose a transfer pricing policy for transfers between the two subsidiaries.

Required:

a. Calculate the return on capital employed (ROCE) ratios for each of the two subsidiaries for the year and analyze these into their secondary ratio components of: i. Pre-Tax Profit % ii. Asset Turnover (3 Marks)

b. i. Calculate Eastern Limited’s gross profit margin on its internal sales and compare this to the gross profit margin on its external sales. (2 Marks)
ii. Discuss the performance of the two subsidiaries excluding the effects of the intra-group transactions. (9 Marks)

c. Explain THREE factors that management should consider when setting the transfer pricing policy. (6 Marks)
(Total 20 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "PM – May 2019 – L2 – Q3 – Divisional Performance Measurement"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@knowsia.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan