Student Doubts Forum

Fall 24/25 Exam

Fall 24/25 Exam

by Inês Rangem Ventura Simões Rosa -
Number of replies: 3

Questions for the Fall 24/25 Exam:

  • Could you please explain the step-by-step solution for exercises 2.2 and 2.3?
  • 3.1. When calculating the break-even point (BEP) in euros, why are the fixed costs calculated the way they are in the solution provided?
  • 6.1 Could you explain the calculations that lead to the value of the Selling, General and Administrative (SG&A) costs for the second semester?
  • 6.2 When preparing the financial budget for the second semester, what is the correct order of thinking we should follow? How do we get the closing cash value?

    Thank you! :)

In reply to Inês Rangem Ventura Simões Rosa

Re: Fall 24/25 Exam

by Pedro Pinto da Silva Perdigão -

Hello Inês,

  • In 2.2, if 750 units of DM were initially budgeted, first you need to find the quantity in the flexible budget - 750 * (1+18%) = 885 units. Knowing that the efficiency variance is - 1 900€, you can find that the actual quantity was indeed 980 units. Then you just divide the actual value by the actual units to find the price
  • In 2.3, you just need to see that in the Flexible Budget you would have 7 080 € of Direct Labor (6000 * (1+18%). Then, knowing the actual value was 10 800€ and that the Labor efficiency variance was - 1 920€, the remaining will be due to labor price variance
  • In 3.1, the solution has a mistake, it should be 34 560€ (Non-Manufacturing Fixed costs) and not 55 440€.
  • In 6.1 you want to find the value in the cash budget of SG&A for the 2nd semester. You know that the annual cost of SG&A (from the Budgeted P&L) is 26 500€, that SG&A are paid in the month they occur, but that from the 26 500€, 5 500€ are depreciation, this is, they do not reflect cash flow. Therefore, on the 2nd semester you'll have in you cash budget (26 500 - 5 500) / 2
  • In 6.2, it is worth noting that the 5 000 € of closing cash is only the minimum amount required, you can end up with more. In the 2nd semester you would have:
Sources

- Opening Cash = 22 510 €
- Positive Cash Balance = 29 250 €

Uses

- Closing Cash = 5 000 €
- LT Loan Payment = 124 000 € (principal + interest)

At this point, you have needs of funds of 77 240 € and the company can only borrow funds at multiples of 1 000. 77 000€ would not be enough, so they need a ST Loan of 78 000 €. The remaining excess funds (78 000 € - 77 240 €) will be excess cash and add up to the closing cash - so, closing cash will be 5 760 €

Good study!
In reply to Pedro Pinto da Silva Perdigão

Re: Fall 24/25 Exam

by Iris Francisco Vieira -
Good afternoon, how can i calculate the interest (24000)? Thanks for your attention.