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FMH810S- FINANCIAL MANAGEMENT HOSPITALITY AND TOURISM- 1ST OPP- JUNE 2023 |
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nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTY OF COMMERCE, HUMAN SCIENCEAND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING & FINANCE
QUALIFICATION: BACHELOR OF HOSPITALITY MANAGEMENT (HONOURS)
QUALIFICATION CODE: 08BHTH
COURSE CODE: FMH810S
LEVEL: 8
COURSE NAME: FINANCIAL MANAGEMENT:
HOSPITALITY AND TOURISM
SESSION: JUNE 2023
DURATION: 3 HOURS
PAPER: PRACTICAL AND THEORY
MARKS: 100
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINERS:
H Namwandi
MODERATOR: A Okafor
INSTRUCTIONS
• This question paper is made up of four (4) questions.
• Start each question on a new page.
• Answer All the questions in blue or black ink only.
• You are advised to pay due attention to expression and presentation. Failure to do so will
cost you marks.
• Start each question on a new page in your answer booklet and show all your workings.
• Questions relating to this paper may be raised in the initial 30 minutes after the start of
the paper. Thereafter, candidates must use their initiative to deal with any perceived error
or ambiguities and any assumption made by the candidate should be clearly stated.
PERMISSIBLE MATERIALS
Non-programmable calculator
THIS QUESTION PAPER CONSISTS OF 5 PAGES (Including this front page)
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Question 1
(27 Marks)
Chef Club Ltd is a company that produces cooking utensils. The management of Master Chef
Ltd made a decision to venture into manufacturing a special cast iron pan which will result in
the improvement of the overall profit of the organisation. The cast iron pan is very competitive
and subject to frequent changes.
The finance team at Chef Club Ltd prepare monthly budgets as part of their planning and
management control process.
The data for the forthcoming new budget period related to the Casserole pot is as follows:
The variable cost of producing a cast iron pan is N$21.
The planned selling price of a cast iron pan is N$45 and at this selling price, the demand for
pots is expected to be 125 000 pans. Information from the marketing division at Chef Club Ltd
suggests that for every N$3 increase in the selling price, the customer demand would reduce
by 10 000 pots and that for every N$3 decrease in the selling price, the customer demand
would increase by 10 000 pans.
An additional cost of producing the product in relation to its output is as follows:
Annual output (units)
115 000
140 000
155 000
Overheads cost (N$)
950 000
950 000
950 000
Administrative costs are as follows:
Selling cost
N$525 000
Advertising cost
N$660 000
REQUIRED:
(a) Advise the management of Chef Club Ltd on the optimum selling price
that should be charged to customers in order to maximise orofit.
(b) Prepare a statement of profiUloss that show the total maximum profit that
Master Chef Ltd will generate from the selling price you calculated in part
(a).
(c) List four (4) limitations of using the profit maximization model.
(d) Explain what are price differentiation and premium pricing.
Total
Show all vour workim1sl
Marks
(12)
(9)
(4)
(2)
27
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Question 2
(30 marks)
NUST Ltd specialises in the importation and sales of equipment for children's indoor play
centres. The company was set up by Mr. Sintentu. Mr Sintentu has asked you to assist him in
managing his cash balance over the next three months. You have been provided with the
following information:
Budgeted statement of profit or loss for three months ended 31 December 2023.
Sales: Credit
Cash
Total
Less: Cost of goods sold
Opening inventory
Add: Purchases - (all credit)
Less: Closing inventory
Gross profit
Discount received
Less: Expenses
Sundry expenses
Wages & salaries
Depreciation
Bad debts
Net profit
October
N$
138 000
36 000
174 000
(116000)
180 000
70 000
250 000
134 000
58 000
1 500
(43 500)
10 000
29 000
2 000
2 500
16 000
November
N$
140 000
40 000
180 000
(114 000)
134 000
85 000
219 000
105 000
66 000
1 100
(48 400)
12 000
32 000
2 000
2400
18 700
December
N$
185 000
65 000
250 000
(130 000)
105 000
55 000
160 000
30 000
120 000
2 400
(54 800)
14 000
36 000
2 000
2 800
67 600
Additional information:
1. It is expected that trade debtors will settle their accounts as follows:
20% during the month of sales
70% during the month after the month of sales
8% during the second month after the month of sales
The remaining 2% is written off as bad debts
2. Purchases will be paid during the month following the month of purchases.
3. Credit purchases for August 2023 are N$75 000 and September 2023 amounts to
N$60 000.
4. Total credit sales for September 2015 are N$120 000.
5. Sundry expenses are paid for in cash in the month incurred. The amounts for sundry
expenses were obtained after deducting a prepayment of N$ 1000 each month.
6. Wages & salaries are paid for in the month incurred. Wages for each month included
accruals of N$4 000.
7. An income tax of N$40 000 will be paid in November.
8. The closing balance for September 2023 amounts to N$8 000.
REQUIRED:
(a) Prepare a cash budget for NUST Ltd for the period of October, November
and December 2023.
(b) List three (3) purposes of why an organisation needs to budget.
Marks
(27)
(3)
Show all vour workinas!
Total
30
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Question 3
(13 Marks)
Gondwana Collection Namibia, is a hub of travel and safari in Namibia and also offers rental
cars and accommodation (hotel, lodges, campsite and self-catering). The company went
through a major strategic restructuring and has recently appointed new management to
implement the revised strategy. One of the key responsibilities of the new management is to
implement a new management control system (MCS) within the organisation specifically
looking at the performance of all employees in the area of hospitality. The management of
Gondwana asked you to advise them on certain key areas that are needed to be done to
successfully ensure that the management control system that will be designed and
implemented works as intended. Therefore, the management requires an adviser to assist
them in the implementation of a good Management Control System (MCS).
REQUIRED:
(a) Explain what is task control.
(b) Give four key differences between strategy formulation and management
control.
Total
Marks
(3)
(10)
15
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Question 4
(30 marks)
Midgard Holdings is considering two projects. The projects are similar in nature and are
expected both operate for four years. Due to the unavailability of funds to undertake both of
them, only one project can be accepted. The cost of capital is 12%.
The following information is available:
Initial investment
Year 1
Year2
Year3
Year4
Estimated scrap value at the end of year 4
Profit for each project
Project A
Project B
N$000
N$000
46 000
46 000
6 500
4 500
3 500
2 500
13 500
4 500
(1 500)
14 500
4 000
4 000
Depreciation is charged on a straight-line basis.
REQUIRED:
Calculate the following for both projects:
Marks
(a) The payback period (answer rounded off to one decimal place)
(8)
(b) The net present value (NPV).
(8)
(c) The accounting rate of return (ARR) on the initial investment (round off
(4)
vour answer to one decimal place).
(d) If the two projects are mutually exclusive, which project should be chosen
(4)
and why?
(e) List three advantages of the payback period and three advantages of
(6)
accounting rate of return methods of capital aooraisal.
Show all your workinQs!
Total
30
THE END
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PresentValueTable
Present value of 1 i.e. (1 + r)-n
Where
r = discount rate
n = number of periods until payment
Discountrate (r)
Periods
(n)
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1 0·990 0·980 0·971 0·962 0·952 0·943 0·935 0·926 0·917 0·909
1
2 0·980 0·961 0·943 0·925 0·907 0·890 0·873 0·857 0·842 0·826
2
3 0·971 0·942 0·915 0·889 0·864 0·840 0·816 0·794 0·772 0·751
3
4 0·961 0·924 0·888 0·855 0·823 0·792 0·763 0·735 0·708 0·683
4
5 0·951 0·906 0·863 0·822 0·784 0·747 0·713 0·681 0·650 0·621
5
6 0·942 0·888 0·837 0·790 0·746 0·705 0·666 0·630 0·596 0·564
6
7 0·933 0·871 0·813 0·760 0·711 0·665 0·623 0·583 0·547 0·513
7
8 0·923 0·853 0·789 0·731 0·677 0·627 0·582 0·540 0·502 0-467
8
9 0·914 0·837 0·766 0·703 0·645 0·592 0·544 0·500 0-460 0-424
9
10 0·905 0·820 0·744 0·676 0·614 0·558 0·508 0-463 0-422 0·386 10
11 0·896 0·804 0·722 0·650 0·585 0·527 0-475 0-429 0·388 0·350 11
12 0·887 0·788 0·701 0·625 0·557 0·497 0-444 0·397 0·356 0·319 12
13 0·879 0·773 0·681 0·601 0·530 0·469 0-415 0·368 0·326 0·290 13
14 0·870 0·758 0·661 0·577 0·505 0-442 0·388 0·340 0·299 0·263 14
15 0·861 0·743 0·642 0·555 0-481 0-417 0·362 0·315 0·275 0·239 15
(n)
11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0·901 0·893 0·885 0·877 0·870 0·862 0·855 0·847 0·840 0·833
1
2 0·812 0·797 0·783 0·769 0·756 0·743 0·731 0·718 0·706 0·694
2
3 0·731 0·712 0·693 0·675 0·658 0·641 0·624 0·609 0·593 0·579
3
4 0·659 0·636 0·613 0·592 0·572 0·552 0·534 0·516 0·499 0·482
4
5 0·593 0·567 0·543 0·519 0-497 0-476 0-456 0-437 0-419 0-402
5
6 0·535 0·507 0·480 0-456 0·432 0·410 0·390 0·370 0·352 0·335
6
7 0-482 0·452 0-425 0·400 0·376 0·354 0·333 0·314 0·296 0·279
7
8 0·434 0-404 0·376 0·351 0·327 0·305 0·285 0·266 0·249 0·233
8
9 0·391 0·361 0·333 0·308 0·284 0·263 0·243 0·225 0·209 0·194
9
10 0·352 0·322 0·295 0·270 0·247 0·227 0·208 0·191 0·176 0·162 10
11 0·317 0·287 0·261 0·237 0·215 0·195 0·178 0·162 0·148 0·135 11
12 0·286 0·257 0·231 0·208 0·187 0·168 0·152 0·137 0·124 0·112 12
13 0·258 0·229 0·204 0·182 0·163 0·145 0·130 0·116 0·104 0·093 13
14 0·232 0·205 0·181 0·160 0·141 0·125 0·111 0·099 0·088 0·078 14
15 0·209 0·183 0·160 0·140 0·123 0·108 0·095 0·084 0·074 0·065 15
6