Division Wed of Grand Agricultural Machinery ltd Company Case Study - Accounting Assignment Help

Assignment Task

    Question                       
                                    
    a) Write briefly on:-                                
                                    
    i) Relevant information for decision making                                
    ii) Differential analysis in decision-making                                
                                    
    b) Division Wed of Grand agricultural machinery ltd was considering adding a small weeding                                
    implement to their product range. Sufficient capacity was currently available to cope with the                                
    additional production, but an extra special-purpose machine costing Kshs 50,000 would have to                                
    be acquired and paid for immediately prior to commencement of production. The machine could                                
    be traded in at the end of year five for Kshs 16,000.                                
                                    
    A new sales promotion programme would be mounted to market the new product and this                                
    would cost Kshs 12,000 at the commencement of production and Kshs 8,000 at the end of the                                
    first year.                                
                                    
    The following forecast figures relates to the proposed net product:-                                
                                    
    Year    Sales    Variable cost    Fixed cost                    
    1    66000    27800    23000                    
    2    81500    46000    28000                    
    3    99000    62400    30000                    
    4    67000    33000    24000                    
    5    87000    21300    20000                    
                                    
    Note                                
    Fixed costs include Kshs 9,000 per annum for an additional part time supervisor, Kshs 6,500 per                                
    annum depreciation on the machine and the balance an apportionment of existing costs. No                                
    credit is given to customers or received from suppliers.                                
                                    
    If the new project is accepted, it would take up facilities that could be used for another purpose                                
    to generate a net cash flow of Kshs 12,000 per annum. The imputed interest charge by                                
    headquarter is at 10%.                                
                                    
    Required                                
    Prepare an appraisal of the project covering a five-year period, give a decision on the basis of                                
    Net Present Value (NPV) given that the PVIF10%, n for n= 0 to 5

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