# PART A Jacobsen plc is a manufacturing firm which has just started up in business.

### The company has provided the following unit data:

Material Costs: £14 Labor Costs: 18 Per Unit Selling Price: £45 Variable Overhead: £6
The following summarizes sales and production data for the first three months of Year 1:
February January March
Unit sales: 3,800 4,900 5,000
Units of production: 4,500, 5,200, 4,600
Information regarding Fixed Overhead is as follows:
Estimated yearly fixed expenses: £105,000 (based on a 60,000 unit production target).
Realized Fixed Overheads \$8,000 in January, \$9,000 in February
March £8,500
(A) Determine the Opening and Closing Inventory for January through March.
(a) Utilizing marginal costing, create a profit statement for each month from January to March.
(c) Utilizing absorption costing, create a profit statement for each month from January to March.

PART B
Elrick Subsea plc is thinking of funding two projects that are incompatible with one another. For each project, it has determined the following financial data:
PROJECT 1 FOR THE YEAR PROJECT 2
Initial Investment: £200,000
Net Cash Inflows of £10,000 plus 2 Additional Costs 1 £110,000 £95,000
2 £65,000 £54,000
3 £50,000 £76,000
4 £47,000 £38,000
The company’s borrowing costs are 10%.
TABLE OF DISCOUNTS (FROM 10% TO 15%)
Discounted at i%, the present value of £1 received after n years is: 10 11 12 13 14 15 n
1 2 3 4 5 0·909 0·826 0·751 0·683 0·621 0·901 0·812 0·731 0·659 0·593 0·893 0·797 0·712 0·636 0·567 0·885 0·783 0·693 0·613 0·543 0·877 0·769 0·675 0·592 0·519 0·870 0·756 0·658 0·572 0·497
(a) Determine each project’s Net Present Value.
(b) Determine both projects’ internal rates of return.
(c) Recommend a project to Elrick Subsea plc based on your results in part (b).

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