Escolar Documentos
Profissional Documentos
Cultura Documentos
Answer 1
Solution
1
Duty of obedience
Requires a director to avoid committing acts beyond the scope of the process
of a corporation as defined by its charter or the laws of the stake of
incorporation.
Duty of loyalty
A director must act in good faith and must not allow his personal interest to
prevail over the interest of the corporation
Duty of care
Require a director to be diligent and prudent in managing the companys
affairs. To safeguard the interest of shareholders and prudent to take into
account the interests of stakeholders when creating governance structure.
Student should relate the fiduciary duties to the issues stated in the case.
-
The directors are more concerned on their own interests instead of the company
and shareholders interest.
To remain in the market and survival, business needs support from the stakeholders
that include shareholders, customers, creditors, activists, government, suppliers and
other related groups. ()
People will support the business due to the following factors (Relate to the case).
-
The company cannot focus merely on profit but also on protecting the public
interests . Therefore, the company should make decision that;
Students should relate the duties of auditors stated in the fundamental principles of
MIA By Law on code of professional conduct to the case
Fundamental Principles of MIA By Law on code of professional conduct
-
2
i
The margin calculated excludes the indirect cost such as administrations, indirect
overheads. Thus, it does not represent the real profit make by the company. It is
important for the company to include all the manufacturing cost as this costing
method is more accurate in determining the actual profit of the company. In other
words, full costing method should be adopted. Thus, the calculation must take into
the consideration of the depreciation of the machinery.
ii
The new calculation to determine the profit of FFA shows that the company actually
only make profit of $26.67 and incur loss of $13.33 for every unit sold to Secconz and
European customer respectively. The overall calculation also shows that in overall,
the company revenue generated only can cover the total manufacturing cost. This
calculation however exclude the administration cost in which the company in overall
making losses if the administration cost will take into consideration.
Working:
Cost of new machinery
Useful life
Annual depreciation
Depreciation per unit
8.3 million
2 years
4.15 million
4.15 million/75,000 units
=55.33
40
10
Indirect cost:
Factory overheads
Depreciation*
55.33
TOTAL COST
Selling price
113.33
140
26.67
42
55.33
13.33
Overall calculation
Manufacturing cost calculation:
Secconz ($)
Europe ($)
Total ($)
Direct material
1,000,000
2,000,000
3,000,000
Direct labour
250,000
500,000
750,000
Direct cost
1,250,000
2,500,000
3,750,000
Factory overhead
200,0000
400,000
6,000,000
Depreciation on
4,150,000
machinery
Total Manufacturing cost
8,500,000
Income statement (extract)
Sales
Less: Manufacturing cost
Gross profit
($)
8,500,000
8,500,000
Nil
(15 marks)