1.1
Richardson Constructions Ltd is a subcontractor to construction companies in Qatar. The Balance Sheet
for the last 2 years is given below:
Total Assets
Total Liabilities
b) Assess the companys investment on (i) Gross Working Capital and (ii) Net Working Capital for the
last two years.
1.2
Popovich Engineering Co. had the following transactions during June 2016.
Prepare the Cash Flow Statement for the above information using Direct Method and explain the need for
a cash flow forecast and cash flow statement as a financial management tool.
1.3
You are given the following information about Gold Mine Architecture Ltd.
Calculate the Economic Order Quantity (EOQ) for Gold Mine Ltd. Describe in details the
techniques which could be used by the company to effectively manage inventory.
Learning Outcome 02.
Following Financial Statements are given for Sterling Construction Company INC & Subsidiaries.
Sterling Construction Company Inc.
Sterling Construction is a leading heavy civil construction company that specializes in the building and
reconstruction of transportation and water infrastructure in Texas, Utah, Nevada, Arizona, California and
other states where there are construction opportunities. Its transportation infrastructure projects include
highways, roads, bridges and light rail and its water infrastructure projects include water, wastewater and
storm drainage systems.
Revenues for the third quarter increased 28.8% over the 2011 comparable quarter primarily as a result of
$48.8 million of revenues from operations in Arizona and California acquired in August 2011 and higher
revenues from our Nevada operations reflecting the impact of the $25.0 million of contracts assumed
from Aggregate Industries, Inc. in January 2012, as well as improvements in estimated profitability in
certain projects and the benefit of
stronger activity levels in Utah. The improvements were somewhat offset by lower revenues in Texas.
Gross profit for the 2012 third quarter decreased 4.0% from the same period last year and gross margin
decreased to 6.9% from 9.3%. As was the case in the first half of the year, the 2012 third quarter was
impacted by downward revisions of estimated revenues and gross profit on a number of construction
projects, primarily in Texas. These revisions were substantially offset by upward revisions on projects in
Utah.
Other Highlights
Backlog at September 30, 2012 was $704.0 million and excluded approximately $79 million of expected
revenues for which contracts had not yet been officially awarded. This compares to backlog of $754
million at June 30, 2012. During the current third quarter, we were awarded contracts totaling $158
million, compared to $240 million in the same period last year bringing 2012 awards through September
30, 2012 to $512 million compared to $476 million in the same period last year.
Company has changed its policy with respect to projects where we are the apparent low bidder but where
we have not yet been awarded a contract as of the end of the period. These awards are now excluded from
our reported backlog and awards. Awards for 2012 now include $125 million of awards previously
reported in 2011 which we were the apparent low bidder on in 2011 but which were officially awarded in
2012. Previously reported amounts for backlog have been restated to conform with the new policy.
2.1
Explore the goals & functions of Financial management of Sterling Construction Company
2.2
Analyze the financial statements of Sterling Construction Company using Liquidity, Solvency, Turnover
and Profitability Ratios.
2.3
2.4
2.5
Beco Construction was a small subcontractor for wall construction. It has planned the following sales for
the next six months.
The company's current selling price of the company is 4.30 per Cubic meter of Wall construction. It will
be increased by 14% per month for first 3 moths and thereof will fall by 15% continuously per month.
Out of total sales 55% will be on credit and the balance on cash. Payment policy for credit transaction
was 70% within a month and the balance within two months.
The company major raw material is the cement blocks and there were 1600 blocks on inventory as at 30
Jun in this year. These were purchased at 0.85 per block. To produce a sale of 1 cubic meter of sales, it
is required 0.60 of Blocks.
The company policy is to have 45% of sales requirement as materials as closing raw materials. Material
suppliers are paid 30% immediately and the balance of 70% after one month time. Overheads is 8000
per month and wages were 5500 per month. Both payments are made as and when it incurred.
Prepare a master budget for Beco Construction for the six months ended to 31 Dec 2012.
E F G
Selling price 30 17 21.00
Variable cost 13 6 9.00
Fixed production cost 10 8 6.00
Other fixed cost 2 1 3.50
Profit 5 2 2.50
Maximum demand (units/period) 250 140 130
No inventory is held.
Fixed production costs are absorbed using a machine hour rate of $2 per machine hour.
Required:
Determine the production plan that will maximize profit for the forthcoming period.
3.2
A summary of a manufacturing companys budgeted profit statement for its next financial year, when it
expects to be operating at 75 per cent of capacity, is given below.
$ $
Less:
- variable 18,000
186,000
- fixed 36,000
63,000
(i) If the selling price per unit were reduced to $28, the increased demand would utilise 90 per
Cent of the companys capacity without any additional advertising expenditure;
(ii) To attract sufficient demand to utilise full capacity would require a 15 per cent reduction in the
current selling price and a $5,000 special advertising campaign.
(a) Calculate the breakeven point in units, based on the original budgets;
(b) Calculate the profits and breakeven points which result from each of the two alternatives
and compare them with the original budget.
3.3
Explain the concept of Marginal Costing and justify why it is a better approach than Absorption
Costing. The information are as follows.
B) Explain the principle of Contract Costing and the importance of it. Prepare a sample Contract
Cost Statement of a Construction Company.