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Differentiate between an incentive plan and a performance plan and describe

conditions under which each works best.
10 marks

I am sure some of you have invested (or intend to invest) in products listed on the Bursa
Malaysia. Explain how Bursa Malaysia mobilises the public to save for investment.
10 marks

Explain how through open market operations, Bank Negara Malaysia directly
influences the money supply in the Malaysian economy.
15 marks

Opportunity costs and sunk costs are specific terminology in management
accounting. Differentiate with your examples from your organization.
15 marks

Discuss any four (4) commonly accepted principles of corporate governance.
10 marks
Question 6
You are the Finance Manager at Fitness Forever. A current issue is on how to determine the
companys cost of capital. You are provided with the following information:
The company has 10 million common stocks and RM5 million of irredeemable 13%
debentures outstanding. The current market interest on debentures is 10%.
Fitness Forevers beta value is 1.2 and the market rate of return is estimated to be 12%.
Government investments offer a risk-free rate of 5%.
Fitness Forever shares are trading at RM2.05 cum dividend and a 15 cent dividend is
payable in the immediate future. The CEO however, expects the dividend to grow by 8%
per annum for the years to come.

(a) Use the Capital Asset Pricing Model (CAPM) and dividend model to calculate Fitness
Forevers cost of equity and find its weighted average cost of capital. [15 marks]

(b) Evaluate the TWO (2) methods and their practical relevance for financial managers. [15
La Loma Furniture Sdn Bhd is experiencing a shortage of the highly skilled labour that
it uses to produce its only product, the Sollozzo sofa. It wishes to prepare budgets for
the year ending 31 March 2017. The standard cost card for the Sollozzo for 2017 and
other relevant information are given below.

The following notes are given to you :-

Direct material A is freely available.
20 skilled workers are employed. Each worker is contracted to work for 40 hours per
week for 48 weeks per year which works out to RM1,248,000.
There is no shortage of unskilled labour and all of their hours will be paid at basic rate.
The standard fixed overhead absorption rate was set based upon 150,000 standard labour
hours per year.
The Sollozzo will be sold at RM250 per unit, and demand at this price is estimated to be
30,000 units per annum.
La Loma Furniture Sdn Bhd carries no inventory of raw materials or finished goods at
any time.

a) Assuming that the principal budget factor for La Loma Furniture Sdn Bhd is 46,080 skilled
labour hours, and that the company wishes to maximise its profits, calculate the following
budgeted figures for the year ending 31 March 2017 :
(i) Production units; [2 marks]
(ii) Unskilled labour in hours and RM; [2 marks]
(iii) Direct material usage in kg and RM; [6 marks]
(iv) Sales in units and RM. [6 marks]

b) Prepare a budgeted statement of comprehensive income for the year ending 31 March
2017. [8 marks]

c) Looking at the situation faced by the company, suggest any two (2) ways (with
elaboration) by which La Loma could overcome shortages of skilled labour. [6 marks]