Assignment (3)
Deadline: Saturday 13/08/2022 @ 23:59
For Instructor’s Use only
Instructor’s Name: Dr. Youssef RIAHI
Students’ Grade:
/10
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answers must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism.
Assignment Question(s):
(Marks 10)
Q1. Define in Your words
a. Cost Centre
[0.5 mark]
b. Profit Centre
[0.5 mark]
c. Investment Centre
[0.5 mark]
Answer:
Q2. Karim Corporation is considering two alternatives that are code-named A and B. Costs
associated with the alternatives are listed below:
Alternative A
Alternative B
Supplies costs
SAR 33 000
SAR 33 000
Assembly costs
SAR 48 000
SAR 51 000
Power costs
SAR 32 000
SAR 22 000
1
Inspection costs
SAR 11 000
SAR 27 000
Required:
a. Which costs are relevant and which are not relevant in the choice between these two alternatives?
[1 Mark]
b. What is the differential cost between the two alternatives?
[2 Marks]
Answer
Q.3 Karim Industries is a division of a major corporation. Last year the division had total sales of
SAR 43,380,000, net operating income of SAR 4,828,980, and average operating assets of SAR
9,000,000. The company’s minimum required rate of return is 12%.
Required:
a. What is the division’s margin?
[1 mark]
b. What is the division’s turnover?
[1 mark]
c. What is the division’s return on investment (ROI)?
[1 mark]
Answer
Q4. Karim Corporation is considering investing in a new piece of equipment for SAR
100,000 that will provide annual cash flows of SAR 20,000 per year for seven years.
Calculate the cash payback period.
[2.5 marks]
Answer
2

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