MAC3703 Assignment 2 Semester 2 2023 (715655)

MAC3703 Assignment 2 Semester 2 2023 () - DUE 19 September 2023 100% TRUSTED workings, explanations and solutions. For assistance call or us on . QUESTION 1 (30 MARKS) Mrs Sindy Lula has been in the financial Services Sector for more than 20 years and is considering a career shift. At present, she is a credit provider (mashonisa) where she owns and runs the money lending business throughout the Eastern Cape under the name BZN Agri-Retailers (PTY) LTD. Having been in this business for more than 20 years, she has grown bored of the business and is considering selling it to a competitor and venture into landscaping and be a landscape designer. She intends to focus on: 1. Garden designs 2. Kids play areas MAC3703/Assignment 2/2023 4 3. Swimming pot Mashonisa (credit providers) is part of the financial services market. Most Mashonisas are illegal and unregulated lenders that operate without compliance with the National Credit Act (NCA). Mashonisas offer loans that don't require formal documents to be filled out. Although they are not registered with NCA, the lender who harasses the borrower is breaking the law and can be reported to NCA and to the police. Mashonisas are very popular is South Africa because of the speed, the convenience, no credit checks requirements, simplicity and fixed interest rates. There are no specific educational requirements for a credit provider (Mashonisa). Some Mashonisas are registered with NCA so as the have the competitive advantage. According to the Wonga report, “The NCR is currently embarking on a campaign to get all unregistered credit providers registered, through the mobile registration office that moves around the country to assist unregistered credit providers to register. In addition the unregistered credit providers are continuously referred to the tribunal so that fines can be imposed on them for operating a business of a credit provider without a licence.” Mrs Sindy Lula’s company is registered with NCA and is a private company registered with CIPC. The company has very few compliance requirements. Landscaping is very different. It is part of the landscaping products market and is subject to a plethora of rules and standards concerning the advice and service that landscapers can give. Certain projects/sites may require and have in place an Environmental Management Plan (EMP), an Environmental authorization or a Water use license. In these instances, it is critical that the landscaping company obtains copies of these documents and takes note of the requirements up front to ensure that all work on-site is undertaken in accordance with these legal requirements. At times external environmental auditors or the “Green scorpions” may visit projects to confirm compliance with the authorization, license or EMP requirements. The landscaping industry is a very competitive space to work in, especially when businesses are within close geographical range to one another. It’s a constant battle and the landscaper must know what she is up against. Who’s taking her share of the market? Or better yet, whose market share does she seek to gain? The landscaper must have qualifications and must be a member of South African Landscaping Institute and must comply with landscape standards. MAC3703/Assignment 2/2023 5 REQUIRED: (a) For each of the markets in turn discuss with reasons whether you feel the level of orchestration is loose or tight and whether the complexity in the market is low or high. (12 Marks) (b) In each case, outline which ecosystem archetype (Hornet’s Nest, Lion’s Pride, Shark Tank or Wolf Pack) is so depicted and the consequences of this on the strategy to be followed. (13 Marks) (Total: 25 marks) QUESTION 2 (30 MARKS) The continent (Africa) is currently the only major world region that does not have any significant domestic vaccine manufacturing company for the covid-19 vaccine. As a result, the government’s decision to procure vaccines from Cipla, because of the absence of a coordinated interministerial decision-making capacity, is a short-sighted one that undermines ongoing efforts in South Africa, and on the continent, to develop domestic vaccine manufacturers. To rectify the situation, the South African government has reconsidered its decision and is showing much greater support for local manufacturing. There was a call for tender for the manufacture of the vaccine in South Africa, and that preference would be given the South African companies. Biovac, the South African covid-19 vaccine manufacturer won a tender to manufacture, store and distribute the manufactured vaccine to all nine provinces according to government roll out programme. The manufacture, storage and distribution of vaccines poses serious logistical challenges both for Biovac and government. As such a proper project management process is required to ensure a successful execution of this assignment. Government has already communicated to the public its timeframes for the third cycle of vaccines roll out. The board of directors of Biovac has emphasised to the Chief Executive Officer, Mr Narthan, that this project is a matter of national importance and that its management should be of high priority given the multitude of stakeholders involved. The board of directors agreed on a Project Board and that it will be chaired by Mrs Saule. Mrs Saule has expertise in communicable diseases. Mr Boots, the Chief Financial Officer (CFO), has been delegated by the CEO to lead this project. Mr Boots is aware of the urgency of this project and the enormity of risks involved. He is also aware that overspending on this project is not allowed. He proposed that the Project be divided into two sub projects, that is, Production Project (Project P) and the Selling and Distribution Project (Project SD). Project SD The board has approved a capital expenditure budget for the company to set up both the storage and distribution facilities within each of the nine provinces within a six-month period from date of the approval. Each facility will be set up at existing Biovac branches in each province. Mrs Tumie, Senior MAC3703/Assignment 2/2023 6 Director: Operations, at Biovac, has been appointed by Mr Boots as the Project Manager for Project SD. Project P The board approved the capital required to set up the manufacturing plant in Cape Town. The company entered into an agreement with professors at University of Cape Town and Stellenbosch University The first vaccine is expected to be released in 6 months’ time. Mr Viwetjie was sub-contracted as a production design engineering (PDE) consultant and Mr Craig, the Chief Operations Officer was appointed as the Project Manager of Project P. On arriving at work one morning Mrs Saule received a message from Mr Narthan that Mr Craig has resigned. After further investigation you discover the circumstances that led to the resignation. At a meeting held between Mr Narthan, Mr Craig and Mr Viwetjie, the PDE consultant. Mr Viwetjie mentioned that the project was running late by four weeks. Mr Narthan pointed out that this would delay the ‘go live’ date of the new machine and would have a major impact on the new product launch schedule. Mr Narthan appeared to have become angry with Mr Viwetjie and Mr Craig, believing that they had been incompetent in not recognising the scale of the problem and the business consequences of the delay. Mr Craig felt that the approach and style of Mr Narthan at the meeting was unacceptable, hence the resigned. Mr Viwetjie, the PDE consultant also refused to undertake any more work on the project since he feels he had been unfairly treated. It had also been brought to Mrs Saule’s attention that Mr Narthan and Mr Craig have had personal conflicts in the past. As a result Mr Craig had been reluctant to discuss the project and had failed to produce regular progress reports. Mr Narthan would like Mrs Saule to take the place of project manager for this project, but would like to meet with her first to assure himself of her ability to salvage the situation. REQUIRED: a) State the key characteristics of a project that should be considered by Mr Boots, the CFO when defining project (4 marks) b) Identify key stakeholders on the project, and for each stakeholder, explain their role on the project. (10 marks) c) Recommend to Mr Narthan the tools and techniques required for a successfully completion of the project: i. at four (4) tools and techniques required to ensure that there is no overspending on the project; (4 marks) ii. the tools and techniques required to ensure that quality standards are adhered to; (2 marks) iii. the tools and techniques required to ensure that the project is completed on time. (2 marks) MAC3703/Assignment 2/2023 7 d) Recommend ways in which the PDE consultant could be persuaded to re-join the project P team in order to get the project completed, and the action needed to ensure the problem does not recur (8 marks). (Total 30 marks) QUESTION 3 (20MARKS) Joyful Kidz Ltd is Mini Quad Kids Electric Ride On (Mini Quad) manufacturing company based in Durban. The company’s Chief Financial Officer (CFO), Ms Naartjie, recently attended a conference on the impact of costing techniques on the pricing strategies within a business. Given the new information obtained from the conference, Ms Naartjie is of the view that the company might have to consider adjusting its costing technique or adopting a new pricing strategy going forward. The company currently uses the full cost-plus pricing to determine their selling price. Below is the information relating to manufacturing cost of a Mini Quad: Description R Engine 200 Other direct Materials 50 Direct Labour (4hours @ R50 per hour) 200 Variable Overheads (2hours @ R15 per hour) 30 Budgeted Monthly Fixed overheads 30 000 The absorption rate for the fixed production overheads will be based on the direct labour hours. Annual budgeted direct labour hours, on a normal year, are 18 000 for the production of mini quads. Joyful Kidz Ltd makes a profit of 25% on full production cost from the sale of each Min Quad. The Sales Department has recently conducted research on the impact of the price increase on the demand for the Mini Quad units. The outcome of the research suggests that at a selling price of R700 per Mini Quad, the demand would be 375 units per month. For every R50 increase in selling price, the monthly demand would reduce by 25 units and for every R50 decrease in the selling price the monthly demand would increase by 25 units. MAC3703/Assignment 2/2023 8 REQUIRED: a) Calculate the selling price of the Mini Quad using the full cost plus-pricing approach. (5 marks) b) Ms Naartjie wants to determine the optimum sales price of a Mini Quad. Calculate the optimum (profit maximizing) selling price of the Mini Quad for the month. (9 marks) Note: if Price = a – bx then Marginal Revenue = a – 2bx c) Explain to Ms Naartjie why most companies adopt pricing strategies based on cost, instead of the profit maximisation model. (2 marks) d) Using the price elasticity of demand, recommend if Ms Naartjie should increase the price of a Mini Quad by R50 or not? (4 marks) (Total 20 marks) QUESTION 4 (25 MARKS) Mercedes-Benz South Africa (Pty) Ltd. (MBSA) is a subsidiary of the Mercedes-Benz Group that manufactures passenger cars and commercial vehicles in South Africa. The Mercedes Benz Plant is situated in a city called East London, in the Eastern Cape Province in South Africa. In March 2022, the Board of Directors decided to expand the car production area. The planned expansion represents an increase of two thirds of the existing passenger car production area. This will include a new paint shop and a new body shop, the extension of the existing assembly hall and new logistics facilities. The company will have the capacity to produce cars for left-hand and right-hand drivers. The manufacturing process of the plant will be environmentally friendlier. The new paint shop will utilise the newest technologies, which contribute to energy efficiencies. The new Industry 4.0 robots and additional assembly lines will reduce energy consumption per vehicle produced at the East London Plant by 25 percent. In order to pursue the afore-mentioned opportunity, MBSA requires additional funding of R40 million. The company entered into the following transactions to raise the needed capital. Issue ordinary equity shares:  On 1 April 2022, the company made a 3 for 10 rights issue (3 rights for every 10 ordinary shares held) at R4 per share. All rights were exercised on 1 May 2022. The market value of the company's shares just before this rights issue was R5.50 per share. MAC3703/Assignment 2/2023 9  On 1 September 2022, MBSA issued 2 million shares at market price (R5.5) in order to raise the much need funding. Issue Preference shares  % Redeemable cumulative preference shares were issued on 1 January 2022. The total proceeds were R5mil. The effective interest rate is 10% per year.  800 000 6% cumulative, convertible preference shares were issued for R4 million on 1 April 2022. Each preference share is convertible into one ordinary shares in July 2024.  200 000 non - cumulative, non-redeemable preference shares were issued for R2 million on 1 July 2022. A discretionary dividend of R400 000 was declared on these preference shares on 31 December 2022. Issue Debentures On 1 July 2022, MBSA issued % convertible debentures for R5 million. The debentures mature on 31 December 2025 and are convertible into two (2) ordinary shares for every one (1) debenture on that date. Interest is payable annually in arrears Bonds Issue R10 million, 2% convertible bonds. The conversion terms being 100 ordinary shares per R1000 bond. The bond holder has an option to convert these bonds at any time before the expiry of the 10 year expiry date. 40% of the issue was converted on 31 April 2022 because the issue was called by the bond holder. Profit after tax from continuing activities as at 31 December 2022 was R20 million. The company discontinued operations in one of its branches and incurred an after-tax net loss of R500 000. The outstanding ordinary shares as at 1 Jan 2022 was 5 000 000. Income tax rate is 28% REQUIRED (a) Calculate the Earnings per share (EPS) for the year ended 31 December 2022 (15 marks) (b) Calculate the Diluted Earnings per share (DEPS) for the year ended 31 December 2022. (10 marks)