ACCA | Paper F2 Topic-WisePast Papers 2001-2007 x-clusive! acca-pakistan.com ACCA F2 2 Topic-Wise | Past exam Papers Material Costing [Type the company name] ACCA acca-pakistan.com 3 1 A business currently orders 1,000 units of product X at a time. It has decided that it may be better to use the Economic Order Quantity method to establish an optimal reorder quantity. Information regarding stocks is given below: Purchase price Fixed cost per order Holding cost Annual demand £15/unit £200 8% of the purchase price per annum 12,000 units Topic-Wise | Past exam Papers Current annual total stock costs are £183,000, being the total of the purchasing, ordering and holding costs of product X. Required: (a) Calculate the Economic Order Quantity. (2 marks) (b) Using your answer to (a) above calculate the revised annual total stock costs for product X and so establish the difference compared to the current ordering policy. (4 marks) (c) List ways in which discounts might affect this Economic Order Quantity calculation and subsequent stock costs. (4 marks) [Sec: B, Q: 4 F2 December 2003] 2 The following data for the current year relate to a sterile pack purchased by the Goodheart Hospital: Annual demand Annual holding cost per unit Cost of placing an order 90,000 units £8 £25 From the start of next year the cost of placing an order will rise by £11 but all the other data will remain the same. The hospital bases its purchasing decisions on the Economic Order Quantity (EOQ) model. Required: (a) Calculate the EOQ for: (i) The current year (ii) Next year. (4 marks) (b) Calculate the total extra annual cost to the hospital for next year of ordering and holding stock of the sterile packs. (4 marks) (c) Identify TWO major costs associated with each of the following: (i) Holding stock; (ii) Ordering stock. (2 marks) [Sec: B, Q: 4 F2 December 2004] 3 Jane plc purchases its requirements for component RB at a price of £80 per unit. Its annual usage of component RB is 8,760 units. The annual holding cost of one unit of component RB is 5% of its purchase price and the cost of placing an order is £12·50. Required: (a) Calculate the economic order quantity (to the nearest unit) for component RB. (2 marks) (b) Assuming that usage of component RB is constant throughout the year (365 days) and that the lead time from placing an order to its receipt is 21 days, calculate the stock level (in units) at which an order should be placed. (2 marks) (c) (i) Explain the terms ‘stockout’ and ‘buffer stock’. (ii) Briefly describe the circumstances in which Jane plc should consider having a buffer stock of component RB. (4 marks) [Sec: B, Q: 3 F2 June 2005] acca-pakistan.com 4 4 Point Ltd uses the economic order quantity (EOQ) model to establish the reorder quantity for raw material Y. The company holds no buffer stock. Information relating to raw material Y is as follows: Annual usage 48,000 units Purchase price £80 per unit Ordering costs £120 per order Annual holding costs 10% of the purchase price Required: (a) Calculate: (i) the EOQ for raw material Y, and (ii) the total annual cost of purchasing, ordering and holding stocks of raw material Y. (4 marks) The supplier has offered Point Ltd a discount of 1% on the purchase price if each order placed is for 2,000 units. (b) Calculate the total annual saving to Point Ltd of accepting this offer. (3 marks) (c) List FOUR examples of holding costs. (2 marks) Topic-Wise | Past exam Papers acca-pakistan.com ACCA F2 5 Topic-Wise | Past exam Papers Overhead Costing [Type the company name] ACCA acca-pakistan.com . Q: 5 F2 December 2005] acca-pakistan.450 direct labour hours Required: (a) Calculate the overhead absorption rates for cost centres T and W. and other information for production cost centres T and W are as follows: Cost centre Budgeted Basis of overhead Budgeted activity overheads absorption T £780.000 Machine hours 16. (7 marks) (b) Using the most appropriate basis establish the overhead absorption rate for production centre 1. (3 marks) [Sec: B.000 units 4. The total budgeted overhead costs (after the allocation.com .6 1 A business operates with two production centres and three service centres. Briefly explain the reason for your chosen absorption basis. (b) Calculate the total production cost for one unit of PP. apportionment and reapportionment of service cost centre costs). (3 marks) (c) Briefly explain why service cost centre costs need to be reapportioned to production cost centres. (2 marks) The prime cost of product PP.400 Direct labour hours 14.250 machine hours W £173.000 hours 2.500 units 3.000 hours Centre 2 2. Q: 1 F2 December 2003] 2 Sangazure Ltd manufactures many different products in a factory that has two production cost centres (T and W) and several service cost centres. The direct labour in cost centre T is paid £7 per hour and £6 per hour in cost centre W. Costs have been allocated and apportioned to these centres as follows: Production Centres 1 £2.000 2 £3. Which method of reapportionment fully recognises the work that service cost centres do for each other? (3 marks) [Sec: B. is as follows: £ per unit Direct material 10 Direct labour: Cost centre T 14 Cost centre W 21 One unit of product PP takes 35 minutes of machine time in cost centre T.500 A £300 Service Centres B £500 C £700 Topic-Wise | Past exam Papers Information regarding how the service centres work for each other and for the production centres is given as: Work done for: Production Centres Service Centres 1 2 A B C By A 45% 45% – 10% – By B 50% 20% 20% – 10% By C 60% 40% – – – Information concerning production requirements in the two production centres is as follows: Centre 1 1.500 hours 6. one of the products made by Sangazure Ltd.000 hours Units produced Machine hours Labour hours Required: (a) Using the reciprocal method calculate the total overheads in production centres 1 and 2 after reapportionment of the service centre costs. 7 3 Phoebe Ltd manufactures many different products which pass through two production cost centres (P1 and P2). Required: (a) Calculate: (i) The machine hour absorption rate for cost centre P1.000 P2 £404.250 65 11. and (ii) The direct labour hour absorption rate for cost centre P2. Q: 5 F2 December 2006] acca-pakistan.com .000 S1 £132. (6 marks) (b) Explain the difference between production overheads that have been ‘allocated’ and those which have been ‘apportioned’ to cost centres. Explain why some manufacturing companies are able to allocate electric power costs to production cost centres. (3 marks) [Sec: B. There are also two service cost centres (S1 and S2) in the factory.000 10 S2 £96. Service cost centre S2 only does work for P1 and P2 and its costs are reapportioned to these centres in the ratio 5:3 respectively.000 4.550 30 68.400 14. The following information has been extracted from the budget for the coming year: P1 Allocated and apportioned production overheads Number of employees Total machine hours Total direct labour hours £477. whereas others can only apportion them.000 15 Topic-Wise | Past exam Papers Service cost centre S1 costs are reapportioned to all other cost centres based on the number of employees. ACCA F2 8 Topic-Wise | Past exam Papers Job Costing [Type the company name] ACCA acca-pakistan.com . 000 Machine hours 16.450 direct labour hours Required: (a) Calculate the overhead absorption rates for cost centres T and W.250 machine hours W £173. (3 marks) (c) Briefly explain why service cost centre costs need to be reapportioned to production cost centres. The total budgeted overhead costs (after the allocation.400 Direct labour hours 14. The direct labour in cost centre T is paid £7 per hour and £6 per hour in cost centre W. apportionment and reapportionment of service cost centre costs).9 Sangazure Ltd manufactures many different products in a factory that has two production cost centres (T and W) and several service cost centres. is as follows: £ per unit Direct material 10 Direct labour: Cost centre T 14 Cost centre W 21 One unit of product PP takes 35 minutes of machine time in cost centre T. (2 marks) Topic-Wise | Past exam Papers The prime cost of product PP. one of the products made by Sangazure Ltd. and other information for production cost centres T and W are as follows: Cost centre Budgeted Basis of overhead Budgeted activity overheads absorption T £780.com . Which method of reapportionment fully recognises the work that service cost centres do for each other? (3 marks) acca-pakistan. (b) Calculate the total production cost for one unit of PP. ACCA F2 10 Topic-Wise | Past exam Papers Process Costing [Type the company name] ACCA acca-pakistan.com . 30% complete 200 units. Q: 2 F2 June 2003] 3 Duddon Ltd makes a product that has to pass through two manufacturing processes. The cost per equivalent unit for materials was £2·60 and for conversion costs was £1·50. (4 marks) (6 marks) [Sec: B. (c) Using your answer from (b) calculate the input costs. Information that is available to Adam for last month is as follows: Opening work in progress Closing work in progress Normal loss Output 100 units. has on file the costs per equivalent unit for the company’s process for the last month but the input costs and quantities appear to have been mislaid. Losses have no realisable value.500 £26. Required: (a) Calculate the units input into the process.com . I and II. (b) Calculate the equivalent units for materials and conversion costs. Output from the process consists of three separate products: two joint products and a by-product. Required: (a) Establish the total cost of the output from the process. Information for last month for each process is as follows: acca-pakistan. (2 marks) (4 marks) (4 marks) [Sec: B. All completed production from process I is transferred into process II in the same month.875 The process is expected to lose 20% of the input. A and B. 40% complete 10% of input valued at £2 per unit 1. Mark Limited uses the FIFO method of stock valuation in its process account. All the material is input at the start of process I. All materials are input at the start of the process.500 kg £29.11 1 Adam. the management accountant of Mark Limited. No losses occur in process I but there is a normal loss in process II equal to 7% of the input into that process.625 for 12.250 units Topic-Wise | Past exam Papers The losses were as expected and Adam has a record of there being 150 units scrapped during the month. There is no work in progress in process II. (b) Calculate the profit per unit for each of the joint products. The following details relate to the output from the process: Product Type % of output Final sales Further costs value per unit to complete A Joint 50% £20 £10 B Joint 40% £25 C By-product 10% £2 Joint costs are allocated on the basis of net realisable value at split-off. Details of the process are as follows: Input costs: Materials Labour Overheads £45. This is sold for scrap for £4 per unit. Q: 5 F2 June 2002] 2 A business uses process costing to establish stock valuations and profitability of its products. Process I is operated only in the first part of every month followed by process II in the second part of the month. 000.500 1. Losses have a realisable value of £2 per kg.500 litres was identified at the end of the process. in the ratio of 7 : 5 by weight.650 completed units were transferred to the finished goods warehouse. (7 marks) (b) Explain clearly how an abnormal gain arises in a process. (ii) A normal process loss of 5% of the input was expected.750 were input into the process and the direct labour costs were £50. It is company policy to apportion joint costs to products using the net realisable value method.800 units £78. Required: (a) Calculate for process I: (i) The value of the closing work in progress. Indicate where it would appear in a process account and how it would be valued.com .450 Topic-Wise | Past exam Papers 1. in the ratio of 3:2 by volume. Joint production costs are apportioned to products using the sales value method. Q: 1 F2 June 2004] 4 Maybud Ltd operates Process X which creates two joint products.000 £93.500 50% complete for conversion costs 1. (b) Prepare the process II account for last month. No stocks of work in progress are held in the process and there is a normal process loss equal to 5% of input. After Process X. Q: 1 F2 December 2004] 5 Saphir Ltd operates a process which creates two joint products. Selling prices of the joint products are: acca-pakistan. The following information relates to the process for last month: 10.800 were input into the process and conversion costs were £133.900 units with a material cost of £133. A and B. (4 marks) (4 marks) (2 marks) [Sec: B.12 Process I Opening work in progress Input into the process Conversion costs incurred Closing work in progress Process II Transfer from process I Conversion costs incurred 200 units (40% complete for conversion costs) valued in total at £16. Losses have a realisable value of 75p per litre. An actual loss of 5. (3 marks) [Sec: B. There is no work in progress. (c) Identify TWO main differences between process costing and job costing. The final selling prices of the products are as follows: Product £ per litre A 8 B 12 Required: (a) Prepare the process account for last month including the output volume and cost of products A and B separately.000. and (ii) The total value of the units transferred to process II. The actual loss was 400 kg.000 litres of raw materials with a total cost of £158. The following information relates to Process X for last month: (i) 80.000 kg of raw materials with a total cost of £18. both product A and product B are further processed at a cost of £2 per litre and £3 per litre respectively. Overheads were absorbed at a rate of 140% of direct labour. X and Y. 000 litres (40% complete for conversion costs) valued at £80. Q: 2 F2 December 2005] 7 Corcoran Ltd operates several manufacturing processes. The company holds no work in progress.000 £54. Losses have a realisable value of £5 per litre. Work in progress occurs in Process II only. (5 marks) (b) Calculate in respect of Process II for last month: (i) The value of the completed output.000 litres £180. Losses have no realisable value. joint products (P1 and P2) are created in the ratio 5:3 by volume from the raw materials input. The following information relates to process G for last month: Raw materials input Abnormal gain 1 Other costs incurred: Direct labour Direct expenses 1 Production overheads 60. (2 marks) [Sec: B.000 110% of direct labour cost. (7 marks) acca-pakistan.000 litres at a cost of £365. (2 marks) [Sec: B. and (ii) The value of closing work in progress. The joint costs are apportioned to the joint products using the physical measure basis.000 £256. Required: (a) Prepare the process G account for last month in which both the output volumes and values for each of the joint products are shown separately. (5 marks) (c) If the losses in Process I were toxic and the company incurred costs in safely disposing of them. (8 marks) (b) Explain briefly the characteristics of a by-product.000 litres (at a cost of £381.000 2.000) 1. Q: 1 F2 June 2005] 6 Topic-Wise | Past exam Papers Partlet Ltd makes a product that passes through two manufacturing processes.000 litres 5.000 litres (50% complete for conversion costs) Required: (a) Prepare the Process I account for last month.000 47. No calculations are required. In this process a normal loss of 5% of the raw material input is expected. All the raw material required to make the product is input at the start of Process I. A normal loss equal to 8% of the rawmaterial input occurs in Process I but no loss occurs in Process II. state how the disposal costs associated with the normal loss would have been recorded in the Process I account.13 Product X Y Selling price per unit £25·00 £37·50 Required: (a) Prepare the process account for last month in which both the output weight and value for each of the joint products are shown.000 £392.com . Information for last month for each process is as follows: Process I Raw material input Conversion costs Output to Process II Process II Opening work in progress Conversion costs Closing work in progress 50. In process G. The output from Process I each month is input into Process II in the same month. Actual output: Closing work-in-progress: Required: (a) Prepare the Process G Account for last month in £ and litres. The following information relates to process K for last month: Raw materials input 90. 3. The following information for last month relates to Process G. Required: (b) Based on financial considerations only.100 for conversion). In process K.600 for 12. This loss has no realisable value. P1 and P2 can be sold for £25 and £40 per litre respectively.250 2. with supporting calculations.000 litres at a total cost of £450. can be sold for £3 per litre. determine. Losses have a realisable value of £5 per litre. where all the material is added at the beginning of the process: Opening work-in-progress: Costs incurred: Direct materials Conversion Normal loss: £99. 10.14 The company can sell product P1 for £20 per litre at the end of process G. £8. (2 marks) [Sec: B. In process L a normal loss of 8% of input is incurred which has no value.000 Required: (a) Prepare the process K account for last month in which both the output volumes and values for each joint product are shown separately. Process H has sufficient spare capacity to do this work. (3 marks) [Sec: B. (2 marks) [Sec: B. In process H there would be a normal loss in volume of 10% of the input to that process. The further processing in process H would cost £4 per litre input from process G. which are incurred evenly throughout the process.800 litres Conversion costs incurred £216. whether product P1 should be further processed to create product PP1. whether product P1 should be further processed in process L to create product XP1. joint products (P1 and P2) are created in the ratio 2:1 by volume from the raw materials input.000 litres (45% complete in respect of conversion costs). Q: 4 F2 December 2006] 9 Luiz Ltd operates several manufacturing processes in which stocks of work-in-progress are never held. Q: 3 F2 June 2007] acca-pakistan. Process L is an existing process with spare capacity. based on financial considerations only. (7 marks) The company could further process product P1 in process L to create product XP1 at an incremental cost of £3 per litre input. (3 marks) (c) In the context of process G in Corcoran Ltd. Product XP1 could be sold for £30 per litre.000 litres were transferred from Process G to the finished goods warehouse. (b) Determine.com . Q: 1 F2 June 2006] 8 Topic-Wise | Past exam Papers Yeomen Ltd uses process costing and the FIFO method of valuation.000 Actual loss incurred 4. All losses.500 litres of input £155. Product PP1 could then be sold for £26 per litre. explain the difference between ‘direct expenses’ and ‘production overheads’.500 for direct materials.600 (£16. 8% of input in the period.000 litres (30% complete in respect of conversion costs) valued in total at £24. For each one suggest a suitable unit cost measure. (10 marks) (b) Identify TWO types of organisation where it would be appropriate to use service (operation) costing. The joint costs of the process are apportioned to the joint products using the sales value basis. In this process a normal loss of 4% of the raw materials input is expected. It is considering a proposal to further process product P1 in process H in order to create product PP1. At the end of process K. ACCA F2 15 Topic-Wise | Past exam Papers Absorption & Marginal Costing [Type the company name] ACCA acca-pakistan.com . com .000 per month and are absorbed on an activity level of 100. Fixed production costs are budgeted at £4. which manufactures a single product. is considering whether to use marginal or absorption costing to report its budgeted profit in its management accounts. (6 marks) (b) Reconcile the profits under these two methods and explain why a business may prefer to use marginal costing rather than absorption costing. Fixed selling costs of £150. Required: (a) Prepare a budgeted profit and loss account under absorption costing for the month ended 31 December 2001. For the month in question.000 units.16 1 Surat is a small business which has the following budgeted marginal costing profit and loss account for the month ended 31 December 2001: £.000 units although production units will be 120.000 per month and absorbed on the normal level of activity of units produced. (4 marks) [Sec: B. sales are expected to be 100.000 units per month.000 48 3 36 (7) (32) 16 Topic-Wise | Past exam Papers Other variable costs: Selling Contribution Fixed costs: Production overheads Administration Selling Net profit The standard cost per unit is: Direct materials (1 kg) Direct labour (3 hours) Variable overheads (3 hours) Budgeted selling price per unit (3·2) 12·8 (4) (3·6) (1·2) 4·00 £ 8 9 3 20 30 The normal level of activity is 2. The following information is available: £/unit 4 15 –– 19 –– Selling price 50 –– Fixed production overheads are budgeted to be £300. Direct materials Direct labour acca-pakistan. Q: 5 F2 December 2001] 2 Oathall Limited.000 Sales Cost of sales: Opening stock Production costs Closing stock £.000 per month will need to be included in the budget as will the variable selling costs of £2 per unit.000 units per month. 320 82.400 £44 Topic-Wise | Past exam Papers £72 £42 5 £ 183.000 7. Clearly show the valuation of any stock figures. where all the work is carried out on the same general purpose machinery. (4 marks) [Sec: B. showing each main cost element separately.com .17 There are no opening stocks. Required: (a) Prepare the budgeted profit and loss account for a month for Oathall Limited using absorption costing. (5 marks) (b) Calculate the budgeted total cost for one unit of product Dale only. Clearly show the valuation of any stock figures.200 £52 Dale 9. The company operates an absorption costing system using budgeted overhead absorption rates. (6 marks) (b) Prepare the budgeted profit and loss account for a month for Oathall Limited using marginal costing. Q: 5 F2 June 2004] acca-pakistan. The management accountant has calculated the machine hour absorption rate for the machining department as £3·10 but a direct labour hour absorption rate for the finishing section has yet to be calculated.120 241. No calculations are required. whether the total profit for the coming year calculated using marginal costing would be higher or lower than the profit calculated using absorption costing. There is a general service cost centre providing facilities for all employees in the factory.800 £40 £36 3 14 32 4 Service cost centre costs are reapportioned to production cost centres. (2 marks) (c) The company is considering a change over to marginal costing. (3 marks) [Sec: B. Q: 3 F2 December 2002] 3 Langdale Ltd is a small company manufacturing and selling two different products – the Lang and the Dale. The following data have been extracted from the budget for the coming year: Product Lang Sales (units) Production (units) Direct material cost per unit Direct labour cost per unit: – machining department (£8 per hour) – finishing section (£6 per hour) Machining department – machine hours per unit Fixed production overhead costs: – machining department – finishing section – general service cost centre Number of employees: – machining department – finishing section – general service cost centre 6. Each product passes through two separate production cost centres – a machining department. State with reasons. and a finishing section.000 10. Required: (a) Calculate the direct labour hour absorption rate for the finishing section. 000 Less: Less Closing stock (600 units at £100 per unit) (60. (4 marks) One of the qualities of good information is that it should be communicated to the right person or persons in an organisation.000 Sales 45. The following data relate to the month just ended: Budget Actual units units Production 48. Non-production costs of £44.000 Less Fixed selling and distribution costs (41.500. Q: 4 F2 June 2005] acca-pakistan. calculate: (i) the variable production cost per unit. Its budgeted profit statement for the first month of trading is as follows: £ £ Sales (1.800 units at £100 per unit) 180. (b) To whom should the variances calculated in (a) be communicated and why? (3 marks) The company is also considering a change from absorption costing to marginal costing. (3 marks) [Sec: B. It operates a standard absorption costing system. (c) Calculate the BUDGETED profit for the month just ended under: (i) Absorption costing.000 per month are all fixed.000 Less: Cost of sales: Less: Production (1. Required: (a) Using the high-low method.000 Topic-Wise | Past exam Papers The actual total sales revenue for the month just ended was £678.000 46. (ii) Marginal costing.200 units at £180 per unit) 216.000 ———— The budget was prepared using absorption costing principles.000 47. The total standard production cost is £9 per unit of which £4 per unit represents the variable cost element. Required: (a) Calculate the sales price and sales volume profit variances for the month just ended. and (ii) the total monthly fixed production cost.000 units then the total production cost would have been £188.18 4 Oakapple Ltd manufactures a single product which has a standard selling price of £15 per unit.000) ———— (120. Q: 3 F2 December 2004] 5 Archibald Ltd manufactures and sells one product. (2 marks) [Sec: B.000) ———— Net profit 55. If budgeted production in the first month had been 2. (4 marks) (c) Explain clearly the circumstances in which the monthly profit or loss would be the same using absorption or marginal costing principles. and (ii) the net profit. (4 marks) (b) If the budget for the first month of trading had been prepared using marginal costing principles.000.com . calculate: (i) the total contribution.000) ———— Gross profit 96. 912) –––––– 1.000 units) £000 4. The budgeted profit statement for this month.19 6 Pinafore Ltd manufactures and sells a single product. Q: 5 F2 June 2006] 125 40 –––– 7 Marco Ltd manufactures and sells a single product.276 (364) –––––– (2.488 360 598 –––––– (958) –––––– 530 Gross profit Less Non-production expenses: Variable selling costs Fixed selling. which has been prepared using marginal costing principles.000 units) 1 Less Production (22.000 units) Less Variable production cost of sales: Less Opening stock (3. is as follows: £’000 Sales (24.000 units) Less Cost of sales: Production cost (45.400 1. administration and distribution costs Net profit acca-pakistan.000 units and stocks are valued at standard cost. is as follows: £000 Sales (40.000 units) Less Closing stock (1. (6 marks) (b) Prepare a statement that reconciles the net profit calculated in (a) with the net profit using marginal costing. The budgeted profit and loss statement for next year. which has been drawn up using absorption costing principles. Assume that fixed production overhead costs are absorbed using the normal level of activity.000 units) 1 £’000 864 69 506 (23) –––– Topic-Wise | Past exam Papers Less Variable selling cost 1 Contribution Less Fixed overhead costs: Less Production Less Selling and administration 1 (552) –––– 312 (60) –––– 252 (165) –––– Net profit 1 87 –––– The normal monthly level of production is 25.000 units): Variable Fixed Less Closing stock (5. (2 marks) (c) Which of the two costing principles (absorption or marginal) is more relevant for short-run decisionmaking. Required: (a) Prepare in full a budgeted profit statement for this month using absorption costing principles.com . and why? (2 marks) [Sec: B.800 1.476 –––––– 3. Required: (a) Using marginal costing principles. and (ii) The budgeted net profit. Q: 4 F2 June 2007] Topic-Wise | Past exam Papers acca-pakistan. calculate the following for next year: (i) The total budgeted contribution from sales. Under what conditions would the two net profits be the same? (3 marks) [Sec: B. (4 marks) (b) Calculate the break-even point (in units) for next year.com .20 There will be no stock at the beginning of next year. (2 marks) (c) Explain clearly why Marco Ltd’s net profit for next year using marginal costing principles differs from that under absorption costing. ACCA F2 21 Topic-Wise | Past exam Papers Breakeven & CVP Analysis [Type the company name] ACCA acca-pakistan.com . (ii) More than 30. Required: (a) (i) Sketch a break-even chart and indicate where the break-even point would be for a single product firm. Q: 3 F2 December 2003] acca-pakistan. [Sec: B. (ii) How would contribution be established from your chart in (b)(i)? (4 marks) [Note: no specific numbers are required. product Y. – fixed costs. (2 marks) (b) Prepare a breakeven chart and clearly identify the breakeven point or points.000 units.22 1 Toowomba manufactures various products and uses CVP analysis to establish the minimum level of production to ensure profitability.300 45 20 1.200 46 21 1. and so determine the selling price at which the company profits are maximised.000 once production exceeds 30. Q: 3 F2 December 2001] Topic-Wise | Past exam Papers 2 Break-even charts and profit-volume charts are commonly associated with cost-volume-profit analysis (break-even analysis). Clearly label the axes and indicate the profit line and fixed costs. Fixed costs of £50. Variable costs per unit are stable at £5 per unit over all levels of activity. (6 marks) (c) Discuss the implications of the results from your graph in (b) with regard to Toowomba’s production plans.000 have been allocated to a specific product but are expected to increase to £100.400 42 19 Required: Using a tabular approach calculate the marginal revenues and marginal costs for product Y at the different levels of demand.100 48 24 1. Clearly label the axes and indicate the following lines: – total revenue. (ii) How would contribution be established from your chart in (a)(i)? (6 marks) (b) (i) Sketch a profit-volume chart and indicate where the break-even point would be for a single product firm.com . Revenue from this product will be £7·50 per unit. (2 marks) [Sec: B. as a new factory will need to be rented in order to produce the extra units.000 units.] [Sec: B. and – total cost. – variable cost. Required: (a) Formulate the equations for the total cost at: (i) Less than or equal to 30. It has documented levels of demand at certain selling prices for this product as follows: Demand Selling price per unit Cost per unit Units £ £ 1.000 units. Q: 2 F2 December 2003] 3 A company manufactures a single product. Details of each strategy are as follows: Topic-Wise | Past exam Papers Strategy A B C Reduction in unit selling price % 2 5 7 Expected increase in weekly sales volume over budget % 10 18 25 The company does not hold stocks of finished goods.000 Contribution to sales ratio 40% The company’s production capacity is not being fully utilised in the current year and three possible strategies are under consideration.23 4 Braithwaite Ltd manufactures and sells a single product. Required: (a) Calculate for the CURRENT YEAR the budgeted: (i) contribution per unit. Q: 2 F2 December 2004] acca-pakistan. Each strategy involves reducing the unit selling price on all units sold with a consequential effect on the budgeted volume of sales.000 £50 £70 75% The selling price per unit for next year is to be 8% above the current year’s budgeted figure. (3 marks) (b) Calculate the number of units which the company should produce and sell next year in order to achieve the target level of profit.com . Required: (a) Calculate for the current year: (i) The selling price per unit for the product. whereas both the variable cost per unit and the total fixed costs are forecast to increase by 12% above their budgeted level in the current year. The following data have been extracted from the current year’s budget: Sales and production (units) Variable cost per unit Fixed cost per unit Contribution to sales ratio 5. (4 marks) (c) Explain. (ii) total profit. (3 marks) [Sec: B. How would such a cost be dealt with in undertaking the analysis in (a)? (3 marks) [Sec: B. with supporting calculations.000 Weekly profit £22. The target for next year is that total profit should remain the same as that budgeted for the current year. which one of the three strategies should be adopted by the company in order to maximise weekly profits. Q: 3 F2 June 2004] 5 Despard Ltd manufactures and sells a single product. the term semi-variable (mixed) cost. and (ii) The weekly sales (in units). The following data have been extracted from the current year’s budget: Contribution per unit £8 Total weekly fixed costs £10. (3 marks) (b) Determine. with an example. (4 marks) (c) Briefly explain the practical problems that a management accountant might encounter in separating costs into their fixed and variable components. com .ACCA F2 24 Topic-Wise | Past exam Papers Decision Making & Limiting Factor [Type the company name] ACCA acca-pakistan. then net income is expected to be £600. If the survey does give a good result then the probability that there will be high demand from the large premises increases to 0·95. if high demand exists then the net income is expected to be £1. If not used on this contract.000. There is a shortage of skilled labour and all the available skilled labour is fully employed in the company in the manufacture of product P.000. If the smaller premises are built then the probability of high demand falls to 0·6.000 to build and large premises would cost £550. Alternatively. The company has 2.com . establish the best course of action for Firlands Limited.600.000 kg of material K currently in stock which had been purchased last month for a total cost of £19. Labour The contract requires 800 hours of skilled labour.000.000 kg of material K.000. is faced with a decision regarding whether or not to expand and build small or large premises at a prime location.25 1 Firlands Limited. This material originally cost a total of £3. If the survey indicates a bad response then the company will abandon all expansion plans. The following information relates to product P: £ per unit Selling price Less Skilled labour Other variable costs 38 22 ––– (60) ––– 40 ––– £ per unit 100 Required: acca-pakistan. Q: 2 F2 December 2002] Topic-Wise | Past exam Papers 2 Ennerdale Ltd has been asked to quote a price for a one-off contract. Required: Using decision tree analysis. The contract also requires 200 kg of material L. from previous surveys. If the survey indicates a good response then the company will build the large premises.125. Skilled labour is paid £9·50 per hour. the stock of material L would be sold for £11 per kg. The likelihood of there being a good response. a retail outlet.500. The survey predicts whether there is likely to be a good or bad response to the size of the premises. The following information is available: Materials The contract requires 3. if low demand exists. Firlands has the option of undertaking a survey costing £50. If large premises are built then the probability of high demand is 0·75. Small premises would cost £300. Since then the price per kilogram for material K has increased by 5%. Regardless of the type of premises built. which is a material used regularly by the company in other production. (10 marks) [Sec: B. There are 250 kg of material L in stock which are not required for normal production. has been estimated at 0·8. The company’s management accountant has asked for your advice on the relevant costs for the contract. 26 (a) Prepare calculations showing the total relevant costs for making a decision about the contract in respect of the following cost elements: (i) materials K and L. and (ii) skilled labour. (6 marks) (b) Calculate the net increase or decrease in monthly profit which would result from acceptance of the new business. However in the second three month period both material L and material M will be in short supply and each will be limited to 24. Q: 4 F2 June 2004] 3 Dauntless Ltd aims to maximise its profits from the two products (X and Y) which it manufactures and sells. Required: (a) Determine the optimal production plan in units for the first three months of next year and the resultant total contribution. (7 marks) (b) Explain how you would decide which overhead costs would be relevant in the financial appraisal of the contract. Q: 5 F2 December 2004] 4 Pointdextre Ltd. Total fixed costs would remain unchanged at all activity levels up to full capacity. (iii) the selling price per unit. (ii) the total monthly fixed costs. which manufactures and sells a single product. The company holds no stocks. A new customer has offered to take a monthly delivery of 15.000 litres. Q: 1 F2 December 2005] acca-pakistan. (3 marks) [Sec: B. (iv) the contribution per unit. The selling prices per unit for products X and Y are £220 and £206 respectively. Total monthly costs are £619. (4 marks) The company’s management accountant has already carried out some preliminary calculations relating to the second three month period. The following product cost data is available: Topic-Wise | Past exam Papers Material L (£6 per litre) Material M (£7·50 per litre) Other variable costs Total variable cost Product X £/unit 30 45 55 –––– 130 –––– Product Y £/unit 36 30 44 –––– 110 –––– In the first three months of next year the supply of material L will be limited to 24.com . (6 marks) [Sec: B. (b) Determine the optimal production plan in units for the second three month period of next year and the resultant total contribution. explain the term ‘opportunity cost’ and illustrate your answer by reference to Pointdextre Ltd. At these prices the company can sell all that it can produce.000 units per month. is currently producing and selling 102. The normal selling price of the product results in a contribution to sales ratio of 40%. (2 marks) [Sec: B.000 litres. which represents 85% of its full capacity. calculate: (i) the variable cost per unit. existing sales are expected to fall by one unit for every six units sold to this new customer. If this new business is accepted. (4 marks) (c) In the context of decision making. Using linear programming.000 units at a price per unit 20% below the normal selling price. Required: (a) For the current production and sales level. she has determined that the optimal production plan for that quarter involves a combination of product X and product Y.000.000 but at full capacity these would be £700. The following production cost and machine hour data are available: Variable production cost (£ per unit) Fixed production cost (£ per unit) General purpose machine hours per unit E 32 6 5 F 27 14 6 G 34 8 7 H 35 16 8 The fixed production costs represent a share of factory-wide costs that have been related to the individual components by using a direct labour hour rate. S and T). The company holds no stocks and aims to maximise its profits each month. These products are made using the same machinery.000 Selling price per unit Contribution to sales ratio Machining minutes per unit Maximum monthly demand (units) Required: (a) Calculate the monthly shortfall in machining hours. S and T required to meet maximum demands.500 hours but this is insufficient to produce all the units of R. (6 marks) [Sec: B. Q: 2 F2 June 2006] 7 Merryl Ltd manufactures four components (E. There are no fixed costs which can be specifically related to individual components. Required: (a) State the objective function and constraints in a form suitable for solving by linear programming. (5 marks) (b) Determine the optimal production plan for next month (in units). S and T and calculate this total contribution. and any quantities produced can be sold for £60 per unit and £25 per unit respectively.com . Variable costs of the two products are: X Y £ per unit £ per unit Materials (at £5 per kg) 15 5 Labour (at £6 per hour) 24 3 Other variable costs 6 5 ––– ––– Total 45 13 ––– ––– Next month only 4. The maximum number of machine hours available for component manufacture is 35.27 5 JWW Ltd manufactures two products. G and H) which are incorporated into different products made by the company. The following information is available: Product R £60 20% 40 9.000 labour hours will be available.000 units of each component.200 kg of material and 3. (2 marks) (b) Determine the monthly production plan in units that will maximise the company’s total contribution from products R. Q: 3 F2 December 2005] Topic-Wise | Past exam Papers 6 Buttercup Ltd manufactures and sells three products (R. The total machining time available each month is 10. No stocks of these products are held.000 Product T £84 25% 75 3. From next month the company’s monthly manufacturing requirements are for 2.000 per month. All the components are manufactured using the same general purpose machinery. (4 marks) [Sec: B.000 Product S £75 24% 54 6. X and Y. F. acca-pakistan. Illustrate your answer with examples of such costs but no calculations are required. Required: (a) Calculate the shortfall in general purpose machine hours next month. Half of that stock was purchased two months ago for £24 per kg and the other half was purchased last month for £25 per kg. and (ii) Skilled labour. (4 marks) (c) Briefly explain THREE other factors that the management of Merryl Ltd should consider before making a final decision to buy in components from Sergeant Ltd for next month. The supplier has recently notified the company that the price of R has risen by 8% compared with last month. which is a material regularly used by the company in other production. (5 marks) (b) Explain the basis you would use to determine if any production overhead costs would be relevant to the evaluation of the contract.com . Labour The contract requires 600 hours of skilled labour which is paid £10 per hour.28 The company can purchase any quantity of each component from Sergeant Ltd at the following unit prices next month: E F G H £48 £51 £55 £63 Merryl Ltd aims to minimise its monthly costs. (3 marks) [Sec: B. Q: 2 F2 December 2006] Topic-Wise | Past exam Papers 8 Inez Ltd is evaluating the relevant costs of a one-off contract. (3 marks) [Sec: B. The following information relates to product T: £ per unit Selling price Less Variable costs: Direct materials Skilled labour Selling 40 25 5 ––– (70) ––– 30 ––– Required: (a) Calculate the total relevant costs for the contract in respect of: (i) Material R. The company has 4. The following information relates to the materials and labour requirements of the contract: Materials The contract requires 2. (2 marks) (b) Determine how many units of which components should be purchased from Sergeant Ltd next month.500 kg of material R. The company’s existing skilled labour is all fully employed in the manufacture of product T and no further supply is available. Q: 5 F2 December 2007] £ per unit 100 acca-pakistan.000 kg of R currently in stock. com .ACCA F2 29 Topic-Wise | Past exam Papers Pricing Decisions [Type the company name] ACCA acca-pakistan. 000 20.500 hours at £8/hour) Labour: Department 2 (2.650 The following is also relevant: Material V The cost of £10 is the original purchase cost incurred some years ago.780 Costs: Materials: V (300 kg at £10/kg) Materials: I (1. This material is no longer in use by the company and if not used in the contract then it would be sold for scrap at £3/kg. Mike Limited could get the men to work overtime to complete the contract paid at time and a half.000 1. These are arbitrarily absorbed at a pre-determined rate. 2 kg of C replaces 1 kg of Y. The standard cost per unit has been estimated as follows: £ Direct materials Material 1 Material 2 Direct labour Fixed overheads 10 (4 kg at £2·50/kg) 17 (1 kg at £7/kg) 13 (2 hours at £6·50/hour) 17 (2 hours at £3·50/hour) 37 Topic-Wise | Past exam Papers Required: (a) Using the standard costs calculate two different cost plus prices using two different bases and explain an advantage and disadvantage of each method. If current stocks are not used for the contract then they would be used as a substitute for material Y in another production process costing £7/kg. There will be no incremental costs incurred.000 hours at £10/hour) Overheads: absorbed on a budgeted labour hour basis Labour: (3. £7 is the historic cost of the material although current supplies are being purchased at £6·50.000 7.000 7.000 litres at £7/ litre) Materials: C (550 kg at £3/kg) Labour: Department 1 (1. (4 marks) [Sec: B.500 hours at £2/labour hour) Total costs 3. or they could divert labour hours from the production of other units that currently average £3 contribution per labour hour. (6 marks) (b) Give two other possible pricing strategies that could be adopted and describe the impact of each one on the price of the product. This department is currently working at full capacity. Department 1 Department 2 Overheads acca-pakistan.com .30 1 Albany has recently spent some time on researching and developing a new product for which they are trying to establish a suitable price.000 50.650 12. Previously they have used cost plus 20% to set the selling price. Material C Mike Limited has 300 kg of this material in stock and new supplies would cost £4/kg. This department has spare labour capacity sufficient for the contract and labour would be retained. Material I This is in continuous use by the business. Q: 1 F2 December 2001] 2 Mike Limited has been asked to quote a price for a one off contract. Management have drawn up the following schedule: £ Contract price (cost plus 20%) 60. (7 marks) (c) Distinguish briefly between penetration and skimming pricing policies when launching a new product. It has assumed that production and sales will be 3. (10 marks) [Sec: B.com . The variable cost of product DG is £4 per unit and the total weekly fixed costs are £18. The company has set the initial selling price of product DG by adding a mark up of 40% to its total unit cost.000 units per week.31 Required: Calculate the minimum contract price that Mike Limited could accept to breakeven using relevant costing techniques. and (ii) the resultant weekly profit. Q: 2 F2 June 2002] 3 Ella Ltd recently started to manufacture and sell product DG. Q: 5 F2 June 2005] acca-pakistan. (2 marks) [Sec: B. Topic-Wise | Past exam Papers Required: (a) Calculate for product DG: (i) the initial selling price per unit.000. The company holds no stocks of product DG. (3 marks) The management accountant has established that a linear relationship between the unit selling price (P in £) and the weekly demand (Q in units) for product DG is given by: P = 20 – 0·002Q The marginal revenue (MR in £ per unit) is related to weekly demand (Q in units) by the equation: MR = 20 – 0·004Q (b) Calculate the selling price per unit for product DG that should be set in order to maximise weekly profit. com .ACCA F2 32 Budgeting Topic-Wise | Past exam Papers [Type the company name] ACCA acca-pakistan. 500 200 Closing stock of materials and finished goods will be sufficient to meet 10% of demand.33 1 Wollongong wishes to calculate an operating budget for the forthcoming period. Q: 4 F2 December 2001] 2 (a) Define the terms ‘operational planning’ and ‘strategic planning’ and explain how one impacts upon the other. (c) Materials purchases (kg. Information regarding products.com .000 units Standard cost per unit: £ Direct materials 5 Direct labour 9 Fixed production overheads 8 ––– 22 ––– Selling price 30 acca-pakistan. Labour costs are £12 per hour for the skilled workers and £8 per hour for the semi skilled workers.000 units Production 12. litres and £). (10 marks) [Sec: B. Material prices are £10 per kg for material X and £7 per litre for material Y. (7 marks) [Sec: B. Required: Produce the following budgets: (a) Production (units). and (d) labour (hours and £).000 100 2 5 1.000 litres. Q: 3 F2 June 2002] 3 A company has obtained the following information regarding costs and revenue for the past financial year: Original budget: Sales 10. (b) Materials usage (kg and litres). (3 marks) (b) List the stages in a planning and control process and briefly explain what is involved at each stage. costs and sales levels is as follows: Product Materials required X (kg) Y (litres) Labour hours required Skilled (hours) Semi skilled (hours) Sales level (units) Opening stocks (units) A B 2 1 3 4 Topic-Wise | Past exam Papers 4 2 2. Opening stocks of material X was 300 kg and for material Y was 1. 750 units £325. and – fixed production overhead.000 units £65. – materials.34 Actual results: Sales Revenue Production Material cost Labour cost Fixed production overheads There were no opening stocks. (7 marks) (b) Explain briefly how the sales and materials variances calculated in (a) may have arisen. Q: 3 F2 December 2003] 9.000 £95.000 11.com . Calculate the variances between the actual and flexed figures for the following: – sales.000 £100. (3 marks) [Sec: B. Required: (a) Produce a flexed budget statement showing the flexed budget and actual results. – labour.000 Topic-Wise | Past exam Papers acca-pakistan. com .ACCA F2 35 Topic-Wise | Past exam Papers Standard Costing & Variance Analysis [Type the company name] ACCA acca-pakistan. 36 1 Newcastle Limited uses variance analysis as a method of cost control.000 hours £2.350 70. (7 marks) (b) Explain what the labour variances calculated in (a) show and indicate the possible interdependence between these variances. The following information has been recorded for the past year: Budgeted fixed production overheads Budgeted (Normal) activity levels: Units Labour hours Actual fixed production overheads Actual levels of activity: Units produced Labour hours £2.hours for the year .250 kg £345.890.500.000 62. (5 marks) [Sec: B. The following information is available for the year ended 30 September 2001: Budget Production for the year Standard cost per unit: Direct materials (3 kg at £10/kg) Direct labour (4 hours at £6/hour) Overheads (4 hours at £2/hour) 12. (3 marks) [Sec: B.000 Topic-Wise | Past exam Papers Actual Actual production units for year Labour .kg used in the year -cost for the year Required: (a) Prepare a reconciliation statement between the original budgeted and actual prime costs.500 units 45. (5 marks) (b) Calculate the fixed production overhead efficiency and capacity variances and briefly explain what each variance shows.000 units 525. Q: 2 F2 December 2001] 2 A company uses absorption costing for both internal and external reporting purposes as it has a considerable level of fixed production costs. The standard cost card for CC includes the following: £ per unit Direct material 20 Direct labour (6 hours at £7·50 per hour) 45 Variable production overheads 27 ––– 92 ––– The budgeted and actual activity levels for the last quarter were as follows: acca-pakistan.com .000 37. The company operates a standard marginal costing system.500 units 500.000 hours Required: (a) Calculate the fixed production overhead expenditure and volume variances and briefly explain what each variance shows.cost for the year Materials .350 hours £300.000 units £ 30 24 08 62 11. Q: 1 F2 June 2003] 3 Coledale Ltd manufactures and sells product CC. 000 units and 12.000 litres of direct material were purchased and used by the company.900 949. (3 marks) (b) Provide an appropriate breakdown of the total variance for direct labour calculated in (a). uses standard absorption costing. A summary of the standard product cost is as follows: £ per unit Direct materials 15 Direct labour 20 Fixed overheads 12 Budgeted and actual production for last month was 10. (3 marks) 5 Ploverleigh Ltd. at £6 per litre.000 units respectively.950 hours) Variable production overheads Topic-Wise | Past exam Papers Required: (a) Calculate the total variances for direct material.37 Sales Production Budget units 20. Q: 2 F2 June 2004] 4 Murgatroyd Ltd. The actual costs incurred last month were: £ acca-pakistan.000 20.000 21. uses standard absorption costing. (b) Provide an appropriate breakdown of the total direct materials cost variance included in your statement in (a). and (ii) The standard quantity for direct materials.620 565.000 Fixed overheads 103.000 £ 417.500 units respectively. to be used in each unit of product.000 Direct labour 178.000 Required: (a) Prepare a statement that reconciles the standard cost of actual production with its actual cost for last month and highlights the total variance for each of the three elements of cost.000 units and 9.com . (3 marks) (c) Suggest TWO possible causes for EACH variance calculated in (b). The standard product cost per unit is as follows: £ Direct materials 11 Direct labour 24 Fixed production overhead 18 Budgeted and actual production for last month were 12. which manufactures a single product. The standard allows for 2·5 litres of the material.000 The actual costs incurred last quarter were: Direct material Direct labour (124. direct labour and variable production overheads. (4 marks) Last month 24. which manufactures a single product. (4 marks) [Sec: B. (3 marks) (c) Explain who in the company should be involved in setting: (i) The standard price. The actual costs incurred were: £ Direct materials 138.740 Actual units 19. 000 36. explain how AND why any of the three total variances calculated in (a) would be different and state clearly which.000 34.000 per annum are all fixed. Q: 3 F2 June 2006] 7 Fairfax Ltd manufactures a single product which has a standard selling price of £22 per unit.152. made up of 4·8 kg of material H at £7·50 per kg. Material H is used only in the manufacture of product MS. (3 marks) [Sec: B. It operates a standard marginal costing system.000 units and budgeted non-production costs of £1. Q: 4 F2 December 2005] Topic-Wise | Past exam Papers 6 Deadeye Ltd operates a standard costing system in which all stocks are valued at standard cost. The statement should incorporate the variances calculated in (a).000 33. (3 marks) (c) (i) Suggest ONE possible cause for EACH of the variances calculated in (a). The following data relate to last month: Budget Actual units units Production 30. Budgeted annual production is 360.800 Required: (a) Prepare a statement that reconciles the standard cost of actual production with its actual cost for last month and highlights the total variance for each of the three cost elements. of the variances would remain unchanged.500 kg 7. and why? (4 marks) [Sec: B. The standard direct material cost of one unit of product MS is £36.700 291. (4 marks) (b) Provide a breakdown of the total fixed production overhead variance in your statement in (a) by calculating two sub variances.300 230.000 Last month the budgeted profit was £200. No calculations are required. if any.000.000 kg for Issued into production Finished output of MS 1 £294. Q: 1 F2 December 2006] acca-pakistan.000 Sales 32.com . (2 marks) (c) If Ploverleigh Ltd uses standard marginal costing instead of standard absorption costing. (ii) Who should the direct material price variance be reported to. The standard variable production cost is £9 per unit.38 Direct materials Direct labour Fixed production overhead 142. Required: (a) Calculate the sales price and sales volume contribution variances for last month showing clearly whether each variance is favourable or adverse.200 units Required: (a) Calculate the direct material price and usage variances for last month. The following information relates to last month: Material H: Purchased 40. (4 marks) (b) Explain how the two variances calculated in (a) could be interrelated. (3 marks) (c) Calculate the BUDGETED profit for last month assuming that the company was using absorption costing. (4 marks) [Sec: B.000 and the actual total sales revenue was £731. (3 marks) (b) Prepare a statement that reconciles the actual cost of material H purchased with the standard material cost of actual production of MS for last month. ACCA F2 39 Topic-Wise | Past exam Papers Investment Appraisal [Type the company name] ACCA acca-pakistan.com . 000) 1–4 25. (2 marks) [Sec: B. The fund matures five years after the last payment is made into the fund. Required: (a) Using the information above. (2 marks) (c) List three general aspects of performance measures that would be appropriate for a service sector company. Once all of these payments have been made the investment will be transferred immediately to an account that will earn interest at 15% per annum until maturity. Q: 5 F2 December 2002] 3 A company has to choose between three investments with details as follows: Investment 1 Investment 2 Timing of Cash Flows Timing of Cash Flows flows per annum flows per annum Year Year £ £ 0 (75.e.com . (b) Doug wishes to take out a loan for £2.40 1 (a) James is considering paying £50 into a fund on a monthly basis for 10 years starting in one year’s time.000 2 40. Division A is currently earning a profit of £35.000 50.000.000) 0 (100. calculate the return on investment and residual income figures for the two divisions under review and comment on your results.000 5 5.000 A perpetuity 11. Q: 4 F2 June 2002] (3 marks) Topic-Wise | Past exam Papers 2 South Plc has two divisions. Q: 5 F2 June 2003] Investment 3 Timing of Cash Flows flows per annum Year £ 0 (125. The interest earned will be 1% per month.000 (10. (5 marks) (ii) Calculate the total amount repaid under each loan and purely on the basis of this information recommend which loan Doug should choose.000 and has net assets of £150.000) acca-pakistan.000 with net assets of £325.000. A and B.000) 1 30. [Sec: B. South Plc has a current cost of capital of 15%. return on investment or residual income) would be more useful when comparing divisional performance and why.000. (5 marks) (b) State which method of performance evaluation (i. He has the choice of two loans: Loan 1: monthly payments for 36 months at an APR of 9·38% Loan 2: monthly payments for 24 months at an APR of 12·68% Required: (i) Calculate the monthly repayments for loans 1 and 2 to two decimal places. Required: Calculate the net present value of each of the three investments at the company’s cost of capital and state which investment would be preferred. Division B currently earns a profit of £70. (3 marks) [Sec: B. whose respective performances are under review.000 starting at time 1 3 4 5 The company has a cost of capital of 10%. Required: Calculate the terminal value of the fund in 15 years’ time to the nearest £.000 60. ACCA F2 41 Topic-Wise | Past exam Papers Miscellaneous Topics [Type the company name] ACCA acca-pakistan.com . 000 units of product A which must be met. (2 marks) (d) The Average Earnings Index for 1995 is 100. (4 marks) (b) Plot the constraints on a suitable graph and determine the optimal production plan. The company also has an agreement to supply 1. Q: 1 F2 June 2002] 1 – Linear Programming A company uses linear programming to establish an optimal production plan in order to maximise profit. Your calculations should be to one decimal place. and (ii) The Average Earnings Index (AEI). What does this mean? (2 marks) [Sec: B.42 1 – Index Numbers Jim is reviewing his pay rises over the last four years compared with the Retail Price Index (RPI) and the Average Earnings Index (AEI).000 labour hours available. Required: (a) Formulate the objective function and constraint equations for this problem. The company finds that for the next year materials and labour are likely to be in short supply. He has obtained the following: Year Jim’s wage increase on prior year % – 5·0 3·0 4·0 Retail Price Index 157·5 162·9 165·4 170·3 Average Earnings Index 108·0 113·5 119·0 124·4 1998 1999 2000 2001 Topic-Wise | Past exam Papers Jim earned £150 per week in 1998 and is carrying out the review in the year 2001 after receiving the 4% increase. (2 marks) (b) Using your answer from part (a) calculate Jim’s weekly earnings in each year in year 2001 terms using: (i) The Retail Price Index (RPI).000 kg of material and 36. Details of the company’s products are as follows: A B £ £ Materials (at £2 per kg) 6 8 Labour (at £6 per hour) 30 18 Variable overheads (at £1 per hour) 5 3 ––– ––– Variable cost 41 29 Selling price 50 52 ––– ––– Contribution 9 23 ––– ––– There are only 30. Required: (a) Calculate Jim’s actual weekly earnings in each year from 1998 to 2001 using the percentage wage increase (to one decimal place). (4 marks) (c) Comment on the results obtained from parts (a) and (b). Q: 4 F2 June 2003] acca-pakistan.com . (6 marks) [Sec: B. Q: 1 F2 December 2002] £1. Plot this on your graph from (a). Complete stocktakes take place once a month.com . (c) Comments critically on the current stock-take procedures and explains how the system could be improved. Figures for the last eight months are as follows: Month Advertising Expenditure £000 2·65 4·25 1·00 5·25 4·75 1·95 3·50 3·00 ––––– 26·35 ––––– Sales Revenue £000 30·0 45·0 17·5 46·0 44·5 25·0 43·0 38·5 ––––– 289·5 ––––– Topic-Wise | Past exam Papers 1 2 3 4 5 6 7 8 Total Further information is available as follows: (Advertising Expenditure x Sales Revenue) 2 (Advertising Expenditure) £101·2625 2 (Sales Revenue) £11. A bookkeeper comes in once a week to make all the relevant entries to the various manual ledgers.283·75 All of the above are given in £ million. [Sec: B. Explain your choice of axes. Q: 4 F2 December 2002] acca-pakistan. Required: (a) On a suitable graph plot advertising expenditure against sales revenue or vice versa as appropriate. calculate a line of best fit. (5 marks) (b) Using regression analysis. (5 marks) [Sec: B. Required: Prepare a report for Ms Swainsthorpe that: (a) Gives three advantages and three disadvantages of introducing a computer system. The stock-take information is also used to prepare a profit and loss account and balance sheet for the owners of the business. They have a very simple manual accounting system to record all of the information of the business. during which the business shuts down for the day.43 1 – Regression Analysis A company is seeking to establish whether there is a linear relationship between the level of advertising expenditure and the subsequent sales revenue generated. The business has just been taken over by Ms Swainsthorpe who wishes to change the manual accounting system to a computerised management information system.055·875 Swainsthorpe Limited is a small old-fashioned company. (b) Explains what a management information system is and what Ms Swainsthorpe should hope to be able to use it for in general terms. and the information from the stock-take is used to check that the store bin cards are correct. Q: 4 F2 June 2006] Plaza Ltd aims to maximise profit from the two products (X and Y) which it manufactures and sells. other than the effect of inflation.598 million (production units)2 = 4. The following product cost data are available: Product X Product Y £ per unit £ per unit Direct material (£5 per kg) 60 40 Direct labour (£10 per hour) 50 80 Other variable costs 60 90 ––– ––– Total variable cost 170 210 ––– ––– Next year the supply of direct material will be limited to 540. Required: (a) Determine the optimal production plan in units for next year and calculate the resultant total contribution.000 kg and the direct labour hours will be limited to 400. The management accountant is using linear regression to establish an equation of the form y = a + bx and has produced the following preliminary calculations: (total maintenance cost x production units) = £61. giving an example. at this price. of the company’s resources will have a shadow price next year. State clearly which.000 units. (6 marks) (b) Explain how Activity Based Costing differs from traditional absorption costing.250 million (total maintenance cost)2 = £809. you would have about this prediction. The company holds no stocks. The unit selling price of product Y is £250 but. The unit selling price for product X is £200 and the company can sell all the units that it can produce at this price. (3 marks) [Sec: B. Q: 2 F2 June 2007] acca-pakistan. She has extracted the following information for the last eight quarters: Quarter number 1 2 3 4 5 6 7 8 Total maintenance cost (£’000) 265 302 222 240 362 295 404 400 Production units (‘000) 20 24 16 18 26 22 32 30 The effects of inflation have been eliminated from the above costs. and (ii) Production centre.000. No calculations are required. predict the total maintenance cost for the next quarter when planned production is 44.640 million Required: (a) Establish the equation which will allow the management accountant to predict quarterly total maintenance costs for a given level of production. Workings should be clearly shown. (8 marks) (b) Explain the term ‘shadow price’ in the context of scarce resources. (4 marks) [Sec: B.000 units. Q: 3 F2 June 2003] Topic-Wise | Past exam Papers The management accountant at Josephine Ltd is trying to predict the quarterly total maintenance cost for a group of similar machines.44 (a) Explain the following terms giving an example of each: (i) Service centre. if any. (7 marks) (b) Using the equation established in (a). (3 marks) [Sec: B. Suggest a major reservation. Explain how the treatment of overheads differs between the two different types of centre. Interpret your answer in terms of fixed and variable maintenance costs.com . the annual demand is limited to 40.
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