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F5 Mock 1 Dec 2012

F5 Mock 1 Dec 2012

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Published by Rakib Hossain
ACCA Initial Mock Exam
ACCA Initial Mock Exam

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Published by: Rakib Hossain on Nov 20, 2012
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 F5 Performance ManagementMock 1Session: Dec 2012Time allowed:Reading and Planning: 15 minutesWriting: 3 hoursAll five questions are compulsory and must be attemptedTotal Marks: 100
 
1. Montreal Ltd
Montreal Ltd. manufactures firelighters under contract for a major supermarket chain. Under the contractMontreal receives a price of $1.70 per kilogram. The company normally produces 30,000 kilograms of firelighters for the supermarket chain each month, but it occasionally varies this quantity slightly if askedto do so. Montreal operates a standard absorption costing system. Fixed production overheads arebudgeted at $9,600 per month. The standards for the direct materials required to produce a kilogram of firelighters are as follows:Direct Material Type “A” 0.6 kg @ $0.25 per kilogramDirect Material Type “B” 0.45 kg @ $0.40 per kilogramDirect Material Type “C” 0.15 kg @ $0.80 per kilogramThe only other cost is a cardboard packaging box, which Montreal purchases from a subcontractor at anagreed price of $0.05 per kilogram of firelighters sold. During January 2007 actual activity was as follows:Montreal Ltd. produced 31,000 kilograms of firelighters and supplied them to the supermarket chain at theagreed price of $1.70 per kilogram.Fixed overheads amounted to $11,520.Direct materials purchased and used in production were:Direct Material Type “A”: 16,700 kg @ $0.25 per kilogramDirect Material Type “B”: 11,900 kg @ $0.42 per kilogramDirect Material Type “C”: 3,800 kg @ $0.80 per kilogramCardboard packaging boxes were purchased at standard cost.
REQUIRED:(a) Calculate the standard profit per kilogram of firelighters, and the company’s total budget andactual profits for January 2007. (3 marks)(b) Calculate the following variances and use them to reconcile the company’s total budget andactual profits for January:(i) Direct materials price, mix and yield variances.(ii) Fixed overhead volume and expenditure variances.(iii) Sales volume variance. (12 marks)(c) The management accountant of Montreal Ltd. has stated: “In interpreting these variances, weneed to bear in mind that we carried out major preventive maintenance work on our productionequipment at the beginning of January, and this greatly improved its efficiency in convertingdirect materials into finished product”.(i) Discuss whether the variances which you have calculated in answer to part (b) supportthis view. (3 marks)(ii) Briefly explain any changes which may be required to the company's standard costingsystem in consequence. (2 marks)(20 marks)
 
2. PHARAOH
 Pharaoh Ltd manufactures and sells three products with the following selling prices and variable costs:
Sphinx Pyramid Mummy£/unit £/unit £/unit
Selling price 3.00 2.45 4.00Variable cost 1.20 1.67 2.60The company is considering expenditure on advertising and promotion of the Sphinx.It is hoped that such expenditure, together with a reduction in the selling price of the product, wouldincrease sales.Existing annual sales volume of the three products is:Sphinx 460,000 unitsPyramid 1,000,000 unitsMummy 380,000 unitsIf £60,000 per annum was to be invested in advertising and sales promotion, sales of Sphinx at reducedselling prices would be expected to be: 590,000 units at £2.75 per unit or 650,000 units at £2.55 per unit Annual fixed costs are currently £1,710,000 per annum.
Required:(a) Calculate the current breakeven sales revenue of the business. (4 mark)(b) Draw a multi-product profit/volume graph assuming that the advertising andsales promotion does not go ahead. (10 marks)(c) Advise the management of Pharaoh Ltd as to whether the expenditure onadvertising andpromotion, together with selling price reduction, should be introduced on Sphinx. (6marks)(Total: 20 marks)

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