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P5 - Interim

P5 - Interim

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Published by: shaggy2k9 on Jun 03, 2009
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Interim AssessmentKAPLAN PUBLISHING Page 1 of 8
Time allowed Reading time:
15 minutes
Writing time:
3 hours
This paper is divided into two sectionsSection A
BOTH questions are compulsory and MUST beanswered
Section B
TWO questions ONLY to be answered
Do not open this paper until instructed by the supervisor This question paper must not be removed from the examinationhallJUNE 2009
Kaplan Publishing/Kaplan Financial
ACCA P5 Advanced Performance Management © Kaplan Financial Limited, 2008All rights reserved. No part of this examination may be reproduced or transmitted in any formor by any means, electronic or mechanical, including photocopying, recording, or by anyinformation storage and retrieval system, without prior permission from Kaplan Publishing.Page 2 of 8 KAPLAN PUBLISHING
Interim Assessment
BOTH questions are compulsory and MUST be answered
Prodcon plc manufactures and sells product Y which has a further expected life of four yearsto 30 June 20X4. In the company long-term plan the target for production/sales of product Y is10,000 units per year. Current market predictions, however, indicate that sales of product Y inthe years to 30 June 20X1, 20X2, 20X3 and 20X4 are likely to be 8,000, 7,000, 6,000 and5,000 units respectively. It is company policy to produce on a just-in-time basis with no stockholding.Strategy changes in advertising and product design should enable the sales of product Y forthe four years to 30 June 20X4 to be boosted to 10,000 units per year, thereby meeting thecompany long-term plan.The current estimates for product Y for the year to 30 June 20X1,
based on the current volume projection of 8,000 units 
, are as follows:(i)
Unit data
$Selling price 1,250Sub-assembly P (material cost) 250Sub-assembly Q (material cost) 120Other direct material cost 200Conversion costs 560The conversion costs are incurred on a dedicated production line that makes sub-assemblies P and Q and uses them with the other direct materials to produce productY. All unit costs are variable with output except that conversion costs contain a 75%fixed element. This fixed element is directly attributable to product Y.(ii)
Total additional costs allocated to the product
Administration cost 
: $500,000. This is 100% fixed and contains a 30% element that isdirectly attributable to product Y, the balance being company fixed cost.
Sales/marketing cost 
: $750,000. This contains a 40% element that varies with salesvolume. The remaining 60% is fixed. Half of this is directly attributable to product Yand the remainder is a company fixed cost.
Distribution cost 
: $100,000. This contains an 80% element that varies with salesvolume. The remainder is a company fixed cost.KAPLAN PUBLISHING Page 3 of 8

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