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14939130 ACCA F5 Performance Management Solved Past Papers 0208

14939130 ACCA F5 Performance Management Solved Past Papers 0208

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Published by: zarakhan13 on Oct 16, 2009
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PerformanceManagement
Time allowed
Reading and planning: 15 minutesWriting: 3 hoursALL FOUR questions are compulsory and MUST be attempted.
Do NOT open this paper until instructed by the supervisor.During reading and planning time only the question paper maybe annotated. You must NOT write in your answer booklet untilinstructed by the supervisor.This question paper must not be removed from the examination hall.
Fundamentals Pilot Paper – Skills module
   P  a  p  e  r   F   5
The Association of Chartered Certified Accountants
For free ACCA resources visit http://kaka-pakistani.blogspot.com
 
2
Answer ALL FOUR questions 1
Triple Limited makes three types of gold watch – the Diva (D), the Classic (C) and the Poser (P). A traditional productcosting system is used at present; although an activity based costing (ABC) system is being considered. Details of thethree products for a typical period are:
Hours per unit Materials ProductionLabour hours Machine hours Cost per unit ($) Units
Product D ½ 201,750Product C 1 12 1,250Product P 1 3 25 7,000Direct labour costs $6 per hour and production overheads are absorbed on a machine hour basis. The overheadabsorption rate for the period is $28 per machine hour.
Required:(a) Calculate the cost per unit for each product using traditional methods, absorbing overheads on the basis ofmachine hours.
(3 marks)Total production overheads are $654,500 and further analysis shows that the total production overheads can bedivided as follows: 
%
Costs relating to set-ups 35Costs relating to machinery 20Costs relating to materials handling 15Costs relating to inspection 30 Total production overhead 100 The following total activity volumes are associated with each product line for the period as a whole:
Number of Number of movements Number ofSet ups of materials inspections
Product D1751121,150 Product C 1151211,180 Product P 4801871,670 670 120 1,000 
Required:(b) Calculate the cost per unit for each product using ABC principles (work to two decimal places).
(12 marks)
(c) Explain why costs per unit calculated under ABC are often very different to costs per unit calculated undermore traditional methods. Use the information from Triple Limited to illustrate.
(4 marks)
(d) Discuss the implications of a switch to ABC on pricing and profitability.
(6 marks)
(25 marks)
For free ACCA resources visit http://kaka-pakistani.blogspot.com
 
3
2
Simply Soup Limited manufactures and sells soups in a JIT environment. Soup is made in a manufacturing processby mixing liquidised vegetables, melted butter and stock (stock in this context is a liquid used in making soups). Theyoperate a standard costing and variances system to control its manufacturing processes. At the beginning of the currentfinancial year they employed a new production manager to oversee the manufacturing process and to work alongsidethe purchasing manager. The production manager will be rewarded by a salary and a bonus based on the directlyattributable variances involved in the manufacturing processAfter three months of work there is doubt about the performance of the new production manager. On the one hand, thecost variances look on the whole favourable, but the sales director has indicated that sales are significantly down andthe overall profitability is decreasing.The table below shows the variance analysis results for the first three months of the manager’s work.
Table 1
F = Favourable. A = Adverse
Month 1 Month 2 Month 3
Material Price Variance $300 (F) $900 (A) $2,200 (A)Material Mix Variance $1,800 (F) $2,253 (F) $2,800 (F)Material Yield Variance $2,126 (F) $5,844 (F) $9,752 (F)Total Variance $4,226 (F) $7,197 (F) $10,352 (F)The actual level of activity was broadly the same in each month and the standard monthly material total cost wasapproximately $145,000.The standard cost card is as follows for the period under review 
$
0.90 litres of liquidised vegetables @ $0.80/ltr = 0.720.05 litres of melted butter @$4/ltr 0.201.10 litres of stock @ $0.50/ltr 0.55Total cost to produce 1 litre of soup 1.47
Required:(a) Using the information in table 1:(i) Explain the meaning of each type of variances above (price, mix and yield but excluding the total variance)and briefly discuss to what extent each type of variance is controllable by the production manager.
 (6 marks)
(ii) Evaluate the performance of the production manager considering both the cost variance results aboveand the sales director’s comments.
(6 marks)
(iii) Outline two suggestions how the performance management system might be changed to better reflect theperformance of the production manager.
(4 marks)
(b)
The board has asked that the variances be calculated for Month 4. In Month 4 the production department datais as follows:
Actual results for Month 4
Liquidised vegetables: Bought 82,000 litres costing $69,700Melted butter: Bought 4,900 litres costing $21,070Stock: Bought 122,000 litres costing $58,560Actual production was 112,000 litres of soup 
Required:Calculate the material price, mix and yield variances for Month 4. You are not required to comment on theperformance that the calculations imply. Round variances to the nearest $.
(9 marks)
(25 marks)
For free ACCA resources visit http://kaka-pakistani.blogspot.com

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