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Managerial Level Paper

P2 – Management Accounting Decision Management
25 November 2009 – Wednesday Morning Session
Instructions to candidates
You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during the reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is, all parts and/or subquestions). The requirements for the questions in Sections B and C are contained in a dotted box. ALL answers must be written in the answer book. Answers or notes written on the question paper will not be submitted for marking. Answer the ONE compulsory question in Section A. This has 8 sub-questions and is on pages 2 to 4. Answer ALL THREE compulsory questions in Section B on pages 6 to 9. Answer TWO of the three questions in Section C on pages 10 to 15. Maths Tables and Formulae are provided on pages 17 to 19. These pages are detachable for ease of reference. The list of verbs as published in the syllabus is given for reference on the inside back cover of this question paper. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.

TURN OVER

 The Chartered Institute of Management Accountants 2009

P2 – Decision Management

Management Accounting Pillar

SECTION A – 20 MARKS [the indicative time for answering this section is 36 minutes] ANSWER ALL EIGHT SUB-QUESTIONS

Instructions for answering Section A:
The answers to the eight sub-questions in Section A should ALL be written in your answer book. Your answers should be clearly numbered with the sub-question number and then ruled off, so that the markers know which sub-question you are answering. For multiple choice questions, you need only write the sub-question number and the letter of the answer option you have chosen. You do not need to start a new page for each sub-question. For sub-questions 1.6, 1.7 and 1.8 you should show your workings as marks are available for the method you use.

Question One
1.1 In the context of quality costs, the cost of removing damaged goods from a customer’s premises is an example of: Prevention Cost Appraisal Cost Internal Failure Cost External Failure Cost (2 marks)

A B C D

1.2

When making a decision between manufacturing a component or outsourcing its production, the information required is: (i) (ii) (iii) (iv) (v) the internal variable manufacturing cost per component the monthly volume of components required the internal fixed overhead absorption rate per component the monthly specific fixed cost total for the component the purchase price of the component from the external supplier

A B C D

(i) and (v) only (i), (iii), and (v) only (i), (ii), (iv), and (v) only (i), (ii), (iii), and (v) only (2 marks)

P2

2

November 2009

000 $120.000. (2 marks) 1. (2 marks) Section A continues on the next page TURN OVER November 2009 3 P2 .4 A project requires an initial investment of $450. The post tax present value of sales revenues is $630. and their associated probabilities.000 $150. Calculate the sensitivity of the investment decision to changes in the value of sales revenues. could be as follows: Variable production costs $4 per unit $5 per unit $6 per unit Fixed production costs per month $100.000 units.000 and has a post tax net present value (NPV) of $80.000 35% 40% 25% 20% 50% 30% Calculate the expected total monthly cost of producing 10.1.3 A company has predicted that its fixed and variable costs for the forthcoming period.000.

5 to 1.6 Calculate the Accounting Rate of Return (ARR) of the investment.7 Calculate the Internal Rate of Return (IRR) of the investment.000 1.000 150.000 60.000 $245.7 The following details relate to an investment project which involves purchasing a machine for $260. (3 marks) 1. (2 marks) 1. assuming the post tax cost of capital is 12%. The company’s post tax cost of capital is 7% per annum and it has already determined the present value of the relevant cash outflows for the three possible replacement cycles as follows: 2 year replacement cycle 3 year replacement cycle 4 year replacement cycle $178. (3 marks) 1.000) 120.000 Prepare calculations to show the optimum replacement cycle and recommend which replacement cycle the bakery should adopt and why. (4 marks) (Total for Section A = 20 marks) Reminder All answers to Section A must be written in your answer book.000 80.000 in year 4. Year 0 1 2 3 4 Post Tax Cash flow $ (260.5 Calculate the discounted payback period of the investment to the nearest 0·01 years.8 A bakery company is considering how often it should replace its ovens.000 in year 0 and selling it for $20.000 $310. Section B starts on page 6 P2 4 November 2009 .The following data is to be used to answer questions 1. Answers to Section A written on the question paper will not be submitted for marking End of Section A.

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YOU SHOULD SHOW YOUR WORKINGS AS MARKS ARE AVAILABLE FOR THE METHOD YOU USE.000) c 0·075 Unfortunately.000.SECTION B – 30 MARKS [the indicative time for answering this section is 54 minutes] ANSWER ALL THREE QUESTIONS. If the management decides to hire the movie it will be screened 32 times during the week. The cinema’s accountant has been asked to evaluate the financial effects of the decision to hire the movie and has made the following estimates: Customers The number of customers watching the movie at each screening is uncertain but has been estimated as follows: 500 customers 700 customers 350 customers 40% probability 35% probability 25% probability The entrance price for each screening of the movie is $6 per customer. Customer contribution from sale of refreshments The average contribution per customer earned from the sale of refreshments is also uncertain but has been estimated as follows: $10 per customer $12 per customer $8 per customer 50% probability 20% probability 30% probability The cinema’s accountant has already started to produce a two-way data table.700) 0·050 $10 0·175 0 b 0·12 (2. This table is shown below where “$” represents the net average contribution from each screening and “pr” represents the probability of that combination of customers and refreshment contribution. Question Two The management of an independent cinema is considering whether or not to hire a movie to show in its cinema for one week. Number of customers 500 $ pr Refreshment Contribution 700 $ pr 350 $ pr $12 a 3. P2 6 November 2009 .200 0·070 1.400) 0·125 $8 1.800 0·105 (1.000 0·08 (1. The cost of hiring the movie for the week is $256. the cinema’s accountant has been called away before he could complete the table or prepare any notes to interpret it for tomorrow’s management meeting.

(3 marks) (b) Explain how the values in the data table can be used by the management of the cinema and recommend whether or not the movie should be hired. b. (7 marks) (Total for Question Two = 10 marks) o Section B continues on the next page TURN OVER November 2009 7 P2 .Required: (a) Calculate the values to be inserted in the table at the points marked a. and c.

The product will be manufactured in batches. (2 marks) (b) Calculate the total time required for the first 60 batches of production. Required: (a) Calculate the total time required for the first 40 batches of production. It is expected that an 80% learning curve will apply to the first 40 batches produced. The learning period will then end. (4 marks) (c) Explain the likely effect of recruiting new employees on the time required for batches numbered 61 to 90. The manufacturing process is highly labour intensive and the first batch is expected to take 15 labour hours to complete. The time taken for each of batches 41 to 60 inclusive will be the same as the time taken for the 40th batch. each batch will be numbered sequentially so that costs can be collected for each batch. (4 marks) Note: The 80% learning index = -0·3219 (Total for Question Three = 10 marks) P2 8 November 2009 . After 60 batches the company is planning to recruit new employees in order to increase weekly production volumes to meet expected demand levels for the product.Question Three A company has completed the testing of a new product and is now about to launch it into full production.

Required: (i) Explain how a JIT production system differs from the company’s existing manufacturing system. the Marketing Director is concerned that the lack of inventory will result in lost sales unless there is a significant increase in the quality controls within the manufacturing process. (Total for Question Four = 10 marks) (ii) (Total for Section B = 30 marks) End of Section B Section C starts on page 10 TURN OVER November 2009 9 P2 . The Managing Director believes that this change will reduce total production costs and therefore increase profits. Explain why quality control systems are particularly important in a JIT environment. However.Question Four A company’s current manufacturing system is based on a constant rate of production throughout the year. The company holds a large inventory of finished goods in order to be able to satisfy sales at those times during the year when demand is greater than output. The company is considering changing from its existing manufacturing system. to a system of just-in-time (JIT) production. Consequently there are large variations in the amount of finished goods held in inventory. which uses changing inventory levels to balance production and sales volumes.

300 units and 1.000 hours.000 kgs of material A and 6. but all of the other production resources are readily available in November 2009. In addition to the contract with Company D.SECTION C – 50 MARKS [the indicative time for answering this section is 90 minutes] ANSWER TWO QUESTIONS OUT OF THREE.450 direct labour hours available to produce products X and Y and the supply of materials will also be limited. the demand for products X and Y in December 2009 is 1. November 2009 The total number of direct labour hours available to produce products X and Y in November 2009 is limited to 4. Only 11.000 units and 800 units respectively. Question Five Company C manufactures two products. If Company C fails to honour this contract in full in each of these months then there is a significant financial penalty for each month of their failure.100 kgs of material B will be available. Inventory Company C does not hold inventories of materials or finished goods. YOU SHOULD SHOW YOUR WORKINGS AS MARKS ARE AVAILABLE FOR THE METHOD YOU USE. the demand for products X and Y in November 2009 is 1. December 2009 In December there will be 5. The budgeted selling price and cost per unit are as follows: Product X $/unit 86 16 12 12 20 12 14 Y $/unit 74 12 15 8 15 12 12 Selling price Direct labour ($8 per hour) Direct material A ($3 per kg) Direct material B ($4 per kg) Other variable costs Fixed overhead absorbed Profit Demand for the products is seasonal. Company D Contract The company is to supply Company D with 500 units of product X and 300 units of product Y in each of November and December 2009 for $73 and $62 per unit respectively.400 units respectively. In addition to the contract with Company D. In order to ensure that the production facilities are not idle at various times during the year the company has signed a contract with company D to supply them with the products as “own label” goods. P2 10 November 2009 .

(5 marks) (Total for Question Five = 25 marks) (b) (i) (ii) (iii) Section C continues on the next page TURN OVER November 2009 11 P2 . (10 marks) Calculate the value of the monthly financial penalty at which the company would be indifferent between supplying products X and Y under the Company D contract or selling them in the general market.Required: (a) Prepare calculations to determine the production plan that will maximise the profits of Company C in November 2009. (5 marks) Calculate the maximum price per kg that should be paid to an alternative supplier to obtain additional material B. (5 marks) For December 2009 only: Use graphical linear programming to calculate the optimal production plan for the month.

The company’s Management Accountant has identified four categories of cost within the ABC system: Unit Costs.000 units @ $35 each = Final 200 units @ $30 each = Total revenue $50. if 3.001 – 7.000 units A C 50 40 35 30 23 20 15 70 65 60 55 50 45 40 80 76 73 70 64 56 45 For example.000 units 6.001 – 2.001 – 5.000 units 4.000 $35. Batch Costs.000 units @ $50 each = Next 1.000 $40. Product Sustaining Costs.000 $131.000 units 3.001 – 3. The findings of the research are set out below: Selling price/unit ($) B Product Sales (units) First 1.200 units of product A were sold.000 units 2.000 $6. and Facility Sustaining Costs.001 – 4.001 – 6.Question Six A manufacturing company uses Activity Based Costing (ABC). Costs and other data relating to the company’s three products are set out below: Product B $ 39 800 300 B 200 4 Cost level Unit Batch Product sustaining per month A $ 18 350 500 A 50 2 C $ 46 600 400 C 100 3 Batch size (units) Machine hours per unit The company has carried out market research to estimate the relationship between selling price and demand for each of the products.000 units @ $40 each = Next 1.000 P2 12 November 2009 .000 units 1. (8 marks) The company uses a JIT production system and only manufactures and sells in whole batches. the research shows that the total revenue would be: First 1. giving one example of each in your explanation. Required: (a) Distinguish between the four categories of cost identified above.000 units 5.

(As stated above. (9 marks) Explain. Assume that product sustaining costs are not avoidable. B. how you would calculate the shadow prices of machine hours for next month. in detail. (4 marks) Due to a fire the availability of machine hours is restricted to 20. 4 hours and 3 hours respectively). (4 marks) (Total for Question Six = 25 marks) (d) Section C continues on the next page TURN OVER November 2009 13 P2 . Assume that sufficient resources are available within the existing cost structures to produce up to 7. No calculations are required. the number of machine hours required per unit of A.000 units of each product per month. B and C required in order to maximise the monthly profit from each product. Required: (c) Calculate the production and sales of products A.Required: (b) Calculate the production and sales of products A. and C are 2 hours.000 hours for the next month only. B and C in order to maximise the profit for next month.

These fixed costs are not affected by the number of guests or by the opening dates of the hotel. The equipment and other furnishings will qualify for tax depreciation at the rate of 20% per annum on a reducing balance basis. there are annual guest related fixed costs which are expected to be $40. The building will be sold at the end of 2014 for $650.000 at the same time. are expected to be $20. Cost of capital The hotel group’s post tax money cost of capital is 8% per annum. Other fixed costs In addition to the guest related costs identified above. P2 14 November 2009 .000 and the equipment and other furnishings are expected to cost $250.000. which vary in direct proportion to the number of guests. No tax depreciation is available on the cost of the building. The building will cost $650. Inflation The hotel group expects that cost inflation (applying to all types of cost) will be in accordance with the following index (2010 = 100): 2011 2012 2013 2014 104 105 107 110 The group has decided that it will increase its prices to guests and these will increase in accordance with the following index (2010 = 100): 2011 2012 2013 2014 100 102 104 107 Taxation The hotel will be liable to Corporation Tax on its profits at the rate of 30%. In addition. also at the start of 2010.000.000 in 2010.000 in 2010. payable in two equal instalments. at 2010 prices. The number of guests in future calendar years is expected to increase in accordance with the following index (2010 = 100): 2011 2012 2013 2014 180 190 210 220 Guest related costs Variable guest related costs.000 per year. Guest revenue The hotel is expected to open to guests on 1 July 2010 and guest revenue for the remainder of 2010 is expected to be $130.000 and the equipment will be sold for $100. the hotel expects to incur other fixed costs of $25. the first day of its next financial year.Question Seven A hotel group is considering the purchase of a new hotel on 1 January 2010. one in the year in which the profits are earned and one in the following year.

Required: (a) Calculate the net present value of the cash flows arising from the investment and recommend to the hotel group whether or not to proceed with the purchase of the hotel. (5 marks) (Total for Question Seven = 25 marks) (c) (Total for Section C = 50 marks) End of Question Paper Maths Tables and Formulae are on pages 17 to 19 TURN OVER November 2009 15 P2 . (6 marks) Explain Pareto Analysis and how the hotel group could improve its profits by combining Pareto Analysis with Activity Based Costing. (14 marks) (b) Calculate the sensitivity of the investment to a change in the value of “other fixed costs”.

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296 0.896 0.356 0.208 0.458 0.624 0.943 0.284 0.743 0.871 0.111 0.061 0.218 0.700 0.145 0.731 0.396 0.178 0.153 0.081 0.410 0.833 0.864 0.093 0.917 0.889 0.043 0.188 0.906 0.099 0.275 0.078 0.820 2% 0.677 0.577 0.181 0.377 0.760 0.694 0.452 0.108 0.962 0.354 0.502 0.350 0.703 0.609 0.198 0.601 0.837 0.212 0.051 0.711 0.605 0.683 0.862 0.376 0.658 0.456 Interest rates (r) 5% 6% 0.160 0.971 0.552 0.763 0.176 0.326 0.535 0.368 0.567 0.044 0.812 0.789 0.045 0.370 0.093 0.714 0.098 0.792 0.319 0.051 7% 0.773 0.232 0.141 0.286 0.681 0.570 0.708 0.613 0.933 0.227 0.887 0.530 0.675 0.148 0.361 0.879 0.107 0.299 0.141 0.138 0.071 0.249 0.135 0.661 0.857 0.073 17% 0.557 0.116 0.593 0.905 0.070 0.855 0.162 0.402 0.352 0.836 0.728 0.233 0.837 0.592 0.277 0.442 0.469 0.840 0.681 0.PRESENT VALUE TABLE Present value of $1.642 0.853 0.111 0.513 0.116 0.705 0.104 13% 0.513 0.641 0. Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1% 0.095 0.422 0.499 0.476 0.558 0.314 0.243 0.844 0.052 0.475 0.587 0.942 0.215 9% 0.037 19% 0.362 0.623 0.915 0.266 0.596 0.292 0.327 0.508 0.794 0.925 0.823 0.890 0. that is 1 r  payment or receipt.722 0.137 0.163 0.870 0.914 0.907 0.123 0.339 0.054 0.295 0.840 0.424 0.084 0.209 0.195 0.388 0.194 0.543 0.257 0.797 0.331 0.842 0.666 0.686 0.296 0.149 11% 0.162 0.540 0.237 0.790 0.069 0.287 0.062 0.352 0.766 0.124 0.031 20% 0.961 0.592 0.404 0.480 0.232 0.391 0.425 0.333 0.527 0. n = number of periods until 4% 0.308 0.516 0.816 0.585 0.125 0.183 0.460 0.888 0.873 0.270 0.258 8% 0.400 0.270 0.333 0.788 0.388 0.285 0.650 0.168 0.935 0.432 0.140 0.247 0.893 0.051 0.735 0.475 0.885 0.444 0.436 0.820 0.743 0.582 0.434 0.350 0.826 0.340 0.783 0.182 0.853 0.481 0.095 0.712 0.731 0.861 0.429 0.952 0.951 0.250 0.877 0.312 Interest rates (r) 15% 16% 0.386 0.060 0.813 0.026 November 2009 17 P2 .519 0.335 0.209 0.769 0.713 0.482 0.731 0.547 0.534 0.322 0.747 0.031 0.415 0.751 0.463 0.572 0.069 0.784 0.261 0.847 0.043 18% 0.579 0.961 0.625 0.924 0.500 0.146 0.160 0.315 0.942 0.756 0.079 0.593 0.305 0.888 0.239 0.901 0.614 0.772 0.497 0.693 0.205 0.630 0.758 0.863 0.394 0.104 0.178 10% 0.225 0.990 0.507 0.191 0.822 0.371 0.130 0.083 0.636 0.746 0.290 0.676 0.317 0.555 0.621 0.038 0.088 0.263 0.059 0.231 0.706 0.980 0.673 3% 0.505 0.456 0.108 0.665 0.252 0.627 0.855 0.376 0.087 14% 0.744 0.828 0.351 0.060 0.564 0.164 0.231 0.081 0.534 0.390 0.037 0.080 0.317 0.870 0.494 0.554 n where r = interest rate.437 0.417 0.718 0.112 0.980 0.125 0.152 0.926 0.497 0.215 0.650 0.258 0.397 0.170 0.416 0.229 0.659 0.065 0.093 0.456 0.419 0.482 0.645 0.909 0.194 0.208 0.123 0.187 0.204 0.279 0.943 0.263 0.971 0.163 0.923 0.804 0.467 0.130 0.544 0.701 0.583 0.180 0.623 0.124 12% 0.

954 10.679 16.833 1.724 5.367 7.628 6.201 8.604 6.102 3.358 8.914 3.134 13.784 4.037 3.380 10.943 8.901 1.100 4.660 5.470 7% 0.106 2.836 4.387 4.730 4.531 3.623 5.351 3% 0.607 4.759 2.876 4.302 6.833 5.240 3.468 5.324 14.842 6.486 4.870 0.675 4.361 2.465 4.943 1.802 7.728 7.398 17.549 7.046 2% 0.990 1.889 4.145 6.652 12.584 5.360 7.938 4.968 5.656 7.326 3.194 6.690 12.865 14.910 5.904 8.019 5.537 5.713 5.706 3.487 4.605 4.849 13.265 6.462 6.191 7.878 4% 0.659 13.469 13% 0.763 10.106 10.828 11.868 5.626 1.316 5.890 4.039 4.247 6.950 9.389 5.029 5.517 3.092 5.713 2.405 5.983 9.963 12% 0.886 2.106 12.990 5.368 11.885 1.583 5.611 4.234 5.373 6.288 4.743 3.533 4.650 5.840 1.917 5.802 4.767 5.812 4.561 13.076 5.296 11.917 1.162 5.847 1.594 8% 0.855 2.775 3.120 7.808 4.687 5.058 3.909 1. Receivable or Payable at the end of each year for n years 1 (1 r )  n r Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1% 0.303 4.163 4.783 2.162 8.566 9.760 9.851 9.365 8.435 8.292 14.421 5.198 6.589 2.033 5.630 4.818 9% 0.647 2.913 2.444 3.259 3.580 5.312 3.575 11.772 5.855 1.103 7.394 9.528 2.954 4.210 2.974 3.799 5.101 20% 0.111 8.514 11% 0.313 8.605 3.566 2.853 5.710 7.024 7.499 7.447 9.786 6.170 3.453 5.536 7.452 5.954 6.229 5.118 11.750 6.754 14.635 11.222 5.942 2.142 6.918 6.467 6.344 4.877 1.273 5.462 4.Cumulative present value of $1 per annum.061 8.787 10.605 2.992 15.192 4.922 4.379 7.982 7.329 4.475 5.884 3.002 6.793 4.696 4.197 5.031 4.417 6.839 7.685 4.575 5.212 5.589 3.585 2.108 7.818 5.283 2.929 17% 0.938 12.601 6.623 Interest rates (r) 15% 16% 0.847 5.199 3.795 6.577 3.590 Interest rates (r) 5% 6% 0.995 6.339 4.426 5.246 2.840 6.993 4.022 8.749 5.756 8.970 2.134 13.729 6.335 5.745 9.146 5.070 5.047 6.306 8.210 6.174 2.559 8.690 3.078 4.718 15.971 1.132 5.295 9.207 6.002 6.423 4.628 18% 0.606 7.639 3.546 3.578 14.161 7.812 4.808 2.433 3.722 8.824 8.899 10.723 2.938 6.020 7.668 5.451 4.736 2.226 18.837 4.639 4.853 9.207 4.563 11.712 10.652 8.798 3.668 2.893 1.477 10.859 1.747 6.733 7.941 3.562 16.424 6.385 9.324 5.952 0.402 3.938 7.971 6.926 1.140 2.998 4.160 4.564 4.786 8.410 3.128 6.274 11.582 6.025 14% 0.775 4.604 9.659 4.059 10.274 3.085 12.231 4.991 3.887 8.863 9.206 5.935 1.108 9.550 6.786 8.544 8.230 7.353 19% 0.829 3.127 3.515 7.611 4.242 6.535 5.673 3.472 7.253 9.327 4.384 8.008 5.712 5.805 7.033 5.325 8.624 3.702 7.372 9.759 6.486 5.129 10% 0.980 1.336 10.439 4.348 12.250 7.255 12.352 3.833 2.487 7.862 1.158 11.962 1.946 5.122 9.322 2.988 5.843 4.487 3.791 4.715 4.418 6.534 5.244 8.342 5.166 13.877 5.492 6.814 7.463 7.811 6.216 5.139 7.494 4.366 7.889 6.690 2.530 9.547 2.328 5.986 10.122 6.717 4.166 12.902 4.471 10.974 7.355 4.498 3.838 11.870 P2 18 November 2009 .111 4.118 5.495 6.004 13.

= n  XY  (  X )(  Y ) n  X  ( X ) 2 2 a= Y –bX  Y = na + b  X  XY = a  X + b  X2 Exponential Geometric Y = abx Y = aXb Learning curve Yx = aXb where: Yx = the cumulative average time per unit to produce X units. X = the cumulative number of units. b = the index of learning. The exponent b is defined as the log of the learning curve improvement rate divided by log 2. November 2009 19 P2 . a = the time required to produce the first unit of output.FORMULAE Time series Additive model: Series = Trend + Seasonal + Random Multiplicative model: Series = Trend*Seasonal*Random Regression analysis The linear regression equation of Y on X is given by: Y = a + bX where: b= and or solve Covariance ( XY ) Variance ( X ) or Y – Y = b(X – X ).

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Analyse Categorise Compare and contrast Construct Discuss Interpret Produce Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between To build up or compile To examine in detail by argument To translate into intelligible or familiar terms To create or bring into existence 5 EVALUATION How you are expected to use your learning to evaluate. make decisions or recommendations. Apply Calculate/compute Demonstrate Prepare Reconcile Solve Tabulate To put to practical use To ascertain or reckon mathematically To prove with certainty or to exhibit by practical means To make or get ready for use To make or prove consistent/compatible Find an answer to Arrange in a table 4 ANALYSIS How you are expected to analyse the detail of what you have learned. Describe Distinguish Explain Identify Illustrate Communicate the key features Highlight the differences between Make clear or intelligible/State the meaning of Recognise. VERBS USED List State Define DEFINITION Make a list of Express. establish or select after consideration Use an example to describe or explain something 3 APPLICATION How you are expected to apply your knowledge. It is important that you answer the question according to the definition of the verb. the details of/facts of Give the exact meaning of 2 COMPREHENSION What you are expected to understand. inform or notify To appraise or assess the value of To advise on a course of action November 2009 23 P2 .LIST OF VERBS USED IN THE QUESTION REQUIREMENTS A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. LEARNING OBJECTIVE 1 KNOWLEDGE What you are expected to know. fully or clearly. Advise Evaluate Recommend To counsel.

Management Accounting Pillar Managerial Level P2 – Management Accounting – Decision Management November 2009 Wednesday Morning Session P2 24 November 2009 .