NB: Please use Separate Booklet(s) for each Part Do not answer PARTS A & B in the same Answer

Booklet(s)

PART A Attempt ALL Questions in this Section NB: Use a Separate Answer Booklet(s) for Part A QUESTION 1 One method commonly used in the preparation of annual budgets is to take the current level of operating and the current budgeted allowances for existing activities as the starting point for preparing the next annual budget. This base is then adjusted for changes which are expected to occur during the next budget period. Required: (a) Write a report to your Finance Director explaining the following terms in the budgeting process. (i) (ii) (b) Zero-Based Budgeting and the benefits of this method over traditional methods of budgeting. Principal Budget Factor and examples of these factors in a manufacturing company. (11 marks)

From the following information, prepare the Material Usage Budget for Beta Company Ltd. Standard Material Cost: Material X Material Y GH 1.80 per unit 4.00 per unit Sigma 8 units 9 units Dept .A (Alpha) 8500 1870 170 Dept. B (Sigma) 1600 90 85 (9 marks) Total: 20 marks

Standard Material Usage for each product Alpha Material X 10 units Material Y 5 units Production Targets: Forecast Sales (units) Ending inventory (units) Beginning Inventory (units)

QUESTION 2 (a) Explain the term Learning Curve in management accounting. What is its usefulness in decision making? (6 marks) Explain the main characteristics of Relevant Cost in the application of decision making in management accounting. (3 marks) The following are the operating results of a company for the last two periods. Period 1 2 Total cost GH 400,000 600,000 Profit GH 50,000 100,000

(b)

(c)

You are required to calculate the following: i) ii) iii) iv) Variable cost and fixed cost for each period Contribution to sales ratio Break-even point (in value) Margin of safety (3 marks) (2 marks) (3 marks) (3 marks) Total: 20 marks

QUESTION 3 (a) Ghana Post Company Ltd has two divisions, EMS and the Postal divisions. Ghana Post company Ltd intends to increase its Investment in EMS and Postal division by GH 10,000,000 each. The increase in investment is expected to increase net income by GH18,000 and GH 20,000 in EMS and Postal respectively. Currently, the assets structure of both EMS and Postal is analysed below: EMS GH 70,000 30,000 20,000 120,000 Postal GH 180,000 120,000 100,000 400,000 3

Investment Motor vehicles Buildings Scales/Equipment

C/A Stamps Stationery Debtors Bank C/L Creditors

25,000 45,000 80,000 60,000 210,000 10,000 200,000 320,000

50,000 80,000 70,000 130,000 330,000 20,000 310,000 710,000

Current Revenue for both EMS and Postal are GH364,000 and GH692,000 respectively. Total expenses as a percentage of revenue are 80.2% and 88.2% for EMS and Postal respectively. Assume cost of capital of Ghana Post is 15% and the company evaluates its managers based on return on Investment (ROI) and Residual Income (RI). Required: (i) (ii) Calculate ROI before and after the expansion. (5 marks) Using the cost of capital, determine the residual income before and after the expansion. (5 marks) (iii) (b) Should management of Ghana Post invest in the expansion? Give reasons (2 marks) i. ii. Describe the main characteristics and objective of profit and investment centres. (4 marks) Explain conditions necessary for the successful introduction of both profit and investment centres. (4 marks) Total: 20 marks

PART B: QUANTITATIVE TECHNIQUES Attempt ANY Two (2) Questions NB: Use a Separate Answer Booklet(s) for this Section

QUESTION 4 Just-Here Ltd manufacturers and sells two types of special mattresses: high-density and lowdensity. A high-density mattress sells for GH270 and uses GH100 worth of raw materials. Each high-density mattress that is manufactured increases Just-Here Ltds variable labour and overhead costs by GH140. A low-density mattress sells for GH210 and uses GH90 worth of raw materials. Each low-density mattress produced increases Just-Here Ltds variable and overhead costs by GH100. The manufacture of the mattress requires two types of skilled labour: hardening and finishing. A high-density mattress requires 2 hours of finishing labour and 1 hour of hardening labour. A lowdensity mattress requires 1 hour of finishing and 1 hour of hardening labour. In each week, Just-Here Ltd can obtain all the needed raw materials but only 100 finishing hours and 80 hardening hours. Demand for low-density mattress is limited, but at most 40 high-density mattresses are sold each week. Required: (a) (b) (c) (d) Formulate a linear programming model for Just-Here Ltds situation that can be used to maximize Just-here Ltds weekly profit. (5 marks) Graphically determine the optimum production mix of the mattresses and the resulting profit. (8 marks) Identify all scarce resources and determine their shadow prices. (4 marks) Mr. Valikem, who is the CEO of Just-Here Ltd, approved the production and sale of 30 high-density mattresses last week just to satisfy his best friend Nana. Was the CEOs decision last week justified? Explain. (3 marks) Total: 20 marks

QUESTION 5 (a) (b) State two (2) trends that may be exhibited in a Time Series. (2 marks) When is it appropriate to use the additive model in analyzing a time series? Illustrate this graphically. (3 marks)

(c)

Thermometo Ltd is a factory employing a number of people in producing thermometers. The following table shows the number of days lost through sickness over a five year period. Days Lost Through Sickness at Thermometo Factory Quarter Year 1 2 3 4 5 1 30 45 60 40 50 2 20 30 35 25 32 3 15 22 30 18 28 4 35 55 70 45 60

Assuming the number of employees at the factory remained constant over the five years, determine: i) ii) The equation of the trend line using the least squares method. (11 marks) The third quarter forecast of number of lost days for year 6, given that the average seasonal variation for the four (4) quarters are: Q1 = 9.94, Q2 = 8.12, Q3 = 15.38 and Q4 = 13.56. (4 marks) Total: 20 marks

QUESTION 6 (a) (b) (c) Distinguish between a Probability Tree and a Decision tree. (2 marks) State the multiplication law of Probability for two events. (2 marks) In an office, three clerks process incoming copies of a certain form. The first clerk processes 40% of the forms. The second clerk processes 35% of the forms. The third clerk processes 25% of the forms. The first clerk has an error rate of 0.04, the second clerk has an error rate of 0.05, and the third clerk has an error rate of 0.03.

Required: i) ii) iii) Draw a Probability Tree Diagram for this problem. (5 marks) What is the error rate of processing the forms in this office? (6 marks) If a form, selected at random from a days output is found to be with error, what is the probability that the second clerk processed it? (5 marks) Total: 20 marks

QUESTION 7 a) b) Distinguish between an activity and an event in network analysis. (4 marks) A district assembly is planning to undertake a project to build a jute factory with their share of the consolidated common fund. This project would be inaugurated by the President of the Republic on the forth-coming yam festival of the people of the district. The project planning committee requested the director of projects to furnish the assembly with the costs and duration of each activity of the project. The table below shows the activities, duration of the activities, the precedent activities and the cost of each activity of the project. Preceding Activity None None B A,C D C F F B H,I G,J Duration (Weeks) 3 6 3 4 7 2 4 2 5 3 3 Cost 000 2,100 6,000 1,800 6,400 6,300 2,000 3,600 9,000 2,000 12,000 1,200 8

Activity A B C D E F G H I J K

Required: i) ii) iii) Draw a net work to represent the inter-relationship between the activities. (6 marks) Determine the critical path and the shortest possible duration of the project. (2 marks) Construct a week by week schedule of cash flows assuming that each activity commences at the earliest start date and that for each activity the cost is incurred evenly over its duration. (8 marks) Total: 20 marks