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Fundamentals Paper F5
Final Mock Examination
3 hours 15 min.
Answer ALL four questions
(12 marks) (b) The Production Manager of X Ltd is new to the job and has very little experience of management information.000 B 37. or otherwise. The actual results for the period were as follows: Actual production and sales 5450 units Actual sales price $445 per unit Material usage and cost A 43. discusses the merits. There were no budgeted inventories of Product P. The standard cost data for Product P is as follows: Standard cost per unit of Product P: Materials A 10 kgs @ $15 per kilo B 8 kgs @ $8 per kilo C 5 kgs @ $4 per kilo 23 kgs Total standard marginal cost Budgeted fixed production overheads $150 $64 $20 $234 $350.500 kgs Fixed production overheads $385.000 In order to arrive at the budgeted selling price for Product P the company adds 80% mark-up to the standard marginal cost. (8 marks) (c) Briefly explain the problems associated with using traditional standard costing in today s business environment (5 marks) (25 marks) 2 . X Ltd operates a standard marginal costing system.000 units of Product P in the period.000 kgs $277.000 kgs $688.500 C 23. Product P. mix and yield variances.ACCA PAPER F5 PERFORMANCE MANAGEMENT FINAL MOCK EXAM Answer ALL four questions Question 1 X Ltd uses an automated manufacturing process to produce an industrial chemical. of calculating the materials mix and yield variances for X Ltd.000 Required: (a) Prepare an operating statement which reconciles the budgeted profit to the actual profit for the period. (The statement should include the material mix and material yield variances).875 103.500 kgs $99. Write a brief report to the Production Manager of X Ltd that interprets the material price. The company budgeted to produce and sell 5.
The new product involves an advanced technology and is demonstrably better in performance and quality than its major competitor. The new product will be in competition with a large number of products from some 25 to 30 companies and particulars from one product selling at $65 per unit in quantities of 6. Required: (a) Advise.40 $1.80 $0.000 Fixed and/or allocated overhead in (x) $5000 $6000 $7500 Department time on new product* X Y Z Machine hours Direct labour hours Direct labour hours $2. the following data applies. The company believes that it has at least 12 to 18 months before competitors could achieve a comparable quality of product. none of whose local market share is less than 5% or more than 35%. with supporting figures.80 2 1. Prices in this local market have been fairly steady for some years. with brief explanations.000 per month which represents some 30% of the potential market for this new product. Direct materials Direct labour $12 per unit* $28 per unit* For each of its three production departments. Production department Unit of measurement Full cost overhead rate (x) Normal monthly volume on which (x) is based 12.5 3 *All these estimates are subject to an error of + 10%. what type of pricing strategy the company should adopt for its new product.000 per month and will be virtually unaffected by the price or sales level achieved by the new product.500 15. (17 marks) (25 marks) 3 . Selling and administration expenses for the new product are expected to be $20. The company estimates that its production costs for the new product will be as follows. The company generally sets its selling prices by adding a mark-up on factory cost of between 30% and 45%.000 25. explaining briefly the reason fort your recommendation.ACCA PAPER F5 PERFORMANCE MANAGEMENT FINAL MOCK EXAM Question 2 A company has developed a new product which it is about to launch on its local market. (8 marks) (b) Recommend a selling price for the new product. The company manufactures and sells other product. mostly towards the upper end.
(i) Return on capital employed (also known as return on investment) based upon closing capital employed) (ii) Net profit margin (iii) Asset turnover (iv) Current ratio.0 20.4 20X4 $ million 185.5 5.0 16. In recent years it has been criticised for providing a poor service to the travelling public in terms of punctuality.2 13.0 5.1 6.6 15.0 48.0 18.3 Sales revenue Earnings before interest and tax Interest Tax Earnings available to ordinary shareholders Summarised balance sheet as at 31 December $m Non-current assets (net) Current assets Inventory Receivables Cash 20X3 $m 100. Heighway Co operates a passenger railway service and is responsible for the operation of services and the maintenance of track signalling equipment and other facilities such as stations. In the last year Heighway Co has invested over $20 million in new carriages.0 9.0 Required (a) Calculate the following ratios for Heighway Co for 20X3 and 20X4.9 132. station facilities and track maintenance programmes in an attempt to counter these criticisms.9 2.2) (4.6 114. and (v) Gearing ratio (8 marks) (b) Briefly comment on the financial performance of Heighway Cc in 20X3 and 20X4 as revealed by the above ratios and suggest causes for any changes.5) 8.4) 10.6 11.2 15.4 25.7) (3.ACCA PAPER F5 PERFORMANCE MANAGEMENT FINAL MOCK EXAM Question 3 Heighway Co is a railway company.2 132. clearly showing your workings.5 (4. safety and the standard of facilities offered to passengers.4 Ordinary share capital ($1 shares) Reserves Amounts payable after more than one year 8% Debenture 20X9 Bankloan Payables due within one year 25.4 $m 20X4 $m 120.0 8.4 114. Summarised financial results for Heighway Co for the last two years are given below.4 3. Summarised income statement for the year ended 31 December 20X3 $ million 180.3 2.0 (3. (You are not required to calculate any other ratios.) (6 marks) 4 .0 35.0 45.
(6 marks) (d) Explain what is meant by short-termism and suggest ways in which a long-term view can be encouraged. (5 marks) (25 marks) 5 .ACCA PAPER F5 PERFORMANCE MANAGEMENT FINAL MOCK EXAM (c) Suggest THREE non-financial indicators that could be useful in measuring the performance of a passenger railway company and explain why your chosen indicators are important.
688 Calculate the overhead rate and the product unit costs under existing costing system. particularly for P2.000 60. For accounting period in question.000 units $6. (5 marks) (25 marks) END OF QUESTION PAPER 6 .000 18.000 390. P2 and P3.ACCA PAPER F5 PERFORMANCE MANAGEMENT FINAL MOCK EXAM Question 4 AME has three product lines P1. attracting additional business. a relatively new line.5 1 30% 1 P2 12.000 718. Since its creation the company has been using a single direct labour cost percentage to assign overhead costs to products. (4 marks) Identify for each overhead activity. have convinced management that the costing system is in need of some development.4 $16 $68 50 0.688 100. (9 marks) Comment on the results of the two costing systems in (a) and (b). A team spent several weeks collecting data (see table below) for the different activities and products.2 10 50% 22 Production volume Direct labour cost per unit Material cost per unit Selling price per unit Materials movements (in total) Machine hour per unit Set ups (in total) Proportion of engineering work Orders packed (in total) Activities Material handling and receiving Machine maintenance and depreciation Set up labour Engineering Packing Total Required (a) Overhead cost $150. an appropriate cost driver from the information supplied and then calculate the product unit costs using a system that assigns overheads on the basis of the use of activities. increasing overheads costs and a loss of market share.5 5 20% 7 P3 4. Despite P3.500 units $8 $25 $80 25 0. (7 marks) (b) (c) (d) Explain why ABC might lead to a more accurate assessment of management performance than absorption costing. given in the tables below is data on AME's three products lines and overhead costs: P1 7500 units $4 $18 $47 4 0. a major product.
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