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Paper CPGA – CIMA Professional Gateway Assessment

Post Exam Guide


May 2010 Exam

General Comments

Section B, the multiple choice section was generally well attempted by candidates. Of the three 25
mark questions, question two, the project management question generally gained most marks.
Question three, the consolidation question, was often very well answered by the stronger candidates
though many candidates gained few marks on this question. With regard to question two, the
management accounting question, many candidates appeared to have spent too much time on
numbers, when discussion and interpretation gained the most marks.

Question 1

(a) Using customer based profitability analysis, evaluate each of GM Ltd's three customers.
Advise GM Ltd, with reasons, which customer is the most profitable.
(8 marks)

(b) Discuss the key factors that should be considered when deciding whether or not to
discontinue supplying a customer who is contributing relatively little profit in comparison with
other customers in GM Ltd.
(5 marks)

(c) GM Ltd is interested in the introduction of Just-in-Time (JIT). Advise GM Ltd on the
advantages and disadvantages that could result from using this method.

(6 marks)

(d) There is the possibility of introducing a new product, plastic moulded garden units, into GM
Ltd's range and producing them in the existing factory. Explain how target and lifecycle
costing may be relevant to the management team in making this decision to adopt the new
product to improve profitability.
(6 marks)

(Total for Question Five = 25 marks)

Rationale
This question examines candidates' ability across several of the learning outcomes in area B of the P2
syllabus.

Suggested Approach
The majority of the marks within this question were awarded for discussion, explanation and supporting
decision making. Candidates who gained a high proportion of marks appreciated that the numbers were
relatively easy to complete but the discussion was expected to be insightful with regard to planning and
strategy. It required a comprehensive knowledge of strategic cost planning and analysis in the quest for
sustainable competitive advantage. Often, too little time was allocated to the written sections with regard
to marks awarded.

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Marking Guide Marks

(a)
Contribution 1
Contribution margin (%) 1
Profit per customer 1
Profit margin per customer (%) 1
Order 1
Discussion 4
Max 8
(b)
1 mark per key factor Max 5

(c)
Explanation of JIT 1
½ mark for each advantage and disadvantage 5
Max 6
(d)
1 mark per relevant point made Max 6

Please refer to published answers for relevant factors and points, etc.
Maximum marks awarded 25

Examiner’s Comments

Many candidates spent too much time on calculations to the detriment of discussion which carried more
marks.

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Question 2(a)
Describe the ways in which the proposed project in PT Hospital differs from 'business as usual' work.
(10 marks)

Rationale
This question examines candidates' comprehension of the specific attributes of a project. It tests learning
outcome B 1 (a) 'identify a project, a program and their attributes' of the E2 syllabus.
Suggested Approach

Answers should describe the specific attributes of the proposed project in PT Hospital that distinguish it
from business as usual work.
To gain a pass mark, answers must develop to beyond a list of attributes, but rather should describe the
attributes. Good answers will use the scenario to provide some specific examples.

Marking Guide Marks

Project lifecycle Up to 2
Other attributes e.g. 1
Specific purpose 1
Scope 1
Defined start and end time 1
Temporary process 1
Non-routine work 1
Schedule of tasks 1
Cost/budget constraints 1
Unique/non repetitive 1
Other 1
Maximum marks awarded 10

Question 2(b)

Explain the different stages that would be involved in the project management process to design and
implement the new pay and reward system for PT Hospital.
(15 marks)

Rationale
This question assesses candidates' understanding of the different stages involved in the process of project
management. It tests learning outcome B 1 (d) 'identify the characteristics of each phase in the project
process' of the E2 syllabus.

Suggested Approach
The answer should develop with reference to the different stages involved in the process of project
management.
Weak answers will simply describe the stages of the project. Good answers will develop the outline of the
different stages with specific reference to the design and implementation on the new pay and reward
system for PT Hospital.

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Marking Guide Marks

Initiation and identification of need Up to 4


Planning Up to 4
Executing/Implementing Up to 4
Controlling/Managing the ongoing project Up to 4
Completing/Post audit etc. Up to 4
Maximum marks awarded 15

Examiner’s Comments
Many candidates performed quite well on this question. Poorer answers were insufficiently developed and
were not applied to the scenario provided.

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Question 3

Prepare the consolidated cash flow statement of the BX group for the financial year ended 30 June 2009
in the form required by IAS 7 Statement of cash flows, and using the indirect method. Notes to the cash
flow statement are NOT required, but full workings should be shown
(25 marks)

Rationale
The question related to syllabus area A of the F2 syllabus.and learning outcome A 1 (a) 'prepare a
complete set of consolidated financial statements in a form suitable for publication for a group of
companies'. Complications include the acquisition during the financial year of a majority shareholding in a
new subsidiary in exchange for a combination of shares or cash.

Suggested Approach
• Calculate net cash from operating activities by taking into account adjustments for profit on
disposal of property, depreciation and finance cost, and by adjusting the movements in working
capital and for interest and income tax paid.
• Calculate cash flows from investing activities
• Present cash flow statement in the format required by IAS 7

Marking Guide Marks

Adjustments to profit 3
Calculation of working capital movements 6
Calculation of interest and income tax paid 5
Calculation of cash flows from investing activities 5
Calculation of cash flows from financing activities 5
Presentation of cash flow statement 1
Maximum marks awarded 25

Examiner’s Comments

This question was done very well by some candidates but also very badly in some cases.

Common errors included failure to take the acquisition into account in calculating movements in working
capital items and the inclusion of non cash items in the cash flow statement. For example, many
candidates included the profit on the sale of the property rather than the proceeds of sale in cash flows
from investing activities.

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Paper CPGA – CIMA Professional Gateway Assessment
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May 2010 Exam

Question 4

Question 4.1

A company manufactures three products using the same machine which has limited time available. The
following cost and selling price details relate to the three products:
Product E F G
$/unit $/unit $/unit
Selling price 35 31 47

Direct material 15 7 12
Direct labour 6 10 14
Variable overhead 4 6 7
Fixed overhead 7 5 10

Profit 6 3 4

Minutes per unit Minutes per unit Minutes per unit


Machine time 30 14 24

The correct rank order for the three products so that the company maximises its profits as measured using
throughput accounting is
A EGF
B GEF
C GFE
D FGE
(2 marks)
The answer is D

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Question 4.2

A company uses a standard absorption costing system and adjusts for any under or over absorbed
overheads at the end of each period. The company produces only one type of product. The unit standard
costs were the same in both March and April.
Data for April included:
Budget Actual
Sales volume 90,000 units 85,000 units
Production volume 80,000 units 78,000 units

Total fixed production overheads $400,000 $395,000


Selling price per unit $11 $14
Variable production costs per unit $4 $4
The sales volume profit variance for April was
A $35,000 adverse
B $10,000 adverse
C $50,000 adverse
D $14,000 adverse
(2 marks)
(90,000 - 85,000) x standard profit per unit = 5,000 x $2
The answer is B

Question 4.3

The following data relate to a manufacturing company. At the beginning of April there was no inventory.
During April, 2,000 units of Product Y were produced but only 1,750 were sold. The financial data for
Product Y for April were as follows:
$
Materials 32,000
Labour 12,600
Variable production overheads 9,400
Fixed production overheads 22,500
Variable selling costs 6,000
Fixed selling costs 19,300
Total costs for Product Y 101,800
The value of inventory of Product Y at the end of April using a marginal costing approach was:
A $6,750
B $5,575
C $9,563
D $7,500
(2 marks)
Marginal cost values the inventory at the variable production cost of £54,000.
1/8 of production cost was in inventory
1/8 of £54,000 = £6,750
The answer is A

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Question 4.4

A company is considering a short-term pricing decision for a contract that would utilise some material D
that it has held in inventory for some time. The company does not foresee any other use for the material.
The work would require 1,000 kgs of material D. There are 800 kgs of material D in inventory, which were
bought some time ago at a cost of $3 per kg. The material held in inventory could currently be sold for
$3.50 per kg. The current purchase price of material D is $4.50 per kg.
The relevant cost of material D for the company to use when making its pricing decision for the contract is
closest to
A $3,700
B $3,500
C $4,500
D $3,300
(2 marks)
800kg x resale price of $3.50 = $2,800
200kg x purchase price of $4.50 = $900
Total = $3,700
The answer is A

Question 4.5

In the typical hierarchical organisation, the requirement for a lower level manager to report to a higher
level manager in the chain of command is known as:
A Authority
B Empowerment
C Delegation
D Accountability
(2 marks)

The answer is D

Question 4.6

Decisions about acquisitions and mergers occur at which ONE of the following levels of strategy?
A Functional
B Business
C Corporate
D Competition
(2 marks)

The answer is C

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Paper CPGA – CIMA Professional Gateway Assessment
Post Exam Guide
May 2010 Exam

Question 4.7

Organisational conflict between different levels in the organisation’s hierarchy is known as what type of
conflict?
(2 marks)

The answer is Vertical conflict

Question 4.8

Identify each of the different team roles as defined by Belbin for the following:
(i) Gives attention to detail and is concerned with meeting deadlines
(ii) Supports other members of the team and helps to promote harmony
(iii) Imaginative and good at coming up with ideas and suggestions
(3 marks)

The answer is (i) Completer/Finisher, (ii) Team Worker, (iii) Plant

Question 4.9

JAC operates a defined benefit pension plan for its employees. The fair value of the plan assets at 1 June
2008 was $3,100,000. JAC made contributions of $300,000 to the plan in the year to 31 May 2009 and
the expected return on assets has been calculated at $190,000. The pension plan paid out a total of
$225,000 in benefits in the period and the fair value of the plan assets at 31 May 2009 was $3,340,000.
The actuarial gain or loss in respect of the pension plan assets of JAC’s defined benefit pension plan for
the year ended 31 May 2009 is:
A $125,000 loss
B $25,000 loss
C $25,000 gain
D $125,000 gain
(2 marks)
Pension plan assets $000
FV of plan assets at 1 June 2008 3,100
Contributions made 300
Expected return on assets 190
Benefits paid (225)
Actuarial loss (balancing figure) (25)
FV of plan assets at 31 Mat 2009 3,340
The answer is B

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Paper CPGA – CIMA Professional Gateway Assessment
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May 2010 Exam

Question 4.10

MX had 5 million $1 ordinary shares in issue at 1 May 2008. On 30 September 2008 MX issued a further
2 million $1 ordinary shares at par.
Profit before tax for the year ended 30 April 2009 was $650,000 and the related income tax charge was
$210,000.
The basic earnings per share of MX for the year to 30 April 2009 is:
A 6.9 cents per share
B 7.1 cents per share
C 10.5 cents per share
D 13.5 cents per share
(2 marks)
Post tax earnings $440,000
Weighted average number of shares in issue:
1 May - 30 September 5 million shares x5/12 months 2,083
1 October - 30 April 7 million shares x 7/12 months 4,083
6,166
Earnings per share $440,000/6,166,000 7.1 cents per
share
The answer is B

Question 4.11

AB, CD and EF are listed entities operating in the same business sector. At 31 December 2009 their P/E
ratios were reported as follows:
AB 17.1
CD 13.2
EF 9.3
Which ONE of the following statements about these P/E ratios is correct?
A AB is regarded by the market as the riskiest of the three entities
B AB has the highest earnings per share of the three entities
C CD represents the safest investment because its P/E lies approximately midway between the other
two
D EF’s share price may be relatively lower than that of AB and CD because of an adverse effect such
as a profit warning.

The answer is D

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May 2010 Exam

Question 4.12

The Global Reporting Initiative created a Sustainability Reporting Framework, which provides details of
disclosures that entities should include in their corporate reports.
Which ONE of the following is not specified in that framework as an area for which disclosures should be
provided?
A Economic
B Environmental
C Segmental
D Social
(2 marks)
The answer is C

Rationale

Question One sub-questions 1.1 to 1.10 test candidates’ knowledge of a wide variety of topics within the
syllabus through the use of objective test questions (OTQs).

Suggested Approach/Marking Guide Marks

Sub-questions 4.1 to 4.12. Except for 4.8 where 1 mark was awarded for each component
these sub-questions have been constructed on the basis that there is only one correct 0 or 2
answer. Marking is therefore on the basis of 2 marks for a correct answer and 0 marks for
an incorrect answer.

Examiner’s Comments
Many candidates scored a pass on this question.

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