Examination

Question and
Answer Book
Write your full examination number,
your contact ID and your name on a
double-sided card, which must be
attached to this booklet here.

Foundation Level Business Mathematics

3c FBSM
17 November 2003
Monday late afternoon

INSTRUCTIONS TO CANDIDATES
Read this page before you look at the questions

THIS QUESTION PAPER BOOKLET IS ALSO YOUR ANSWER BOOKLET.

Sufficient space has been provided for you to write your answers and also for workings where questions
require them. For section B questions, you must write your answers in the shaded space provided. Please
note that you will NOT receive marks for your notes or workings. Do not exceed the stated number of
words. Do NOT remove any sheets from this booklet: cross through neatly any work that is not to be
marked. Avoid the use of correction fluid.

You are allowed two hours to answer this question paper. All questions are compulsory.

Answer the ONE question in section A (this has 25 sub-questions and is on pages 2 – 12)

Answer the THREE questions in section B (these are on pages 14 – 21)

Maths Tables and Formulae are provided on pages 22 – 27

You are advised to spend 10 minutes reading through the paper before starting to answer the questions.
You should spend no more than 55 minutes on answering the ONE question in section A, which has 25
sub-questions.
You should spend no more than 55 minutes on answering the THREE questions in section B.

Hand this entire booklet to the invigilators at the end of the examination. You are NOT permitted to leave
the examination hall with this booklet.

Do NOT write your name or your contact ID anywhere on this booklet.

TURN OVER

For office use only Total One Two Three Four

Marks awarded (First marker) for each question

Marks awarded (Second marker) for each question

 The Chartered Institute of Management Accountants 2003

SECTION A — 50 MARKS
ANSWER ALL TWENTY-FIVE SUB-QUESTIONS – 2 MARKS EACH

Each of the sub-questions numbered from 1.1 to 1.25 inclusive, given below, has only ONE correct
answer.

REQUIRED:
Place a circle "O" around the letter A, B, C or D that gives the correct answer to each sub-question.
If you wish to change your mind about an answer, block out your first answer completely and then circle
another letter. You will NOT receive marks if more than one letter is circled.

Please note that you will NOT receive marks for any workings to these sub-questions. Sufficient space
has been provided for you to do your workings where these sub-questions require them.

Question One

1.1 A large department store wishes to carry out a survey by issuing a questionnaire to a sample of 100 of
its 2,000 account holders. The sample is to be selected as follows:

Each customer will be allocated a number from 1 to 2000. A table of random numbers from 1 to 20 will
then be used to select the first member of the sample. Every succeeding 20th member of the
population of account holders will then be selected.

This form of sampling is called

A stratified. B multi-stage. C systematic. D quota.

For office use only Total 1.1

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

FBSM 2 November 2003

1.2 The yearly sales of a particular product from three factories are represented by the following diagram:

Yearly Sales

8000
7000
6000
5000 Factory C
$000

4000 Factory B
3000 Factory A
2000
1000
0
2000 2001 2002

This diagram is an example of

A a Histogram.

B a multiple Bar Chart.

C a Component Bar Chart.

D an Ogive.

1.3 The solution to the simultaneous equations:

4x + 3y = 26
2x - y = 8
in the form (x,y) is

A (2, 5) B (-5, 2) C (-2, 5) D (5, 2)

Space for workings to 1.3

TURN OVER

For office use only Total 1.2 1.3

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

November 2003 3 FBSM

1.4
Y
20
18 x x
16
x x
14
12 x x
x x
10
x
8 xx x
6 x x
4 x x
2 x
0 X
0 2 4 6 8 10

Which of the following equations best represents the above scatter diagram:

A Y = 2X + 3 B Y = 3X + 2 C Y = 3X - 2 D Y = 2 - 3X

Space for workings to 1.4

1.5 A customer paid $230 for a television which had been reduced by 15%. The original price of the
television before the price reduction was closest to

A $243. B $265. C $271. D $276.

Space for workings to 1.5

For office use only Total 1.4 1.5

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

FBSM 4 November 2003

1.6 If the rank correlation coefficient between the performances of two groups of fifteen people performing
the same task was -0⋅1, which ONE of the following statements is true?

A There is perfect agreement between the performances of the two groups.

B There is moderate agreement between the performances of the two groups.

C There is no agreement between the performances of the two groups.

D This is an impossible result.

1.7 Since 1995, the average annual salaries for a group of workers have been index-linked to prices. The
table below shows the price index since 1997:
(1995 = 100)
Year 1997 1998 1999 2000 2001 2002
Price Index 112 118 122 125 127 130
If the average salaries were $30,000 in 1997, then the average salaries of the workers in 2002 would have
been closest to
A $31,800. B $33,600. C $34,821. D $36,000.

Space for workings to 1.7

TURN OVER

For office use only Total 1.6 1.7

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

November 2003 5 FBSM

1.8 A toy manufacturer sells 3 ranges of toys. The following table shows sales information for the last two
years:
Quantity
(000 units)
Range: Price 2001 2002
($/unit)
A 10 30 40
B 15 50 70
C 30 10 15

A relatives quantity index, to the nearest whole number, for the year 2002, with 2001 as the base year, will
be

A 144 B 141 C 139 D 69

Space for workings to 1.8

1.9 The sum, S, of the first n terms of a geometric series with first term a and common ratio r, is given by
the formula:
a(r n − 1)
S=
(r − 1)
The sum of the first 8 terms of a geometric series with common ratio 3 is 19,680.
The first term of this series is

A 7 B 6 C 5 D 4

Space for workings to 1.9

For office use only Total 1.8 1.9

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

FBSM 6 November 2003

 The following data are to be used to answer questions 1.10 and 1.11 below.
A cell phone retailer conducts a survey of 200 cell phone purchasers, and obtains the following results
relating to their ages in years:
Age Under 25 25 to 50 Over 50
Male 40 30 40
Female 60 20 10

1.10 The probability that a randomly selected purchaser is male and aged 50 or under is

A 0⋅15 B 0⋅27 C 0⋅35 D 0⋅64

1.11 If the selected purchaser is female, the probability that she is aged 25 to 50 is

A 0⋅10 B 0⋅22 C 0⋅25 D 0⋅35

Space for workings to 1.10 and 1.11

1.12 The following table shows the number of cars of a particular model sold by a dealer over the last five
weeks:
Week 1 2 3 4 5
Cars sold 8 3 7 9 4

The expected number of cars of this model to be sold in the year (50 weeks) is

A 300 B 310 C 325 D 350

Space for workings to 1.12

TURN OVER

For office use only Total 1.10 1.11 1.12

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question
November 2003 7 FBSM
1.13 A car insurance company estimates that in a given year, each policyholder will make a "small" claim of
$500 with a probability of 0⋅1, a "moderate" claim of $1,000 with a probability of 0⋅05, or a "large" claim
of $2,000 with a probability of 0⋅01.

In order to break even, between premiums taken in and claims paid out, the company should set the annual
premium for each policy at

A $100. B $120. C $140. D $160.

Space for workings to 1.13

The following data are to be used to answer questions 1.14 to 1.16 below.
Flights arriving at an airport are subject to delays. The length of the delays is normally
distributed with a mean of 20 minutes and a standard deviation of 8 minutes.

1.14 The probability that a flight will be delayed by less than 10 minutes is nearest to

A 0⋅894 B 0⋅494 C 0⋅250 D 0⋅106

1.15 The probability that a flight will be delayed by between 15 and 25 minutes is nearest to

A 0⋅268 B 0⋅465 C 0⋅535 D 0⋅732

1.16 Approximately 20% of the flight delays are less than

A 11 minutes B 13 minutes C 15 minutes D 17 minutes

Space for workings to 1.14 to 1.16

For office use only Total 1.13 1.14 1.15 1.16

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question
FBSM 8 November 2003
 The following data are to be used to answer questions 1.17 and 1.18 below.
The records of a supplier of an automobile part show that the quarterly demand over the past
three years was as follows:

2000 2001 2002

Quarter 1 2 3 4 1 2 3 4 1 2 3 4
Demand 142 54 162 206 130 50 174 198 126 42 162 186
(000 units)

1.17 Using a 4-point centred moving average, the trend component of the demand (000 units) for Quarter 4
of the year 2000 will be closest to

A 206. B 166. C 160. D 138.

1.18 If an additive model is assumed, and the seasonal components of the demand for quarters 2,3 and 4
are -88, 30 and 66 respectively, the seasonal component of the demand (000 units) for Quarter 1 will
be

A 8⋅0 B -8⋅0 C 2⋅7 D -2⋅7

Space for workings to 1.17 and 1.18

1.19 A small manufacturing company owns two machines, A and B. Machine A is valued at $15,000 ± 10%,
and machine B is valued at $25,000 ± 5%.
The maximum percentage error in the combined value of the two machines is closest to
A 7⋅0% B 7⋅5% C 10⋅0% D 15⋅0%

Space for workings to 1.19

TURN OVER

For office use only Total 1.17 1.18 1.19

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question
November 2003 9 FBSM
1.20 Which ONE of the following statements regarding sample measures is INCORRECT?

A The arithmetic mean is always distorted by extreme values.

B The median will not be distorted by extreme values.

C The mode can be distorted by extreme values.

D The standard deviation can be distorted by extreme values.

The following data are to be used to answer questions 1.21 and 1.22 below.
$20,000 is invested at an interest rate of 4%, which is compounded annually.

1.21 After 10 years, the investment will have a value, to the nearest $, of

A $23,798. B $25,408. C $27,398. D $29,605.

1.22 The investment will have approximately doubled after

A 18 years. B 20 years. C 22 years. D 25 years.

Space for workings to 1.21 and 1.22

For office use only Total 1.20 1.21 1.22

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

FBSM 10 November 2003

1.23 An individual has taken out a mortgage of $150,000, at a fixed interest rate of 5% per annum over 20
years. Repayments will commence one year after the mortgage is taken out.

The annual repayments will be closest to

A $12,276. B $12,036. C $11,796. D $11,076.

Space for workings to 1.23

1.24 If the annual rate of interest is 4⋅75%, the amount (to the nearest $) that should be invested now in
order to receive $5,000 per annum in perpetuity, with receipts starting one year from now, is

A $100,653. B $102,365. C $103,526. D $105,263.

Space for workings to 1.24

TURN OVER

For office use only Total 1.23 1.24

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

November 2003 11 FBSM

1.25 An item of machinery that was purchased 5 years ago for $100,000 now has a value of $50,000.
Assuming the reducing balance method of calculation, the annual rate of depreciation to the nearest
whole percentage point will be

A 17%. B 15%. C 13%. D 11%.

Space for workings to 1.25

(Total for Question One= 50 Marks)

End of Section A

For office use only Total 1.25

Marks awarded (First marker) for each sub-question
Marks awarded (Second marker) for each sub-question

FBSM 12 November 2003

 Section B starts on the next page

TURN OVER

November 2003 13 FBSM

SECTION B – 50 MARKS
ANSWER ALL THREE QUESTIONS

IMPORTANT
MARKS ARE AWARDED FOR COMPLETING THE SHADED BOXES WITH THE CORRECT
ANSWER WHERE A MARK IS INDICATED IN THE RIGHT-HAND COLUMN.

THERE ARE NO MARKS FOR COMPLETING THE MISSING FIGURES WHERE NO MARK IS
INDICATED, BUT COMPLETING THESE WILL HELP YOU OBTAIN THE CORRECT ANSWERS.

DO NOT WRITE IN THE MARGINS NOR IN THE COLUMNS FOR USE BY MARKERS.

Question Two

Because of an increasing population, the executive committee of a local community centre is planning to
build an extension to its main building. In order to fund this building project, the centre will need to have
$300,000 available at the beginning of January 2005.

To achieve this, the centre intends to make 8 equal quarterly instalments of $X into a sinking fund which
pays a quarterly compound interest rate of 1%. The first of the instalments was paid at the beginning of April
2003.

Do not write in these

columns below

Required: For use For use

by the by the
Write your answers to (a) and (b) in the shaded boxes below Marks first second
available marker marker
(a) Calculate the annual effective interest rate. 2
(b) Calculate the value of the quarterly instalments, $X. 4
Sub-total: 6

Note:
The sum of the first n terms of a geometric series with first term A and common ratio R, is:

A(R n − 1)
Sn =
(R − 1)

Space for workings for question two

Question Two continues on the next page

FBSM 14 November 2003
Question Two continued

The executive committee has estimated that the project will take one year to complete, and will be ready for
use in January 2006. The increased cash flows that will be generated by the centre’s extended facilities and
fundraising activities during the construction period have been estimated to be $50,000 for each of the first
five years, and then $30,000 for each of the next five years.
Do not write in these
columns below

Required: For use For use

by the by the
Write your answers to parts (c) to (e) in the shaded boxes below Marks first second
available marker marker
(c) The following table shows the calculations necessary to evaluate the Net
Present Value (NPV) of the project, assuming a constant discount rate of
5% per year. Complete the table by replacing the letters with the
appropriate numerical values:
Cash flow Discount Present
Year ($) factor value ($)
2005 = 0 (300,000)
1 50,000
2 50,000 A 2
3 50,000
4 50,000
5 50,000
6 30,000
7 30,000
8 30,000 B 2
9 30,000
10 30,000
NPV 18,290
(d) An alternative way of calculating the NPV would have been to use the
following formula:
NPV = -300,000 + (50,000 x C) + 30,000 x (D - C)
The values that should be inserted for C and D are:
C 2
D 2
(e) Comment on the NPV of the project.

maximum of 20 words 2

(Total for Question Two = 16 Marks)

Question Three starts on the next page

TURN OVER

November 2003 15 FBSM

Question Three

Airport Catering Ltd provides catering services at airports throughout Europe. Each month, the Sales
Manager is required to produce a statistical report that summarises the company’s performance.

The table below shows October's sales figures ($000) at 50 of its branches:

Sales
($000) Frequency

Less than 30 3
30 < 60 5
60 < 90 7
90 < 120 9
120 < 150 11
150 < 180 8
180 < 210 5
210 < 240 2
Total 50

Do not write in these

columns below

For use For use

Required: by the by the
Marks first second
Write your answers to part (a) in the shaded boxes below available marker marker
(a) The following table shows the workings leading to the calculation of
the mean and standard deviation of October’s sales.
Calculate the numerical values that would occupy the spaces in the
table shown as A, B and C.
Class Mid-
Sales Frequency
point f.x f.x2
($000) (f)
(x)
< 30 3
30 < 60 5
60 < 90 7 A 2
90 < 120 9 B 2
120 < 150 11 C 2
150 < 180 8
180 < 210 5
210 < 240 2
Total 50 5,970 859,050
(b) For October, calculate
(i) The mean sales ($000) 2
(ii) The standard deviation of the monthly sales ($000) 2
Sub-total: 10

Question Three continues on the next page

FBSM 16 November 2003

Question Three continued
Do not write in these
columns below

For use For use

Required: by the by the
Marks first second
Write your answer to part (c) in the shaded box below available marker marker
(c) For September, the mean and standard deviation of the monthly
sales figures were $120,100 and $34,450 respectively.
Compare the two months’ sales figures.

maximum of 30 words 2
(d) Use the following axes to draw an ogive for October’s sales figures:

AIRPORT CATERING Ltd

%
100
90
80
70
60
50
40
30
20
10
0
30 60 90 120 150 180 210 240

SALES($000)
3
sub-total: 5

Space for workings to question three

Question Three continues on the next page

TURN OVER

November 2003 17 FBSM

Question Three continued
Do not write in these
columns below

For use For use

Required: by the by the
Marks first second
Write your answer to part (e) in the shaded box below available marker marker
(e) The company operates a bonus scheme under which each one of the
10 branches with the highest sales is given a free flight, which can
then be allocated to a member of staff at the branch manager’s
discretion. Based on your ogive, estimate the monthly sales figure
needed to qualify for the bonus in October.
The estimated monthly figure is $ 2

Space for workings to question three

(Total for Question Three = 17 marks)

FBSM 18 November 2003

Question Four

Each year, a large company, which manufactures domestic electrical appliances, pays its employees an
annual bonus. The Company Accountant wishes to assess the effect of the previous year’s bonus on the
company’s output for the following year.

Data relating to bonus paid (as a percentage of annual salary) and total output (tens of thousands of units
sold) over an 8-year period are given in the following table:

Previous years bonus (%) 0 1 2 3 4 5 6 7

Following years output (0,000s) 3 6 14 15 20 18 24 25

Do not write in these

columns below

For use For use

Required: by the by the
Marks first second
available marker marker
(a) Plot a scatter diagram of the above data on the axes provided:
Scatter Diagram

30
Output (0,000 units)

25

20

15

10

0
0 1 2 3 4 5 6 7 8

Bonus (%)

2
Comment on the relationship shown by your scatter diagram in the
(b) shaded box below.

maximum of 20 words 2
Sub-total: 4

Question Four continues on the next page

TURN OVER

November 2003 19 FBSM

Question Four continued
Do not write in these
columns below

For use For use

Required: by the by the
Marks first second
Write your answers to parts (c) and (d) in the shaded boxes below available marker marker
(c) If Bonus (%) is represented by X, and Output (0,000s) is represented
by Y, the following totals have been calculated from the data given in
the table on page 19:
ΣX = 28, ΣY = 125, ΣX2 = 140, ΣY2 = 2391, ΣX.Y = 568
Calculate the correlation coefficient between Bonus and Output,
giving your answer correct to 2 decimal places.
4
(d) The least squares regression equation relating the previous year's
annual bonus to the following year’s output is:
Output (0,000s) = 4⋅75 + 3⋅11 x Bonus (%)
In the above equation, what does the value 4⋅75 represent?

maximum of 20 words 3
Sub-total: 7

Space for workings to question four

Question Four continues on the next page

FBSM 20 November 2003

Question Four continued
Do not write in these
columns below

For use For use

Required: by the by the
Marks first second
Write your answers to parts (e) to (g) in the shaded boxes below available marker marker
(e) If the annual bonus paid last year was 10%, predict the output for the
current year.
2
(f) Comment on the reliability of the prediction that you made in part (e)

maximum of 20 words 2
(g) Another similar manufacturing company has found that the coefficient
of determination between Bonus and Output is 0⋅86. Explain what this
means.

maximum of 20 words 2

(Total for Question Four = 17 Marks)

Space for workings to question four

End of Question Paper

Maths Tables and Formulae are on pages 22 – 27

November 2003 21 FBSM

FBSM 22 November 2003
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 3c

FBSM

Business Mathematics

Monday late afternoon

FBSM 28 November 2003