Examiner’s report

MA2 Managing Costs and Finance

For CBE exams covering September 2017 to June 2018

General Comments

The intention of this report is that, when considered in conjunction with previous reports,
candidates at future sittings will have a resource which maximises their chance of success. The
most effective way to use these reports is to consider both the technical content of each question,
and the approach to answering the question – noting that different question types will require
slightly different approaches.

In considering the technical content, candidates should make sure that they have a clear
understanding of that content. Whilst not every candidate will use exactly the same approach, it is
important to ensure that a logical and sequential approach is applied, based on relevant technical
knowledge.

The examination consists of 50 objective test questions, each worth 2 marks. The purpose of this
report is to provide illustrations of questions which have especially posed problems for candidates.

The three sample multiple-choice questions below cover different aspects of the syllabus. The
approach to correctly answering each question is explained and the common incorrect
approaches, along with the misunderstandings which they indicate, are highlighted. Answering
objective test questions requires candidates to have both a clear understanding of the subject
matter being examined and a logical approach.

Sample Questions for Discussion

Example 1

Which of the following statements, about presenting information, is/are TRUE?

(1) In a component column chart, the width of each column will be the same
(2) On a line graph, the dependent variable is on the x axis

A Both 1 and 2
B 1 only
C 2 only
D Neither 1 nor 2

Examiner’s report – MA2 Sept 2017 -June 2018 1

Here is an example of a component column chart to aid with understanding the question:

As illustrated in the component chart above, Statement 1 is therefore correct where the width of
each column is correct.

Whereas statement 2 is incorrect. The ‘independent’ variable goes on the x-axis (the bottom,
horizontal one) and the “dependent” variable goes on the y-axis (the left side, vertical one).

The correct answer was therefore option B, that statement 1 only was true.
Most candidates selected option A; that both statements were true or option D that neither
statement was true; in error.

Example 2

The following unit costs are incurred in the production of 1,000 units of a product in a period:

$ per unit

Variable costs 7.80

Semi-variable costs 5.30
Fixed costs 6.50
Total costs 19.60

$3·70 per unit of the semi-variable costs are fixed costs.

What total costs would be incurred for production of 1,200 units of the product in a period?

A $23,520
B $21,480
C $21,900
D $21,160

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Very few candidates correctly split semi-variable costs and remembered to use the 1,000 units for
fixed costs per unit as shown here:

Variable Cost Fixed Cost

Variable costs per unit $ 7.8
Semi-variable costs per unit $ 1.6 3.7
Fixed costs per unit $ 6.50
Total cost per unit $ 9.4 10.20 Correct Answer
Units 1,200 1,000 Option B
Total cost $ 11,280 10,200 21,480

Most candidates forgot to multiply fixed costs by the original estimate based on 1,000 units.
Thus calculating a total cost at $23,520 as displayed below by mistake.

Variable Cost Fixed Cost

Variable costs per unit $ 7.80
Semi-variable costs per unit $ 1.60 3.70
Fixed costs per unit $ 6.50
Total cost per unit $ 9.40 10.20
Units 1,200 1,200 OptionA
Total cost $ 11,280 12,240 23,520

Quite a few got the split of variable and fixed costs the wrong way around when splitting semi-
variable costs as follows:

Variable Cost Fixed Cost

Variable costs per unit $ 7.80
Semi-variable costs per unit $ 3.70 1.60
Fixed costs per unit $ 6.50
Total cost per unit $ 11.5 8.1
Units 1,200 1,000 Option C
Total cost $ 13,800 8,100 21,900

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A few candidates treated the whole of semi-variable as fixed costs by mistake:

Variable Cost Fixed Cost

Variable costs per unit $ 7.80
Semi-variable costs per unit $ 5.30
Fixed costs per unit $ 6.50
Total cost per unit $ 7.80 11.80
Units 1,200 1,000 Option D
Total cost $ 9,360 11,800 21,160

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Example 3

A process with costs of $15,600 has resulted in 1,000 kilogrammes (kg) of product A and 4,000 kg
of product B. Product A can be sold for $50 per kg, but only after further processing at a cost of
$10 per kg. Product B can be sold for $20 per kg with no further processing.

How much of the process costs will be apportioned to product A, using the net realisable
value method?
A $5,200

B $6,000

C $3,120

D $10,400

Only a few candidates correctly chose $40 per kg after deducting the further processing cost
for product A as follows:
$
per
kg kg $ $ Correct Answer is Option A

A 1,000 40 40,000 5,200 40,000/120,000*15,600

B 4,000 20 80,000

5,000 120,000

Some candidates chose option C which used the kilograms as the basis of
apportionment by mistake:
kg $

A 1,000 3,120 1,000/5,000*15,600

B 4,000
5,000

Some candidates chose option B where they used the $50 per kg for product A,
ignoring the further processing cost in error:
$
per
kg kg $ $

A 1,000 50 50,000 6,000 50,000/130,000*15,600

B 4,000 20 80,000

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 5,000 130,000

A select few chose option D where they used the total for product B as the basis of
apportionment by mistake:
$ per
kg kg $ $

A 1,000 40 40,000 10,400 80,000/120,000*15,600

B 4,000 20 80,000

5,000 120,000

Summary

The three multiple-choice questions illustrated in this report reveal a number of misunderstandings,
confusion or a lack of knowledge amongst candidates regarding the particular topics being
examined. In many cases this may be symptomatic of a more widespread problem which can only
be overcome by a rigorous study program and by practicing objective test questions.

Candidates preparing for future examinations should try to ensure that they develop a clear
understanding of the different areas of the syllabus, read questions carefully and think logically
when answering them.

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