Grand Test 1 Autumn 2023 SAUD TARIQ

CAF 6 Managerial & Financial Analysis

ST Academy
Certificate in Accounting and Finance Stage Examination
May 26, 2023
55 Minutes – 30 marks
Additional reading time – 5 minutes

CAF-6 Managerial & Financial Analysis (Test 1)

Q1) Hasnain Ltd planned to commence business on 1st January 2024 and provided following
information:
• It is anticipated that 40% of the following month’s sales will be manufactured in January. Each
month thereafter the production will consist of 60% of the current month’s sales and 40% of
the following month’s sales.
• Estimated sales are:
Units Rs.
Jan Nil Nil
Feb 3,200 80,000
Mar 3,600 90,000
Apr 4,000 100,000
May 4,000 100,000
• Material cost per unit is Rs 8.
• Raw material stocks costing Rs. 10,000 have been purchased (out of manager’s Rs. 80,000) to
enable production to commence and it is intended to buy, each month, and 70% of the
materials required for the following month’s production requirements. The other 30% will be
purchased in the month of production.
• Payment will be made in 30 days.
Required:
Compute month wise payment of Materials from January to April (8 Marks)

Q2)

(2 Marks)
Lectures: https://sta.saudtariq.com/Course/Detail/5117 1 Sir Saud Tariq (CAF 3, CAF 6, CFAP 3, CFAP 4, MSA 2)
 Grand Test 1 Autumn 2023 SAUD TARIQ
CAF 6 Managerial & Financial Analysis
ST Academy
Q3)

Jupiter Confectionery Ltd manufactures four brands of chocolate bar. It is an old, established
business and relies heavily on the traditional qualities of rich-tasting chocolate and prestige
packaging to sell its products. It rarely introduces new brands – its last launch was three years
ago, but the other three brands are each more than ten years old. No extension strategies have
been used. The products are:
■ Orion – the newest brand, designed to appeal to teenagers with Star Wars wrappers and a
competitive price. Sales are increasing at a steady rate.
■ Venus – the original product of the company, a dark, rich chocolate bar with a black-and-gold
wrapper. The same size as most bars, but slightly more expensive – to suit its image. Sales and
cash flow from this product have helped to finance the launch of the other three.
■ Sun – the firm’s only attempt at boxes of chocolates. There is intense competition in this
high-value and high-profit-margin market sector. Sales figures are given below.
■ Mercury – this is a very sweet soft-centred bar that has been very popular with older
consumers. Sales have declined in recent years because of imports of healthier low-fat
chocolates. Old stocks are being returned by retailers.
The marketing manager is concerned both about sales of Mercury bars and the sales record of
Sun boxes. Should they both be dropped or could sales be revived? The manager decides to
analyse the current sales of the range of products by using product portfolio analysis.
Sales of Sun boxes of chocolates (units)

2009 120,000
2010 125,000
2011 115,000
2012 123,000
2013 124.000

Required:
a) Define the term ‘extension strategies’. (2 Marks)
b) What stage of its product life cycle does the Sun box of chocolates appear to be in? (3 Marks)
c) Outline the options available to the marketing manager for the Sun box of chocolates
product. (3 Marks)
d) Outline two problems this business could face as a consequence of launching very few new
products. (2 Marks)
e) The business has decided to try to extend the life of the Sun box of chocolates product.
Evaluate and explain two extension strategies that it could use in your country (4 Marks)

Lectures: https://sta.saudtariq.com/Course/Detail/5117 2 Sir Saud Tariq (CAF 3, CAF 6, CFAP 3, CFAP 4, MSA 2)
 Grand Test 1 Autumn 2023 SAUD TARIQ
CAF 6 Managerial & Financial Analysis
ST Academy

(4-6)

4)

5)

6)

(2 Marks for Each of the above MCQ from 4 to 6… Total 6 Marks (2 Marks x 3 MCQs))

Lectures: https://sta.saudtariq.com/Course/Detail/5117 3 Sir Saud Tariq (CAF 3, CAF 6, CFAP 3, CFAP 4, MSA 2)
 Grand Test 1 Autumn 2023 SAUD TARIQ
CAF 6 Managerial & Financial Analysis
ST Academy
SOLUTION
Q2) Arsal Limited

Production Units = Sales + Closing – Opening

Jan Feb March April May
Sales (units) (1 Mark) 0 3,200 3,600 4,000 4,000
Add Closing Stock (0.5 Each = 2 Marks) 1,280 1,440 1,600 1,600
(Next month Sales x 40%)
Less Opening Stock (1 Mark) (- ) (1,280) (1,440) (1,600)
Production Units 1,280 3,360 3,760 4,000
Material Budgets

Materials Budget Jan Feb March April

Production Unit 1,280 3,360 3,760 4,000
Material Cost / Unit (0.5 Mark) x8 x8 x8 x8
Material Usage 10,240 26,880 30,080 32,000
Add Closing (0.5 Each = 1.5 Marks) 18,816 21,056 22,400
(Next month required x 70%)
Less Opening (1 Mark) (10,000) (18,816) (21,056)
Purchases kgs (Rs.) 19,056 29,120 31,424
Payment Period (1 Mark) Feb March April

MCQ Answers:
2) C

MCQ Answers:
4) A
5) A
6) C

Lectures: https://sta.saudtariq.com/Course/Detail/5117 4 Sir Saud Tariq (CAF 3, CAF 6, CFAP 3, CFAP 4, MSA 2)
 Grand Test 1 Autumn 2023 SAUD TARIQ
CAF 6 Managerial & Financial Analysis
ST Academy
Question 3)
2a)
• Changes made to a product to extend maturity and (1 Mark)
• Avoid decline (1 Mark)

2b) Sales for the Sun box of chocolates peaked in 2010 before falling in 2011; the product has
reached maturity and saturation (1.5 Marks). Growth in sales between 2012 and 2013 may
have been extension strategy. (1.5 Marks)
(1.5 Mark for identifying maturity stage and further 1.5 Marks for identifying Extension
Strategy)

2c) Possible Strategies:

• Extension strategies, such as new packaging or new flavours of chocolates;
• divestment could be adopted;
• price could be reduced to make the product more competitive

(1 Mark for each point below… Total 3 Marks… Give marks only if any other sensible point is
mentioned by student other than those mentioned above)

2d) Possible Problems:

• Dependency on few products for future cash and profit. Difficulty in arranging finances
for new products when needed.
• Decline of product may force business to shut down operations.
• Image of business is affected due to offering small range of products.
(1 Mark for each point below… Total 2 Marks as only 2 points need to be mentioned… Give
marks only if any other sensible point is mentioned by student other than those mentioned
above)

2e)
Extension
Commentary
strategy
• A cheap extension strategy. Packaging may appear dated and a new design can be
New packaging,
used to revitalise sales.
new sizes
• Launching product in new box sizes may encourage new users and more frequent use.
• Market research to identify which are the most and least popular choices within the
New flavours
selection box.
Reposition the • May be possible to develop lower fat and sugar product, a healthier alternative to
product competitors.
New users • Find new markets for the product.
• Focus on the core features that make Sun different from the competition and model
Rebrand and
the new brand image on them.
relaunch
• Rebranding will be expensive and requires market research.
(For each of the above 1 Mark for identification of strategy and 1 Mark for its commentary)
Total 4 Marks (2 Marks x 2 Strategies).. Any 2 strategies will be enough
Lectures: https://sta.saudtariq.com/Course/Detail/5117 5 Sir Saud Tariq (CAF 3, CAF 6, CFAP 3, CFAP 4, MSA 2)