Lincoln International Business School

Time Constrained Assessment - Resit

Department Accountancy, Finance and Economics

Module Title Finance and Accounting

Module Code ACC9011M
Module Coordinator Geeta Lakshmi/Umer Farooq
Duration of 4 hours and 30 minutes
Assessment
Date Wednesday 22nd February 2023

Release Time 10:00am

Submission Time 2:30pm

General Instructions to Candidates.

1. In sitting this examination you agree to comply with the University
of Lincoln Code of Conduct in Examinations
2. You must submit your answers as a MS Word Document to Turnitin on
Blackboard before the submission time: failure to do so will be
classified as misconduct in examinations.
We strongly recommend you submit 15 minutes prior to the deadline.
3. You must also send a copy of your work to the
ACC9011M@lincoln.ac.uk at the same time. You must place the Module
Code and your Student Id in the Subject Field of the e-mail.
4. Hand-written notes, expressions, symbols, Excel workings, or diagrams,
must be inserted into the Word Document.
5. This assessment is an open resource format: you may use online
resources, lecture and seminar notes, text books and journals.
6. All work will be subject to plagiarism and academic integrity checks.
In submitting your assessment you are claiming that it is your own original
work; if standard checks suggest otherwise, Academic Misconduct
Regulations will be applied.
7. The duration of the Time Constrained Assessment will vary for those
students with Personal Academic Study Support (PASS). Extensions
do not apply, but Extenuating Circumstances can be applied for in the
normal way.
8. A reference list is not required.

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Module Specific Instructions to Candidates

1. QUESTIONS TO ANSWER:
Answer ALL THREE questions
2. MARKING SCHEME:
Question 1 is worth 40 marks
Question 2 is worth 35 marks
Question 3 is worth 25 marks
3. MATERIALS PROVIDED:
None
4. MATERIALS PERMITTED:
Candidates whose first language is not English are permitted an
unmarked translation dictionary into the examination
Non-programmable calculator

5. Show all workings

6. All Accountancy, Finance and Economics students are required to uphold

the highest ethical and professional standards in line with professional
bodies. Any identified cases of unethical behaviour during the assessment
may be reported to a relevant professional body and may impact on your
ability to claim exemptions. Students are also welcome to report any
detected cases of integrity breach (anonymous reporting of a breach holds
no weight).

7. Remember that due to the extended time limit, students may be tempted to
write overly long answers. Please note, lengthy answers will not
necessarily get you extra marks for discursive questions. Be guided by the
marks available for each question and focus on the content and
requirements.

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QUESTION 1

Mean Beans Plc. is a manufacturer of baked beans and bean products, as ingredients for
other products, headquartered within the UK. It has, as of recent times, faced increased
pressures of bean prices, such as soya and energy prices. The manufacturing plant within
the UK runs 24 hrs a day. Transportation prices for the movement of produce have also
experienced some volatility.

Because of this Mean Beans Plc. which is “mid-priced” currently in the market, is considering
various decisions, in relation to both price and costs, of the products which it sells to the
market.

Required:

a. Explain the impact of these changes on the contribution, fixed costs, and break-even
point of Mean Beans Plc. Illustrate your argument with the use of appropriate equations
or graphs in this context.
(10 Marks)
Required:

b. Evaluate how those factors you have identified in part (a) might impact the company’s
published financial statements (income statement, statement of financial position and
cash flow statement).
(10 Marks)
Required:

c. Explain how a potential shareholder may use ratio analysis to appraise the
performance of a PLC, such as Mean Beans Plc. against that of any other investments
that they could have made with their capital.

You should discuss the FOUR most relevant financial ratios, setting out how these
may be impacted by the deterioration in the economic outlook.
(10 Marks)
Required:

d. Classify Means Beans product {Complement, substitute, Giffen, Elastic, Inelastic etc.}
and explain the likely impact of decisions which the firm can make in terms of.
• Price Elasticity of Demand,
• Income Elasticity of Demand,
Discussing how these factors are affected by the wider-economic outlook.
(10 Marks)

TOTAL 40 MARKS

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QUESTION 2

King plc is in the process of evaluating the feasibility of a long-term project. The project
requires an initial investment of £10 million today, and the project will generate annual future
cash flows of £4 million in both years 1 and year 2, £6 million in year 3 and £3 million in year
4.

The company uses a discount factor of 9% to evaluate its capital projects and it is assumed
that all cash flows occur at the end of the relevant year.

Required:
a. Companies use different investment appraisal techniques to determine the feasibility
of capital projects. Compare the Accounting Rate of Return technique to the Net
Present Value technique and discuss which investment appraisal technique is more
widely used.
(10 Marks)
Required:

b. To initiate the project, company needs an investment of £10 million. Discuss in detail,
the factors that King plc should consider before selecting either equity or debt as a
suitable source of finance for the project.
(10 Marks)

Required:

c. Calculate the Net Present Value and the Internal rate of Return for the project and
comment on the feasibility of the project based on both the methods.
(10 Marks)
Required:

d. Discuss any non-financial factors that King plc should consider as a result of
undertaking the project.
(5 Marks)

TOTAL 35 MARKS

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QUESTION 3

Cups plc manufacture standardised high-end cups which it sells to its customers. The selling
price of a single cup is £20 per unit and for the next year the company expects to sell 6,000
cups. The business’s costs are expected to be as follows:

Variable material cost per cup: £4

Variable labour cost per cup: £3
Variable selling cost per cup: £1

Fixed manufacturing costs will be £40,000 per annum while the fixed administrative costs will
be £20,000 per annum.

Required:

a. For Cups plc, determine the current contribution, current profit, the break-even point
(in number of cups) and the margin of safety in percentage. Clearly show your
workings.
(10 Marks)
Required:

b. Explain the significance of the break-even point and the margin of safety calculated in
part (a).
(5 Marks)
Required:

c. Ratio analysis is a widely used tool for financial statements analysis. Discuss in detail,
the inherent limitations of using ratios analysis for an investor analysing the financial
statement of a company.
(10 Marks)

TOTAL 25 MARKS

You have now reached the end of the examination paper and should have answered a
total of THREE questions.

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