Formal Exams SP?, 20??

BU1002 / BU1902 Accounting for Decision Making

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BU1002 / BU1902 Accounting for Decision Making

Formal Exams SP?, 20??
SAMPLE EXAMINATION PAPER

College of Business, Law & Governance

Examination Duration: 150 minutes

Reading Time: 10 minutes

Exam Conditions:

This is a FORMAL exam.

This is a CLOSED BOOK exam

Non-programmable calculator is permitted

Notes are NOT permitted in exam

English Dictionary NO/Bilingual Dictionary YES

This exam paper MUST be handed in.

Materials Permitted In The Exam Venue:

(No electronic aids are permitted e.g. laptops, phones)

Drawing instruments

Materials To Be Supplied To Students:

1 x 18 Page Books

Instructions To Students:

Total marks on the paper = 50 marks

Answer all of the questions in the answer booklet. Show all workings as part marks may be awarded.
Students may write in the exam booklet in pencil.

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Formal Exams SP?, 20?? BU1002 / BU1902 Accounting for Decision Making

Question 1 (10 marks)

These following financial statement balances are for Wellington Design Services for the end
of the financial year, 30 June 2017:
Accounts Payable $11,000
Accounts Receivable 9,800
Accumulated Depreciation Building 14,000
Advertising incurred 1,200
Advertising Payable 1,200
Bank Loan 110,000
Building 140,000
Capital 163,000
Cash 25,000
Depreciation 7,000
Drawings 10,200
Fees Revenue 100,000
Inventory 20,000
Land 120,000
Motor Vehicle Expenses 20,000
Other Expenses 38,000
Rent Revenue 50,000
Rent Revenue Received in Advance 2,000
Salaries Expense 40,000
Supplies used 20,000
Required:
a) Prepare a Statement of Profit or Loss for Wellington Design Services at 30 June
2017. (7 marks)
b) Discuss how management would use a Statement of Profit or Loss to assist in their
decision making. (3 marks)
(7 + 3 = 10 marks)

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Formal Exams SP?, 20?? BU1002 / BU1902 Accounting for Decision Making

Question 2 (10 marks)

Kosinski Manufacturing Ltd had the following information for the financial year ending 30
June 2017.
Cash at beginning of the period $ 130,000
Cash at end of the period 672,000
Cash collections from customers 6,418,000
Payments for income tax 353,000
Payments to suppliers and employees 4,843,000
Depreciation expense 880,000
Loss on sale of machinery 165,000
Net Profit 430,000
Payment of cash dividends 200,000
Proceeds from borrowings 200,000
Proceeds from sale of machinery 70,000
Purchase of machinery 750,000
Required:
a) Prepare a Cash Flow Statement for Kosinski Manufacturing Ltd at 30 June 2017
and identify the final closing cash balance. (7 marks)
b) Discuss the link between the Cash Flow Statement and the other general
purpose financial reports. (3 marks)
(7 + 3 = 10 marks)

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Formal Exams SP?, 20?? BU1002 / BU1902 Accounting for Decision Making

Question 3 (10 marks)

Brockbank Builders Ltd is preparing a cash budget for May and June of 2017. Past
records reveal that 20% of all credit sales are collected during the month of sale, 60% in
the month following the sale and the balance remaining in the second month following
the
sale.
The company pays for 75% of purchases in the month after purchase, and the balance is
paid in the month following that.
Selling expenses amount to $6,600 per month. Administrative expenses are estimated to
be $13,200 per month, which includes $4,800 of depreciation expense. Finance
expenses are $1,200 per month. All selling and distribution, administrative, and finance
and other expenses (except depreciation) are paid for when incurred.
It is planned to purchase equipment during May 2017 at a cost of $8,500. A $15,000 loan
payable will be repaid during June 2017. The interest due at maturity will be $2,650. The
company’s expected Cash at Bank balance at 1 May 2017 is $13,500.
Estimated sales and purchases data are as follows:

2017 Credit Sales Credit Purchases

March 66,000 33,000
April 88,000 65,000
May 60,500 27,500
June 71,500 38,500

Required:

a) Prepare a cash budget for May and June 2017. (8 marks)

b) Briefly advise if Brockbank Builders Ltd will need to obtain additional financing at the
end of June 2017. If additional finance is required, recommend two suitable sources
of finance. (2 marks)
(8 + 2 = 10 marks)

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Formal Exams SP?, 20?? BU1002 / BU1902 Accounting for Decision Making

Question 4 (10 marks)

MaxiMac Enterprises manufactures “The Kitchen Wizz”. Data relating to the production of
“Kitchen Wizz” for 2017 was as follows:
Annual volume in units 32,000
Selling price per unit $60
Variable manufacturing cost per unit $28
Annual fixed manufacturing costs $120,000
Variable marketing and distribution costs per unit $12
Annual fixed non-manufacturing costs $360,000
Required:
a) Calculate the contribution margin in dollars and the contribution margin ratio for 2017.
(2 marks)
b) Calculate the break-even units and dollars for 2017. (2 marks)
c) Calculate the number of “Kitchen Wizz” units that would need to be sold in order to
make a profit of $45,000. (3 marks)
d) A business owner stated “I am in business to make a profit, I am not interested in
merely breaking even”. Discuss how break-even analysis is an important analysis
tool for any business. (3 marks)
(2 + 2 + 3 + 3 = 10 marks)

Question 5 (10 marks)

The financial ratios for Zig Ltd and Zag Ltd for 2012 are provided below:
Ratio: Zig Ltd Zag Ltd
Profit Margin 1.8% 2.4%
Current Ratio 2.01:1 1.21:1
Receivables turnover 7.3 times 37.3 times
Average collection period 50 days 9.8 days
Inventory turnover 6.4 times 8.1 times
Average days in 57 days 45 days
inventory
Required:
a) Briefly analyse the ratio results above for Zig Ltd and Zag Ltd and comment on the
liquidity, asset efficiency and profitability of the two entities. (8 marks)
b) Compare the management of working capital in Zig Ltd and Zag Ltd. (2 marks)
(8 + 2 = 10 marks)

END OF EXAMINATION

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