Question 1 Part A

Receipts Issues Balance

Date unit Cost Balance unit Cost Balance unit Cost
1st July 10 40.00
5th July 10 42.00 420 10 42.00
20
7th July 8 40.00 320 8 40.00
12
12th July 2 40.00 80
2 42.00 84 4
8
15th July 5 44.00 220 5 44.00
13
20th July 8 42.00 336
2 44.00 88 10
3 44.00

b)
Co Cost of placing an order 1 mark
D Annual demand 1 mark
Ch Cost of holding one item for one year 1 mark

An organisation would use this formula to calculate the

amount of goods to order at any one time in order to
minimse the total of the ordering costs and the holding
costs 2 marks

c)
1. The organisation can set a minimum stock level. This is a
warning level that stocks are falling unacceptably low. It can
also act as a buffer stock to ensure that unexpected orders 2 marks
can be met or to ensure that there is still stock available
should a delivery be delayed

2. The organisation can set a maximum level - this is the

maximum amount that should be held in stock and can be
determined by the size of the warehouse. A maximum level
will help to keep holding costs under control 2 marks

3. The organisation can set a reorder level - this is an

indication as to when it is time to place an order. This will
ensure goods are ordered and delivery received, before the
orgnanisation falls below the minimum stock level
2 marks
Balance MARKS
Balance
400 1
420
820 1
320
500 2

164
336 2
220
556 1

424 2
132 1

10

Total 5 marks

Max 4 marks - any two

Grand total 25 marks
Question 2

a) basis Machining Finishing Assembly Canteen Total

£ £ £ £ £
Overheads 105,000 95,000 79,000 63,000 342,000

Rent floor area 22,400 16,800 11,200 5,600 56,000 2 marks

Maintenance costs machine hr 21,000 18,000 6,000 45,000 2 marks

148,400 129,800 96,200 68,600 443,000 1 mark OF
1 mark
Total 6 marks
b)
Canteen Labour hou 6,236 12,473 49,891 -68,600 1 mark
1 mark 154,636 142,273 146,091 0 443,000 1 mark OF

1 mark 1 mark
Basis to be used machine hr 700 600 1 mark
labour hours 800

OAR £221 £237 £183 2 marks OF

per per per
machine machine labour
hour hour hour 1 mark for use of descriptors
Total 9 marks

c) Direct materials 1097

Direct Labour 30
Prime cost 1127 1 mark

Machining dept 221 0.5 111 1 mark OF

Finishing dept 237 0.25 59 1 mark OF
Assembly dept 183 1.4 256 1 mark OF
Production Cost 65 1553 2 marks (1 mark OF)
Profit 35 836 2 marks OF
Selling price 100 2389 2 marks (1 marks )OF

Total 10 marks
Total 6 marks

Total 9 marks

Total 10 marks
Question 3

a) £
Selling price 53
Direct materials -13
Direct labour -28
Contribution 12 1 mark

Fixed costs 99,000

Breakeven point 8,250 units 2 marks

Total 3 marks

b) Margin of safety 8,400 - 8250 150 units 1 mark

% 1.79% 2 marks

The margin of safety is only 1.79% this means that if production/sales units fall
by this samll amount then the business will be in a loss making position. 1 mark
This is a very risking place to be in. 1 mark This is particularly risky since the
business see sales falling and they might have underestimated the amount of
the reduction 1 mark
total 3 marks
other answer acceptable, but need a definition of MoS and sconsideration of
risk

c) Fixed costs + profit 124,000

Target profit units 10,333 units 3 marks

Total 3 marks

Small Large
Medium
paddling Paddling
Paddling pool
d) pool pool
Materials (Kgs) per unit 5 7.5 10
weekly demand units 1,000 500 250

Total materials 5,000 3,750 2,500 11,250 kgs 1 mark

materials available 10,500 kgs
shortfal 750 kgs 2 marks

total 3 marks

Small Large
Medium
paddling Paddling
Paddling pool
e) pool pool
Contribution 7 11 12
 materials kgs 5 7.5 10

Contribution per kg 1.4 1.466666667 1.2 2 marks

Ranking 2 1 3 2 marks

materials available 10,500 kgs

Medium paddling pool 500 x 7.5 -3,750 kgs
6,750
Small paddling pool 1,000 * 5 -5,000
1,750
Large paddling pool 175 units 10 kg per unit -1,750

Production plan
Small paddling pool 1000 units
1 mark
Medium paddling pool 500 units
Large paddling pool 175 units 2 marks
total 7 marks

f) Plan contribution £
Small paddling pool 1000 7 7000
Medium paddling pool 500 11 5500
Large paddling pool 175 12 2100
Total contribution 14600 1 mark
Fixed costs 5400
Total profit 9200 2 marks

total 3 marks
Question 4

a) monthly sales receipt £ October November December

August 2,000 30,000 12,000

September 2,500 37,500 18,750 15,000
October 3,000 45,000 22,500 18,000
November 3,500 52,500 26,250
2 marks 30,750 37,500 44,250
2 marks 2 marks 2 marks

Total 8 marks

b) monthly purchases p £ October November December

September 2500 20000 20000

October 3000 24000 24000
November 3500 28000 28000
20000 24000 28000
1 mark 1 mark 1 mark 1 mark

Total 4 marks

c) October November December

£ £ £
Opening balance 1 mark OB 9500 -1,825 4,975 1 mark OF

Receipts
Receipts from customer 30,750 37,500 44,250 1 mark OF

Payments
payments to suppliers 20,000 24,000 28,000 1 mark OF
Rent 375 1 mark
Other expenses 6,700 6,700 6,700 1 mark
Machine 15,000 2 marks
total payments 42,075 30,700 34,700

Closing balance -1,825 4,975 14,525 1 mark OF

Total 9 marks

d)
The business could take the following two steps
it could delay buying the new machine until it had more available cash or use hp or
lease finance to acquire the asset quicker
if could increase its credit control procedure to get more cash in from its debtors
sooner
it could delay paying its suppliers, this could be difficult since the supplier may not
want to do business with a slow payer.

total 4 marks (max 2 marks each)

alternative suitable answers acceptable
more answers given above for illustrative purposes.
 total 4 marks (max 2 marks each)
alternative suitable answers acceptable
more answers given above for illustrative purposes.