SERIES 4 EXAMINATION 2005

ADVANCED BUSINESS CALCULATIONS

LEVEL 3
(Code No: 3003)
WEDNESDAY 23 NOVEMBER
_________

Instructions to Candidates
(a) The time allowed for this examination is 3 hours.
(b) Answer all questions.
(c) Your answers should be written in blue or black ink/ballpoint.
graphs, charts, diagrams, etc.

Pencil may be used only for

(d) All answers must be clearly and correctly numbered but need not be in numerical order. If no
working is shown, a correct answer may receive full marks but an incorrect answer will receive no
marks. Candidates are therefore advised to indicate how they arrive at their answers.
(e) All calculations, where applicable, must be shown on the answer paper provided.
(f)

The use of statistical tables is allowed.

(g) Candidates must pay due regard to good figures, accuracy and neatness in their work.
(h) Candidates may use calculators provided the calculators give no printout, have no word display
facilities, are silent and cordless. The provision of batteries and responsibility for their condition
must rest with the candidate.
_________

3003/4/05

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QUESTION 21
An
investor
1,500
8% Preference
Sharesinterest
(nominal
value 1)
at 140
pence
each,
Karim
Shah bought
has a bank
account
on which simple
is earned
at 3
% per
annum
onand
credit
600
Ordinary
Shares
(nominal
valueby
0.50)
at 270
each.
balances.
Simple
interest
is charged
the bank
at pence
9.5% per
annum on debit balances.
(a)
Calculate
the totaldaily
cost on
of the
shares. and earned/charged at the end of the month.
Interest
is calculated
all balances

(3 marks)

Broker's
commission
is shown
0.85% of
the nominal value of the shares.
The account
for May is
below:
(b)
paid on the shares.
DateCalculate the commission
Details

Debit

Credit

Balance

4,231.56 Cr
30 Apr
Balance c/f
After
Shares were sold for a total of 3,500 and the Ordinary Shares sold for731.56 Cr
2 Maytwo years the Preference
Cheque
3,500.00
362p
per share.
968.44 Dr
15 May
Cheque
1,700.00
568.03 Cr
26 May
Deposit
1,536.47
(c) Calculate the total proceeds from the sale, before commission.
The balance at the end of May, before interest and charges, is 568.03 in credit. Karim Shah uses the
'products method' to check the interest he receives from the bank.
The commission on the sales totalled 25.
Dividends declared on the Ordinary Shares were:
(a) Copy and complete the following table:

(3 marks)

(2 marks)

Year 1
16p per share
Year 2Products method:
21p per share
(d) Calculate:
Balance
Credit or Debit
Number of Days
4,231.56
Credit
2
(i) the
total dividends received by the investor on the Ordinary
Shares
731.56
13
the total dividends received Debit
by the investor on the Preference Shares
Credit
5
---------Total
Debit
= commission
---------(iii) the total income from dividends and sales of the shares, net of
---------Total Credit =
---------(ii)

Product
8,463.12
10,652.84

20,813.55

(6 marks)
(7 marks)
(Total 14 marks)

(b) Giving your answer to the nearest penny, calculate the net interest payable by
QUESTION
3 on 31 May.
Karim Shah
An industrial product may be manufactured by two methods of production. Using Method X, fixed
costs are 6,500,000 per trading period and variable costs are 22.10 per unit of product. Using
Method Y, fixed costs are 8,460,000 per trading period and variable costs are 16.50 per unit of
product.

(4 marks)
(Total 11 marks)

(a) Calculate the level of output for which the total costs are the same.
(4 marks)
Produced by Method X the product has unit costs of production during a trading period as follows
(the figures include variable costs and apportioned fixed costs):

Components
Labour
Production overheads
Distribution expenses

8.35
15.00
7.65
3.60

(b) Calculate the number of units produced in that trading period.

(4 marks)
(c) A company produces the product by Method X and sells it for 38.35 per unit of product.
Calculate the output for break-even and the total costs of production for this output.
(5 marks)
(Total 13 marks)

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32

OVER

QUESTION 64
TheInfollowing
information
to an internetcalculate
trader's business
at the
end of by
thean
first
year of trading.
(a)
each of the
followingrelates
three bankruptcies,
the amount
received
unsecured
creditor who is owed 4,500.

167,250
Annual sales
(i) Bankruptcy A: The bankrupt trader pays 0.47 in the pound to unsecured creditors.
95,700
Annual purchases
12,250
Sales returns
4,100
Purchases returns
B: The bankrupt trader has assets
of 20,700, owes 12,000 to
15,800
Initial(ii)
stockBankruptcy
value
secured
creditors
and
11,600
to
unsecured
creditors.
15,000
Final stock value
43,400
Overhead expenses
(iii) Bankruptcy C: An unsecured creditor who is owed 3,600 receives 1,548.

(4 marks)

(3 marks)

(a) Calculate:
(b) Calculate
thecost
amount
owed
by Bankrupt A to an unsecured creditor who is paid
(i) the
of goods
sold
1,527.50.
(ii)

(2 marks)

(3 marks)
(2
(4 marks)

the net profit

(iii) the overhead expenses as a percentage of the net sales.

(2 marks)
(Total 11 marks)

(b) Give a brief explanation of the difference between gross and net profit.
QUESTION 7

(2 marks)

(c) Calculate the rate of stockturn.

A factory machine that costs 250,000 is estimated to have a life of 4 years and a scrap value of
12,000.

(3 marks)
(Total 14 marks)

(a) Using the equal instalment method, calculate:

QUESTION
5 percentage of the cost which must be written off in total
(i) the

(2 marks)

A business
is considering
investment
project.
The year.
capital cost of the project is 625,000.
(ii) owner
the percentage
of the an
cost
to be written
off each
Including the initial cost, the estimated costs and returns are as follows:

(2 marks)

The factory owner decided to use the diminishing balance method, with a rate of depreciation

of 20% per annum.

625,000
Year 0 cash outflow
50,000
Year
1 cash
(b) What
willinflow
the value of the machine be after 4 years?
250,000
Year 2 cash inflow
400,000
Year 3 cash inflow
150,000
Year 4 cash inflow
(c) After how many years will the machine's value be less than 12,000?

(2 marks)

(3 marks)

The project chosen must earn a return of at least 12%.

The
ownera decides
20%ofis12%
too low
for this
method.
(a) Using
discountthat
factor
and the
following
table, calculate the net present value for the
project.
(d) What whole number percentage should the factory owner use to get a scrap value close to
12,000 after 4 years?
Discounting factor
12%
(4 marks) 0.893
Year 1
Year 2
Year 3
Year 4

0.797
0.712
0.636

(Total 13 marks)
(4 marks)

(b) Assuming the owner requires the project to earn at least 12%, advise the owner
whether or not to proceed with the project.
(2 marks)
The owner discovers that 50,000 of the capital cost of 625,000 can be paid after one year.
(c) Calculate the new net present value and advise the owner.
(6 marks)
(Total 12 marks)

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54

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QUESTION 8
An index of industrial productivity has the following values over the period 2001 to 2004, with 2000 as
the base year.
2000

2001

2002

2003

2004

100

107.7

115.8

130.1

144.2

(a) Calculate these indices as a chain base index. Give each answer correct to one decimal place.
(6 marks)
(b) Calculate the percentage increase in industrial productivity between 2001 and 2003.
(2 marks)
An index of average earnings is shown below.
2002 (2000 = 100)

2004 (2002 = 100)

105.9

104.6

(c) Calculate the index of average earnings for 2004 with 2000 as the base year.
(2 marks)
(d) Give a brief interpretation of your answer.
(2 marks)
(Total 12 marks)

3003/4/05

Education Development International plc 2005