THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD

A Committee of the Council of ICPAU

CPA (U) EXAMINATIONS

LEVEL ONE

QUANTITATIVE TECHNIQUES - PAPER 2

TUESDAY 27 NOVEMBER, 2018

INSTRUCTIONS TO CANDIDATES

1. Time allowed: 3 hours 15 minutes.

The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.

2. This examination contains six questions and only five questions are to be
attempted. Each question carries 20 marks.
3. Formulae and tables are provided on pages 8 – 12.
4. Write your answer to each question on a fresh page in your answer
booklet.
5. Please, read further instructions on the answer booklet, before attempting
any question.

© 2018 Public Accountants Examinations Board

 Quantitative Techniques – Paper 2

Attempt five of the six questions

Question 1
(a) Explain the term ‘tables’ in terms of summarising raw data. (2 marks)
(b) A dairy sold milk, in liters, on a daily basis for a period of 24 days as
shown in the table below:
28 36 41 22 44 23
24 45 20 26 53 54
57 43 21 29 60 42
33 28 39 44 49 52

Required:
(i) Using a uniform class interval and starting with the class 20-24;
construct a frequency distribution for the data above.
(2 marks)
(ii) Calculate the standard deviation for the data. (7 marks)
(c) A beverages company produced and sold crates of dry gin in the years
2016 and 2017 as shown in the following table.
Month 2016 2017
January 20 30
February 50 40
March 30 50
April 40 40
May 60 50
June 100 90
July 70 110
August 90 120
September 60 80
October 80 100
November 50 70
December 120 110
Required:
(i) Construct a Z-chart for the above data. (8 marks)
(ii) Comment on any feature in the Z-chart you have drawn. (1 mark)
(Total 20 marks)

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 Quantitative Techniques – Paper 2

Question 2
Mongoli Enterprises Ltd (NEL) deals in solar products. A routine visit by
Uganda National Bureau of Standards (UNBS) established that the lifetime
of the solar panels NEL sold was normally distributed with a mean of 25
years and standard deviation of 4 years. A quality controller from UNBS
later visited NEL, tested a sample of solar panels and picked one at
random.
Required:
Determine the:
(i) probability that its lifetime is greater than 18 years. (3 marks)
(ii) probability that its lifetime is between 18 and 28 years. (3 marks)
(iii) sample size of the panels that were tested if only two failed to
exceed a life time of 18 years.
(3 marks)
(b) Zakaria, a teller at Eurit Bank handles clients with bulk transactions. On a
certain day, he examined a random sample of 9 transactions and noted
that the mean and variance of the sample were Shs 15.2 million and Shs 5
million respectively.
Required:
Determine the range of the average transaction at 95% confidence level.
(4 marks)
(c) Tuge Ltd sells on average 3 motorcycles daily and the sales are believed to
follow a Poisson distribution.
Required:
Find the probability that the motorcycle sales are:
(i) exactly two. (2 marks)
(ii) at most one. (3 marks)
(iii) at least two. (2 marks)
(Total 20 marks)

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 Quantitative Techniques – Paper 2

Question 3
(a) Explain any one application of a regression line. (1 mark)
(b) The maize yield on a farm is believed to depend on the amount of rainfall.
The values of the yield Q (tons per acre) and the rainfall P (in mm) for
seven successive seasons are given in the table below.
P 125 137 145 112 132 141 120
Q 6.25 8.02 8.42 05.3 07.2 08.7 05.7
Required:
(i) Compute the product-moment correlation coefficient between rainfall
and yield.
(9 marks)
(ii) Comment on the result obtained in (b) (i) above. (1 mark)
(c) A sample of six households were interviewed regarding their incomes (x)
and expenditure (y). The results (in Shs ‘000’) are as shown below:
x 230 340 370 380 140 280
y 80 90 160 180 050 070
Required:
(i) Determine the regression equation relating y to x. (8 marks)
(ii) Find the income of a household with an expenditure of Shs 60,000.
(1 mark)
(Total 20 marks)
Question 4
(a) A roofing materials company produces ridges ( x ) and iron sheets ( y )
using resources according to the production function given
by: x  y 2  4 y  20 .
Required:
Determine the number of ridges and iron sheets produced given that for
every 4 iron sheets, 1 ridge is produced.
(5 marks)
(b) A famous writer of project planning textbooks would like to be paid a
royalty of 15% of the sales revenue and insists the price should maximise
total revenue. On the other hand the publishing company is interested in
maximising profit. Given the total revenue and total cost functions are
R (q )  10,000q  10q 2 and C (q)  1,000  2,500q  5q 2 respectively, where q is
the number of textbooks sold.

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 Quantitative Techniques – Paper 2

Required:
Determine the:
(i) output that maximises total revenue and obtain the maximum
royalty.
(5 marks)
(ii) output that maximises profit and associated royalty at that output.
(6 marks)
(c) The approximate sales, in thousands of shillings, for a small retail shop in
a given week are given in the probability distribution table below:
Sales ( x ) 100 105 110 115 120
Probability ( p ) 0.01 0.08 0.20 0.50 0.21

Required:
Calculate the variance for the distribution. (4 marks)

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 Quantitative Techniques – Paper 2

Question 5
(a) Explain any two limitations of linear programming. (2 marks)
(b) Airplanes from YK airport sometimes delay to take off. The quality control
manager decided to randomly choose 5 flights per day for eight days. The
table below shows the number of minutes that the planes were late for
takeoff.
Day 1 Day 2 Day 3 Day 4 Day 5 Day 6 Day 7 Day 8
17 05 12 04 03 10 02 03
03 14 05 21 09 22 14 05
22 04 06 08 15 40 13 23
06 13 08 05 35 26 08 33
24 14 04 19 05 23 12 23
Required:
(i) Draw a control chart for the range for the above information.
(8 marks)
(ii) Given that the coefficients for the upper control and the lower
control limits are 2.114 and 0 respectively; determine whether the
process is out of control.
(1 mark)
(c) An employer wants to recruit experienced workers (x) and those on
probation (y) for his firm. The firm can accommodate at most 9 workers.
On average, 5 hours and 3 hours of work are required of the experienced
workers and those on probation respectively. The employer has to
maintain an output of at least 30 hours of work per day. The rules and
regulations demand that the number of experienced workers recruited
should not be more than 5 times the number of those on probation. The
workers union, however, emphasizes that the number of experienced
workers recruited should be at least twice the number of those on
probation.
Required:
(i) Formulate linear inequalities from the information given. (4 marks)
(ii) Illustrate the above information on a graph. (4 marks)
(iii) Obtain all the possible combinations of workers that may be
recruited.
(1 mark)
(Total 20 marks)

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 Quantitative Techniques – Paper 2

Question 6
(a) Distinguish between normal costs and crash costs under network analysis.
(2 marks)
(b) KA Construction Ltd is in the process of designing an improved drainage
system in one of the suburbs of Kampala. The activities and duration
times required are listed in precedence table below:
Activity Preceding activity Duration (days)
A - 6
B A 8
C A 7
D C 12
E B 3
F D 5
G E, F 7
Required:
(i) Draw an activity network. (2 marks)
(ii) List the possible paths through the network and their duration.
(4 marks)
(iii) Identify the critical path and justify your answer. (2 marks)
(c) (i) Distinguish between the fixed base and chain base methods of
computing index numbers. (2 marks)
(ii) Explain three limitations of consumer price index numbers.
(3 marks)
(iii) The table below shows the average prices (in Shs ‘000’) for a ton of
each of the following commodities in 2016 and 2017.
Commodities Prices in 2016 Prices in 2017
Maize 600 700
Beans 850 900
Sorghum 520 500
Millet 550 620
Required:
Calculate the simple aggregate price index for 2017 using 2016 as
the base year and comment on your results.
(5 marks)
(Total 20 marks)

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 Quantitative Techniques – Paper 2

FORMULAE
n!
1. Combination nC r 
(n  r )!r!
n!
2. Permutations n pr 
(n  r )!
3. Mean of the binomial distribution= np
4. Standard deviation = npq
5. Variance of the binomial distribution  np(1  p)
pq
6. Standard error of population proportion S ps 
n
6 d 2
7. Spearman’s rank correlation coefficient r  1 
n(n 2  1)
Product moment coefficient of correlation =
8. n xy   x  y
( n  x 2  ( x ) 2 )  ( n  y 2  ( y ) 2 )
crash cost – normal cost
9. Cost slope  normal time – crash time
n
Harmonic mean (ungrouped data) hm 
10. 1
x
11. Sample mean x
x
n
n
Harmonic mean (grouped data) hm 
12. f
x
Q3  Q1
13. Quartile coefficient of dispersion 
Q3  Q1

Mean x  A   Mean x  
fd fx
14. or
f f
N 
  Cfb 
15. Median  Lb   2 C
 fm 
 
 
 d1 
16. Mode  lm   C
 d1  d 2 

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 Quantitative Techniques – Paper 2

2 2

Variance Var ( x)  
fx   fx 
17.  
 
f  f
2 2

18. Standard deviation  

 fx x 2

 f (x  x)
f f
2
19. Sample standard deviation s
 (x  x)
n 1
20. Least squares regression equation of y on x is given by; y  a  bx
n xy   x  y
Where; b  and a
 y  b x
n x 2   x 
2
n n
21. Least squares regression equation of x on y is given by; x = c +dy
n xy   x  y
Where c   
x d y
and d
n n n  y 2  ( y ) 2
x µ
22. Standardizing normal. z

s
23. Confidence interval for sample mean  x  t / 2
n
2
24. 2  
O  E 
E
pq
25. Confidence interval of proportion  p  z 2
n
 
( x  mode) 3 x  median 
26. Pearson coefficient of skewness Sk  or
sd Sk   
sd

27. Expectation =  xP ( X  x)

Laspeyres’ price index = 

( p1  q0 )
28.  100
 (q 0  p0 )

Weighted aggregate price index  

wv n
29.  100
 wv 0

30. Additive law of probability; P( A  B)  P( A)  P( B)  P ( A  B)

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 Quantitative Techniques – Paper 2

FORMULAE
P( A  B)
31.  
Conditional probability P A B 
P( B)
32. Independence of A, B P A B   P ( A)orP ( A  B )  P ( A)  P ( B )
b(1  r ) n  b
33. Continuous compounding A  P(1  r ) n 
r
1 1
vu  uv u
34. Quotient rule of differentiation f  2
; where f 
v v

35. Paasche ' sModel 

 ( p1  q1 )  100
 (q1  p0 )
x
36. PoissonModelP X  x   e 
x!

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 Quantitative Techniques – Paper 2

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 Quantitative Techniques – Paper 2

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