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ASTON UNIVERSITY
DECEMBER 2009
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CLOSED BOOK
Page 1 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
Attempt all 16 questions in this section, which are all equally weighted.
There is no penalty for an incorrect answer.
Use the answer sheet provided to record your answer, and enter your
candidate number in the space provided.
Select the nearest, most correct answer from each of the alternatives
provided, and circle the letter corresponding to your answer.
Mark only one answer for each question. In the event of ambiguity, mark
the one you believe the examiner most likely considers to be correct.
A2. Diversified plc is a company with four product lines. The following
information is available for their inventory at their accounting year end:
A. £96,300
B. £97,100
C. £108,700
D. £118,800
Page 2 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
A3. Wholesaler Ltd started selling a new product in August 2009. By its
accounting year end, 30 September 2009, the following inventory
transactions had occurred:
What is the value of closing inventory and cost of sales for this product
using the First In First Out (FIFO) method?
A4. Prep Ltd have an accounting year end of 30 June 2009. On May 1st
2009 they paid £60,000 for 3 months rent to 31st July 2009. On 20th
September they paid a utility bill of £45,000 that related to the 3 months
from 1 June 2009 to 31 August 2009. What are the expenses that
should be included in the income statement for the year ended 30 June
2009?
A5. Investo Ltd have recently purchased plant and machinery at a cost of
£120,000. The directors of the company are currently debating whether
this asset should be depreciated on a straight line basis – using a
residual value of £15,000 and a useful economic life of three years; or
on a reducing balance basis using a rate of 50%. What would be the
depreciation charges in the first year using these two methods?
Page 3 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
A6. Liti plc are currently involved in two court cases. They have taken
expert legal advice and been informed that:
- in the first case there is an 80% chance that they will be required to
pay a fine and damages, but due to its unusual nature it is not
possible to reliably estimate the amount that will be required to be
paid; and
- in the second case there is a 30% chance that they will be required
to pay a fine and damages that will total £100,000.
How will these items be treated in the financial statements of Liti plc?
A7. Taser plc is a company that is listed on the London Stock Exchange. In
the last year Taser’s share price has fallen from £7.35 to £7.05. The
company has paid a dividend in the year of 40 pence per share. What
are the total shareholder returns for Taser plc over the last year?
A. -4.1%
B. 0.7%
C. 1.4%
D. 5.4%
Page 4 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
A10. Harmison plc has three products: Andersen, Botham and Collingwood.
The company is considering deleting its Collingwood product due to
losses being made. The company’s summary profit report is provided
below:
A. Increase it by £2m
B. Make it worse by £3m
C. Make it worse by £2m
D. Make it worse by £1m
Page 5 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
A11. A company has prepared the following budget for the month of
September 2009:
During September 2009, the actual production and sales quantity was
90,000 units and the actual sales revenue generated was £880,000.
What is the sales volume variance for the month?
A. £120,000 Adverse
B. £50,000 Adverse
C. £30,000 Adverse
D. £20,000 Adverse
A12. A company has received an order for 100 units of a special customised
version of its standard product. Each unit will require 2 kg of raw
materials and 5 direct labour hours to complete. The company has a
stock of 150 kg of raw material which originally cost £5 per kg to buy
and which have a net realisable value of £1 per kg. The replacement
cost is £6 per kg. These raw materials are in regular use. The
company’s direct labour are paid £10 per hour. The company is
currently operating at below full capacity and the company’s existing
labour force has sufficient capacity to complete this order. The
company has an overhead absorption rate of £4 per labour hour, 60%
of which relates to fixed overheads. If the order was accepted special
equipment would need to be used, which would cost £1,000 to hire.
A. £2,800
B. £3,000
C. £8,200
D. £9,200
Page 6 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
£’000
Sales revenue 5,500
Variable production costs (1,800)
Fixed production costs (1,200)
Variable selling and administration (400)
costs
Fixed selling and administration costs (600)
Profit 1,500
For 2009, the company expects the sales volume to remain at 10,000
units. Production costs are expected to increase by 5% and selling and
administration costs by 10%. What new selling price is required to
ensure the contribution margin % remains at the level achieved in 2008?
A. £550.00
B. £572.73
C. £582.50
D. £600.00
£
Variable production cost 10.00
Fixed production cost 6.00
Variable selling cost 2.50
18.50
Selling price 25.00
Profit 6.50
Page 7 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
A14 How much net profit reported would be reported for the year using
marginal costing?
A. £115,000
B. £117,500
C. £123,500
D. £165,000
A. 52.0%
B. 43.3%
C. 54.4%
D. 49.5%
Page 8 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
SECTION B
B1. Last year UDT Co’s operating profit before interest and tax was €11.4
million. During the year inventories increased by €2.6 million; trade
receivables increased by €1.8 million and trade payables increased by
€0.7 million. The balance sheet of UDT Co shows a net book value for
property, plant and equipment of €243.0 million (as compared to
€286.5 million at the end of the previous year) and the depreciation
charge for the year was €36.3 million. The net book value of the
property, plant and equipment disposed of in the year was €11.7 million
and the cash proceeds from these disposals totalled €15.4 million. UDT
Co owns no other non-current assets.
Required
(40%)
(30%)
(30%)
Page 9 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
B2. PC Co is a car manufacturer that has its headquarters in Europe and sells
its products globally. Extracts from the financial statements for the year-
ended 31 March 2009 are as follows:
Current liabilities:
Trade payables 8,417 10,571
Other payables 4,466 4,681
Total current liabilities 12,883 15,252
Page 10 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
QUESTION B2 CONTINUED
Required
(50%)
(50%)
Page 11 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
SECTION C
Question C1
Product costs are currently calculated on a full cost basis using a blanket
overhead absorption rate based on direct labour hours. Prices are set at full
cost plus a 25% mark-up.
You have been provided with the following information regarding the three
products:
Standard Advanced Premier
Other data:
Sales volume per annum (units) 40,000 4,000 20,000
Proportion of machine hours
per annum 40% 20% 40%
Proportion of production runs
per annum 40% 10% 50%
Proportion of material orders
per annum 50% 10% 40%
Proportion of space required
per annum 40% 25% 35%
Labour is paid at a rate of £12 per hour. Raw materials cost £25 per kg. You
have found that the production overhead which amounts to £4,500,000 per
annum relates to four main activities. Your investigations reveal that the
relevant overhead activities and their related cost drivers are as follows:
Page 12 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
QUESTION C1 CONTINUED:
The business is facing increasing competition for its Premier product line and
the Marketing Director has suggested that the price for this product should be
reduced to £300 per unit in order to maintain demand.
Required:
a) An analysis of the full cost per unit and implied selling price by product
using the current (labour hour) overhead absorption system.
(20%)
(10%)
c) A revised analysis of the full cost per unit and implied selling price by
Product using Activity Based Costing methodology.
(40%)
(30%)
Page 13 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
Question C2
Variable costs/unit:
Materials £800 £1,200 £1,600
Labour £300 £340 £500
Labour is paid £8 per hour. Materials cost £20 per litre. The company incurs
fixed costs of £6m per annum, which are to be apportioned to each service on
the basis of the relative total sales value generated.
Required:
a) Prepare an annual budget for the company in a format that you consider
to be most useful for management which reveals the profitability of the
company as a whole and of its three individual services.
(20%)
b) Before the budget for the year was finalised, the company has realised it
will face a capacity constraint next year due to a shortage of labour.
Prepare a revised budget for next year that optimises the profit potential
for the company. Highlight the reduction in profit (in £’s and as a %)
arising as a result of this capacity constraint compared with the budget
prepared in part a).
(30%)
Page 14 of 15
DECEMBER 2009 POSTGRADUATE & REFERRED EXAMINATIONS
BFM212 ACCOUNTING FOR NON-FINANCIAL MANAGERS
BFM212R ACCOUNTING FOR NON-FINANCIAL MANAGERS
QUESTION C2 CONTINUED
c) Market research data relating to the Deluxe service has revealed the
following combinations of price and volume could be achieved:
Price/unit Demand
£3,500 1,300 units
£3,750 1,150 units
£4,000 1,000 units
£4,250 950 units
£4,500 850 units
Required:
Determine the price for the Deluxe service at which profits will be
maximised. Briefly discuss any considerations that you believe are
relevant before a final decision is made on the price at which to charge
for the Deluxe service. (You should ignore the impact of the capacity
constraint in part b) in answering this part).
(20%)
(30%)
END OF PAPER
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