ACCA | Paper F2 Topic-Wise Past Papers 2001-2007 x-clusive! http://kakakakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 Material Costing http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com A business currently orders 1,000 units of product X at a time It has decided that it may be better to use the Economic Order Quantity method to establish an optimal reorder quantity Information regarding stocks is given below: Topic-Wise | Past exam Papers Purchase price Fixed cost per order Holding cost Annual demand £15/unit £200 8% of the purchase price per annum 12,000 units Current annual total stock costs are £183,000, being the total of the purchasing, ordering and holding costs of product X Required: (a) Calculate the Economic Order Quantity (2 marks) (b) Using your answer to (a) above calculate the revised annual total stock costs for product X and so establish the difference compared to the current ordering policy (4 marks) (c) List ways in which discounts might affect this Economic Order Quantity calculation and subsequent stock costs (4 marks) [Sec: B, Q: F2 December 2003] The following data for the current year relate to a sterile pack purchased by the Goodheart Hospital: Annual demand Annual holding cost per unit Cost of placing an order 90,000 units £8 £25 From the start of next year the cost of placing an order will rise by £11 but all the other data will remain the same The hospital bases its purchasing decisions on the Economic Order Quantity (EOQ) model Required: (a) Calculate the EOQ for: (i) The current year (ii) Next year (4 marks) (b) Calculate the total extra annual cost to the hospital for next year of ordering and holding stock of the sterile packs (4 marks) (c) Identify TWO major costs associated with each of the following: (i) Holding stock; (ii) Ordering stock (2 marks) [Sec: B, Q: F2 December 2004] Jane plc purchases its requirements for component RB at a price of £80 per unit Its annual usage of component RB is 8,760 units The annual holding cost of one unit of component RB is 5% of its purchase price and the cost of placing an order is £12·50 Required: (a) Calculate the economic order quantity (to the nearest unit) for component RB (2 marks) (b) Assuming that usage of component RB is constant throughout the year (365 days) and that the lead time from placing an order to its receipt is 21 days, calculate the stock level (in units) at which an order should be placed (2 marks) (c) (i) Explain the terms ‘stockout’ and ‘buffer stock’ (ii) Briefly describe the circumstances in which Jane plc should consider having a buffer stock of component RB (4 marks) [Sec: B, Q: F2 June 2005] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers Point Ltd uses the economic order quantity (EOQ) model to establish the reorder quantity for raw material Y The company holds no buffer stock Information relating to raw material Y is as follows: Annual usage 48,000 units Purchase price £80 per unit Ordering costs £120 per order Annual holding costs 10% of the purchase price Required: (a) Calculate: (i) the EOQ for raw material Y, and (ii) the total annual cost of purchasing, ordering and holding stocks of raw material Y (4 marks) The supplier has offered Point Ltd a discount of 1% on the purchase price if each order placed is for 2,000 units (b) Calculate the total annual saving to Point Ltd of accepting this offer (3 marks) (c) List FOUR examples of holding costs (2 marks) FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 Overhead Costing http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com A business operates with two production centres and three service centres Costs have been allocated and apportioned to these centres as follows: Production Centres Topic-Wise | Past exam Papers £2,000 £3,500 Service Centres B £500 A £300 C £700 Information regarding how the service centres work for each other and for the production centres is given as: Work done for: Production Centres Service Centres A B C By A 45% 45% – 10% – By B 50% 20% 20% – 10% By C 60% 40% – – – Information concerning production requirements in the two production centres is as follows: Units produced Machine hours Labour hours Centre 1,500 units 3,000 hours 2,000 hours Centre 2,000 units 4,500 hours 6,000 hours Required: (a) Using the reciprocal method calculate the total overheads in production centres and after reapportionment of the service centre costs (7 marks) (b) Using the most appropriate basis establish the overhead absorption rate for production centre Briefly explain the reason for your chosen absorption basis (3 marks) [Sec: B, Q: F2 December 2003] Sangazure Ltd manufactures many different products in a factory that has two production cost centres (T and W) and several service cost centres The total budgeted overhead costs (after the allocation, apportionment and reapportionment of service cost centre costs), and other information for production cost centres T and W are as follows: Cost centre Budgeted Basis of overhead Budgeted activity overheads absorption T £780,000 Machine hours 16,250 machine hours W £173,400 Direct labour hours 14,450 direct labour hours Required: (a) Calculate the overhead absorption rates for cost centres T and W (2 marks) The prime cost of product PP, one of the products made by Sangazure Ltd, is as follows: £ per unit Direct material 10 Direct labour: Cost centre T 14 Cost centre W 21 One unit of product PP takes 35 minutes of machine time in cost centre T The direct labour in cost centre T is paid £7 per hour and £6 per hour in cost centre W (b) Calculate the total production cost for one unit of PP (3 marks) (c) Briefly explain why service cost centre costs need to be reapportioned to production cost centres Which method of reapportionment fully recognises the work that service cost centres for each other? (3 marks) [Sec: B, Q: F2 December 2005] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Phoebe Ltd manufactures many different products which pass through two production cost centres (P1 and P2) Topic-Wise | Past exam Papers There are also two service cost centres (S1 and S2) in the factory The following information has been extracted from the budget for the coming year: Allocated and apportioned production overheads Number of employees Total machine hours Total direct labour hours P1 P2 S1 S2 £477,550 30 68,000 4,000 £404,250 65 11,400 14,000 £132,000 10 £96,000 15 Service cost centre S1 costs are reapportioned to all other cost centres based on the number of employees Service cost centre S2 only does work for P1 and P2 and its costs are reapportioned to these centres in the ratio 5:3 respectively Required: (a) Calculate: (i) The machine hour absorption rate for cost centre P1, and (ii) The direct labour hour absorption rate for cost centre P2 (6 marks) (b) Explain the difference between production overheads that have been ‘allocated’ and those which have been ‘apportioned’ to cost centres Explain why some manufacturing companies are able to allocate electric power costs to production cost centres, whereas others can only apportion them (3 marks) [Sec: B, Q: F2 December 2006] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 Job Costing http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Sangazure Ltd manufactures many different products in a factory that has two production cost centres (T and W) and several service cost centres The total budgeted overhead costs (after the allocation, apportionment and reapportionment of service cost centre costs), and other information for production cost centres T and W are as follows: Cost centre Budgeted Basis of overhead Budgeted activity overheads absorption T £780,000 Machine hours 16,250 machine hours W £173,400 Direct labour hours 14,450 direct labour hours Required: Topic-Wise | Past exam Papers (a) Calculate the overhead absorption rates for cost centres T and W (2 marks) The prime cost of product PP, one of the products made by Sangazure Ltd, is as follows: £ per unit Direct material 10 Direct labour: Cost centre T 14 Cost centre W 21 One unit of product PP takes 35 minutes of machine time in cost centre T The direct labour in cost centre T is paid £7 per hour and £6 per hour in cost centre W (b) Calculate the total production cost for one unit of PP (3 marks) (c) Briefly explain why service cost centre costs need to be reapportioned to production cost centres Which method of reapportionment fully recognises the work that service cost centres for each other? (3 marks) FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 10 Process Costing http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 30 Albany has recently spent some time on researching and developing a new product for which they are trying to establish a suitable price Previously they have used cost plus 20% to set the selling price The standard cost per unit has been estimated as follows: Topic-Wise | Past exam Papers £ Direct materials Material Material Direct labour Fixed overheads 10 (4 kg at £2·50/kg) 17 (1 kg at £7/kg) 13 (2 hours at £6·50/hour) 17 (2 hours at £3·50/hour) 37 Required: (a) Using the standard costs calculate two different cost plus prices using two different bases and explain an advantage and disadvantage of each method (6 marks) (b) Give two other possible pricing strategies that could be adopted and describe the impact of each one on the price of the product (4 marks) [Sec: B, Q: F2 December 2001] Mike Limited has been asked to quote a price for a one off contract Management have drawn up the following schedule: £ Contract price (cost plus 20%) 60,780 Costs: Materials: V (300 kg at £10/kg) Materials: I (1,000 litres at £7/ litre) Materials: C (550 kg at £3/kg) 3,000 7,000 1,650 Labour: Department (1,500 hours at £8/hour) Labour: Department (2,000 hours at £10/hour) 12,000 20,000 Overheads: absorbed on a budgeted labour hour basis Labour: (3,500 hours at £2/labour hour) Total costs 7,000 50,650 The following is also relevant: Material V The cost of £10 is the original purchase cost incurred some years ago This material is no longer in use by the company and if not used in the contract then it would be sold for scrap at £3/kg Material I This is in continuous use by the business £7 is the historic cost of the material although current supplies are being purchased at £6·50 Material C Department Department Overheads Mike Limited has 300 kg of this material in stock and new supplies would cost £4/kg If current stocks are not used for the contract then they would be used as a substitute for material Y in another production process costing £7/kg kg of C replaces kg of Y This department has spare labour capacity sufficient for the contract and labour would be retained This department is currently working at full capacity Mike Limited could get the men to work overtime to complete the contract paid at time and a half, or they could divert labour hours from the production of other units that currently average £3 contribution per labour hour These are arbitrarily absorbed at a pre-determined rate There will be no incremental costs incurred FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 31 Required: Calculate the minimum contract price that Mike Limited could accept to breakeven using relevant costing techniques (10 marks) [Sec: B, Q: F2 June 2002] Topic-Wise | Past exam Papers Ella Ltd recently started to manufacture and sell product DG The variable cost of product DG is £4 per unit and the total weekly fixed costs are £18,000 The company has set the initial selling price of product DG by adding a mark up of 40% to its total unit cost It has assumed that production and sales will be 3,000 units per week The company holds no stocks of product DG Required: (a) Calculate for product DG: (i) the initial selling price per unit; and (ii) the resultant weekly profit (3 marks) The management accountant has established that a linear relationship between the unit selling price (P in £) and the weekly demand (Q in units) for product DG is given by: P = 20 – 0·002Q The marginal revenue (MR in £ per unit) is related to weekly demand (Q in units) by the equation: MR = 20 – 0·004Q (b) Calculate the selling price per unit for product DG that should be set in order to maximise weekly profit (7 marks) (c) Distinguish briefly between penetration and skimming pricing policies when launching a new product (2 marks) [Sec: B, Q: F2 June 2005] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com ACCA F2 32 Topic-Wise | Past exam Papers Budgeting http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 33 Topic-Wise | Past exam Papers Wollongong wishes to calculate an operating budget for the forthcoming period Information regarding products, costs and sales levels is as follows: Product A B Materials required X (kg) Y (litres) Labour hours required Skilled (hours) Semi skilled (hours) 2 2,000 100 1,500 200 Sales level (units) Opening stocks (units) Closing stock of materials and finished goods will be sufficient to meet 10% of demand Opening stocks of material X was 300 kg and for material Y was 1,000 litres Material prices are £10 per kg for material X and £7 per litre for material Y Labour costs are £12 per hour for the skilled workers and £8 per hour for the semi skilled workers Required: Produce the following budgets: (a) Production (units); (b) Materials usage (kg and litres); (c) Materials purchases (kg, litres and £); and (d) labour (hours and £) (10 marks) [Sec: B, Q: F2 December 2001] (a) Define the terms ‘operational planning’ and ‘strategic planning’ and explain how one impacts upon the other (3 marks) (b) List the stages in a planning and control process and briefly explain what is involved at each stage (7 marks) [Sec: B, Q: F2 June 2002] A company has obtained the following information regarding costs and revenue for the past financial year: Original budget: Sales 10,000 units Production 12,000 units Standard cost per unit: £ Direct materials Direct labour Fixed production overheads ––– 22 ––– Selling price 30 FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 34 Actual results: Sales Revenue Production Material cost Labour cost Fixed production overheads 9,750 units £325,000 11,000 units £65,000 £100,000 £95,000 Topic-Wise | Past exam Papers There were no opening stocks Required: (a) Produce a flexed budget statement showing the flexed budget and actual results Calculate the variances between the actual and flexed figures for the following: – sales; – materials; – labour; and – fixed production overhead (7 marks) (b) Explain briefly how the sales and materials variances calculated in (a) may have arisen (3 marks) [Sec: B, Q: F2 December 2003] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 35 Standard Costing & Variance Analysis http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 36 Topic-Wise | Past exam Papers Newcastle Limited uses variance analysis as a method of cost control The following information is available for the year ended 30 September 2001: Budget Production for the year Standard cost per unit: Direct materials (3 kg at £10/kg) Direct labour (4 hours at £6/hour) Overheads (4 hours at £2/hour) Actual Actual production units for year Labour - hours for the year - cost for the year Materials - kg used in the year -cost for the year 12,000 units £ 30 24 08 62 11,500 units 45,350 hours £300,000 37,250 kg £345,000 Required: (a) Prepare a reconciliation statement between the original budgeted and actual prime costs (7 marks) (b) Explain what the labour variances calculated in (a) show and indicate the possible interdependence between these variances (3 marks) [Sec: B, Q: F2 December 2001] A company uses absorption costing for both internal and external reporting purposes as it has a considerable level of fixed production costs The following information has been recorded for the past year: Budgeted fixed production overheads £2,500,000 Budgeted (Normal) activity levels: Units Labour hours Actual fixed production overheads 62,500 units 500,000 hours £2,890,350 Actual levels of activity: Units produced Labour hours 70,000 units 525,000 hours Required: (a) Calculate the fixed production overhead expenditure and volume variances and briefly explain what each variance shows (5 marks) (b) Calculate the fixed production overhead efficiency and capacity variances and briefly explain what each variance shows (5 marks) [Sec: B, Q: F2 June 2003] Coledale Ltd manufactures and sells product CC The company operates a standard marginal costing system The standard cost card for CC includes the following: £ per unit Direct material 20 Direct labour (6 hours at £7·50 per hour) 45 Variable production overheads 27 ––– 92 ––– The budgeted and actual activity levels for the last quarter were as follows: FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 37 Budget units 20,000 20,000 Sales Production Actual units 19,000 21,000 The actual costs incurred last quarter were: Topic-Wise | Past exam Papers Direct material Direct labour (124,950 hours) Variable production overheads £ 417,900 949,620 565,740 Required: (a) Calculate the total variances for direct material, direct labour and variable production overheads (3 marks) (b) Provide an appropriate breakdown of the total variance for direct labour calculated in (a) (3 marks) (c) Suggest TWO possible causes for EACH variance calculated in (b) (4 marks) [Sec: B, Q: F2 June 2004] Murgatroyd Ltd, which manufactures a single product, uses standard absorption costing A summary of the standard product cost is as follows: £ per unit Direct materials 15 Direct labour 20 Fixed overheads 12 Budgeted and actual production for last month was 10,000 units and 9,000 units respectively The actual costs incurred were: £ Direct materials 138,000 Direct labour 178,000 Fixed overheads 103,000 Required: (a) Prepare a statement that reconciles the standard cost of actual production with its actual cost for last month and highlights the total variance for each of the three elements of cost (4 marks) Last month 24,000 litres of direct material were purchased and used by the company The standard allows for 2·5 litres of the material, at £6 per litre, to be used in each unit of product (b) Provide an appropriate breakdown of the total direct materials cost variance included in your statement in (a) (3 marks) (c) Explain who in the company should be involved in setting: (i) The standard price; and (ii) The standard quantity for direct materials (3 marks) Ploverleigh Ltd, which manufactures a single product, uses standard absorption costing The standard product cost per unit is as follows: £ Direct materials 11 Direct labour 24 Fixed production overhead 18 Budgeted and actual production for last month were 12,000 units and 12,500 units respectively The actual costs incurred last month were: £ FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 38 Direct materials Direct labour Fixed production overhead 142,700 291,300 230,800 Topic-Wise | Past exam Papers Required: (a) Prepare a statement that reconciles the standard cost of actual production with its actual cost for last month and highlights the total variance for each of the three cost elements (4 marks) (b) Provide a breakdown of the total fixed production overhead variance in your statement in (a) by calculating two sub variances (2 marks) (c) If Ploverleigh Ltd uses standard marginal costing instead of standard absorption costing, explain how AND why any of the three total variances calculated in (a) would be different and state clearly which, if any, of the variances would remain unchanged No calculations are required (3 marks) [Sec: B, Q: F2 December 2005] Deadeye Ltd operates a standard costing system in which all stocks are valued at standard cost The standard direct material cost of one unit of product MS is £36, made up of 4·8 kg of material H at £7·50 per kg Material H is used only in the manufacture of product MS The following information relates to last month: Material H: Purchased 40,000 kg for Issued into production £294,000 36,500 kg Finished output of MS 7,200 units Required: (a) Calculate the direct material price and usage variances for last month (3 marks) (b) Prepare a statement that reconciles the actual cost of material H purchased with the standard material cost of actual production of MS for last month The statement should incorporate the variances calculated in (a) (3 marks) (c) (i) Suggest ONE possible cause for EACH of the variances calculated in (a) (ii) Who should the direct material price variance be reported to, and why? (4 marks) [Sec: B, Q: F2 June 2006] Fairfax Ltd manufactures a single product which has a standard selling price of £22 per unit It operates a standard marginal costing system The standard variable production cost is £9 per unit Budgeted annual production is 360,000 units and budgeted non-production costs of £1,152,000 per annum are all fixed The following data relate to last month: Budget Actual units units Production 30,000 33,000 Sales 32,000 34,000 Last month the budgeted profit was £200,000 and the actual total sales revenue was £731,000 Required: (a) Calculate the sales price and sales volume contribution variances for last month showing clearly whether each variance is favourable or adverse (4 marks) (b) Explain how the two variances calculated in (a) could be interrelated (3 marks) (c) Calculate the BUDGETED profit for last month assuming that the company was using absorption costing (4 marks) [Sec: B, Q: F2 December 2006] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 39 Investment Appraisal http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 40 (a) James is considering paying £50 into a fund on a monthly basis for 10 years starting in one year’s time The interest earned will be 1% per month Once all of these payments have been made the investment will be transferred immediately to an account that will earn interest at 15% per annum until maturity The fund matures five years after the last payment is made into the fund Topic-Wise | Past exam Papers Required: Calculate the terminal value of the fund in 15 years’ time to the nearest £ (3 marks) (b) Doug wishes to take out a loan for £2,000 He has the choice of two loans: Loan 1: monthly payments for 36 months at an APR of 9·38% Loan 2: monthly payments for 24 months at an APR of 12·68% Required: (i) Calculate the monthly repayments for loans and to two decimal places (5 marks) (ii) Calculate the total amount repaid under each loan and purely on the basis of this information recommend which loan Doug should choose (2 marks) [Sec: B, Q: F2 June 2002] South Plc has two divisions, A and B, whose respective performances are under review Division A is currently earning a profit of £35,000 and has net assets of £150,000 Division B currently earns a profit of £70,000 with net assets of £325,000 South Plc has a current cost of capital of 15% Required: (a) Using the information above, calculate the return on investment and residual income figures for the two divisions under review and comment on your results (5 marks) (b) State which method of performance evaluation (i.e return on investment or residual income) would be more useful when comparing divisional performance and why (2 marks) (c) List three general aspects of performance measures that would be appropriate for a service sector company (3 marks) [Sec: B, Q: F2 December 2002] A company has to choose between three investments with details as follows: Investment Investment Timing of Cash Flows Timing of Cash Flows flows per annum flows per annum Year Year £ £ (75,000) (100,000) 1–4 25,000 A perpetuity 11,000 5,000 starting at time Investment Timing of Cash Flows flows per annum Year £ (125,000) 30,000 40,000 50,000 60,000 (10,000) The company has a cost of capital of 10% Required: Calculate the net present value of each of the three investments at the company’s cost of capital and state which investment would be preferred [Sec: B, Q: F2 June 2003] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic-Wise | Past exam Papers ACCA F2 41 Miscellaneous Topics http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 42 – Index Numbers Jim is reviewing his pay rises over the last four years compared with the Retail Price Index (RPI) and the Average Earnings Index (AEI) He has obtained the following: Year Topic-Wise | Past exam Papers 1998 1999 2000 2001 Jim’s wage increase on prior year % – 5·0 3·0 4·0 Retail Price Index Average Earnings Index 157·5 162·9 165·4 170·3 108·0 113·5 119·0 124·4 Jim earned £150 per week in 1998 and is carrying out the review in the year 2001 after receiving the 4% increase Required: (a) Calculate Jim’s actual weekly earnings in each year from 1998 to 2001 using the percentage wage increase (to one decimal place) (2 marks) (b) Using your answer from part (a) calculate Jim’s weekly earnings in each year in year 2001 terms using: (i) The Retail Price Index (RPI); and (ii) The Average Earnings Index (AEI) Your calculations should be to one decimal place (4 marks) (c) Comment on the results obtained from parts (a) and (b) (2 marks) (d) The Average Earnings Index for 1995 is 100 What does this mean? (2 marks) [Sec: B, Q: F2 June 2002] – Linear Programming A company uses linear programming to establish an optimal production plan in order to maximise profit The company finds that for the next year materials and labour are likely to be in short supply Details of the company’s products are as follows: A B £ £ Materials (at £2 per kg) Labour (at £6 per hour) 30 18 Variable overheads (at £1 per hour) ––– ––– Variable cost 41 29 Selling price 50 52 ––– ––– Contribution 23 ––– ––– There are only 30,000 kg of material and 36,000 labour hours available The company also has an agreement to supply 1,000 units of product A which must be met Required: (a) Formulate the objective function and constraint equations for this problem (4 marks) (b) Plot the constraints on a suitable graph and determine the optimal production plan (6 marks) [Sec: B, Q: F2 June 2003] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 43 – Regression Analysis A company is seeking to establish whether there is a linear relationship between the level of advertising expenditure and the subsequent sales revenue generated Figures for the last eight months are as follows: Topic-Wise | Past exam Papers Month Total Advertising Expenditure £000 2·65 4·25 1·00 5·25 4·75 1·95 3·50 3·00 ––––– 26·35 ––––– Sales Revenue £000 30·0 45·0 17·5 46·0 44·5 25·0 43·0 38·5 ––––– 289·5 ––––– Further information is available as follows: (Advertising Expenditure x Sales Revenue) (Advertising Expenditure) £101·2625 (Sales Revenue) £11,283·75 £1,055·875 All of the above are given in £ million Required: (a) On a suitable graph plot advertising expenditure against sales revenue or vice versa as appropriate Explain your choice of axes (5 marks) (b) Using regression analysis, calculate a line of best fit Plot this on your graph from (a) (5 marks) [Sec: B, Q: F2 December 2002] Swainsthorpe Limited is a small old-fashioned company They have a very simple manual accounting system to record all of the information of the business A bookkeeper comes in once a week to make all the relevant entries to the various manual ledgers Complete stocktakes take place once a month, during which the business shuts down for the day, and the information from the stock-take is used to check that the store bin cards are correct The stock-take information is also used to prepare a profit and loss account and balance sheet for the owners of the business The business has just been taken over by Ms Swainsthorpe who wishes to change the manual accounting system to a computerised management information system Required: Prepare a report for Ms Swainsthorpe that: (a) Gives three advantages and three disadvantages of introducing a computer system; (b) Explains what a management information system is and what Ms Swainsthorpe should hope to be able to use it for in general terms; (c) Comments critically on the current stock-take procedures and explains how the system could be improved [Sec: B, Q: F2 December 2002] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com 44 (a) Explain the following terms giving an example of each: (i) Service centre; and (ii) Production centre Explain how the treatment of overheads differs between the two different types of centre (6 marks) (b) Explain how Activity Based Costing differs from traditional absorption costing, giving an example (4 marks) Topic-Wise | Past exam Papers [Sec: B, Q: F2 June 2003] The management accountant at Josephine Ltd is trying to predict the quarterly total maintenance cost for a group of similar machines She has extracted the following information for the last eight quarters: Quarter number Total maintenance cost (£’000) 265 302 222 240 362 295 404 400 Production units (‘000) 20 24 16 18 26 22 32 30 The effects of inflation have been eliminated from the above costs The management accountant is using linear regression to establish an equation of the form y = a + bx and has produced the following preliminary calculations: (total maintenance cost x production units) = £61,250 million (total maintenance cost)2 = £809,598 million (production units)2 = 4,640 million Required: (a) Establish the equation which will allow the management accountant to predict quarterly total maintenance costs for a given level of production Interpret your answer in terms of fixed and variable maintenance costs (7 marks) (b) Using the equation established in (a), predict the total maintenance cost for the next quarter when planned production is 44,000 units Suggest a major reservation, other than the effect of inflation; you would have about this prediction (3 marks) [Sec: B, Q: F2 June 2006] Plaza Ltd aims to maximise profit from the two products (X and Y) which it manufactures and sells The unit selling price for product X is £200 and the company can sell all the units that it can produce at this price The unit selling price of product Y is £250 but, at this price, the annual demand is limited to 40,000 units The company holds no stocks The following product cost data are available: Product X Product Y £ per unit £ per unit Direct material (£5 per kg) 60 40 Direct labour (£10 per hour) 50 80 Other variable costs 60 90 ––– ––– Total variable cost 170 210 ––– ––– Next year the supply of direct material will be limited to 540,000 kg and the direct labour hours will be limited to 400,000 Required: (a) Determine the optimal production plan in units for next year and calculate the resultant total contribution Workings should be clearly shown (8 marks) (b) Explain the term ‘shadow price’ in the context of scarce resources State clearly which, if any, of the company’s resources will have a shadow price next year No calculations are required (3 marks) [Sec: B, Q: F2 June 2007] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com .. .Topic- Wise | Past exam Papers ACCA F2 Material Costing http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com FOR FREE ACCA & CAT RESOURCES... FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic- Wise | Past exam Papers ACCA F2 Overhead Costing http://kakakakistani.blogspot.com [Type the company name] ACCA http://kaka-pakistani.blogspot.com... apportion them (3 marks) [Sec: B, Q: F2 December 2006] FOR FREE ACCA & CAT RESOURCES VISIT: http://kaka-pakistani.blogspot.com Topic- Wise | Past exam Papers ACCA F2 Job Costing http://kakakakistani.blogspot.com