Sample exam
Answer table for Section A, B multiple choice questions:
1
2
3
4
5
6
7
8
…
30
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to be completed by instructor
Grade:
Comments:
Themes
A Information, technologies and systems for organisational performance
1. Managing information
2. Sources of information
3. Information systems and data analytics
B Specialist cost and management accounting techniques
1. Activity-based costing
2. Target costing
3. Life-cycle costing
4. Throughput accounting
5. Environmental accounting
C Decision-making techniques
1. Relevant cost analysis
2. Cost volume profit analysis (CVP)
3. Limiting factors
Final
Section A
Section A
Section A
Section A
Section A
Section A
4. Pricing decisions
5. Make-or-buy and other short-term decisions
6. Dealing with risk and uncertainty in decision-making
D Budgeting and control
1. Budgetary systems and types of budget
2. Quantitative techniques
3. Standard costing
4. Material mix and yield variances
5. Sales mix and quantity variances
6. Planning and operational variances
7. Performance analysis
E Performance measurement and control
1. Performance analysis in private sector organisations
2. Divisional performance and transfer pricing
3. Performance analysis in not-for-profit organisations and the public
sector
4. External considerations and the impact on performance
Section B
Section B
Section A
Section A
Section A
Section B
Section C
Section C
Section A
Section A
Section A
Section A
Section C
31. Ties Only Co is a new business, selling high quality imported men's ties through the internet. The managers, who
also own the company, are young and inexperienced but they are prepared to take risks. They are confident that
importing quality ties and selling through a website will be successful and that the business will grow quickly. This
is despite the well-recognised fact that selling clothing is a very competitive business.
They were prepared for a loss-making start and decided to pay themselves modest salaries (included in administration
expenses in Table 1 below) and pay no dividends for the foreseeable future.
The owners are so convinced that growth will quickly follow that they have invested enough money in website server
development to ensure that the server can handle the very high levels of predicted growth. All website development
costs were written off as incurred in the internal management accounts that are shown below in Table 1.
Significant expenditure on marketing was incurred in the first two quarters, to launch both the website and new
products. It is not expected that marketing expenditure will continue to be as high in the future.
Customers can buy a variety of styles, patterns and colours of ties at different prices.
The business's trading results for the first two quarters of trade are shown below in Table 1.
Table 1
Quarter 1
Quarter 2
$
420,000
Sales
Less cost of sales
Gross profit
Less expenses Website
development
Administration
Distribution
Launch marketing
Other variable expenses
$
$
(201,600)
218,400
120,000
100,500
20,763
60,000
50,000
Total expenses
Loss for quarter
$
680,000
(340,680)
339,320
90,000
150,640
33,320
40,800
80,000
(351,263)
(132,863)
(394,760)
(55,440)
Required
(a)
Assess the financial performance of the business during its first two quarters, using only the data in Table 1
above. (10 marks)
(b)
Briefly consider whether the losses made by the business in the first two quarters are a true reflection of the
current and likely future performance of the business. (3 marks)
The owners are well aware of the importance of non-financial indicators of success and therefore
have identified a small number of measures to focus on. These are measured monthly and then
combined to produce a quarterly management report.
The data for the first two quarters' management reports is shown below:
Quarter 1
Number of ties sold
27,631
Quarter 2
38,857
On-time delivery
95%
89%
Sales returns
12%
18%
2%
4%
System downtime
The industry average for sales returns was 13%.
Required
(c)
Comment on each of the non-financial data in Table 2 above, taking into account, where appropriate, the
industry averages provided, providing your assessment of the performance of the business. (7 marks)
(Total = 20 marks)
Solution
a)
Financial performance
Sales growth
Ties Only Co appears to have made an excellent start with initial sales of $420,000 growing by 62% ((680,000 –
420,000)/420,000 × 100%) to Quarter 2. This is particularly impressive given the acknowledged
competitiveness of this business sector.
Gross profit
The gross profit margin in Quarter 1 was 52% (218,400/420,000 × 100%) and 50% (339,320/680,000 × 100%)
in Quarter 2. The level of margin may be as expected for this business sector but we would need industry
average data for comparison.
However, a fall in margin needs to be investigated. It could be that Ties Only was initially able to source cheaper
ties but the rapid growth meant that alternative, more expensive, suppliers had to be found. Alternatively,
competitors quickly responded to this new entrant and lowered their prices in response. This pressure could have
forced Ties Only to lower their prices.
Website development
All website development costs are being written off as incurred so we would expect costs to be higher in the
initial quarters. The website costs are over a third of total expenses, so the initial loss is mostly explained by this
write-off and does not therefore give any major cause for concern.
Administration costs
Although administration costs have risen in absolute terms, as a percentage of sales they have fallen from 23.9%
(100,500/420,000 × 100%) to 22.2% (150,640/680,000 × 100%).
Administration costs are the second biggest expense so very important to control.
This could indicate that administration costs are being effectively controlled which is good news. It could also be
because fixed overheads are being spread over a larger volume and this will continue to improve as the business
grows.
Distribution costs
These costs form the smallest proportion of total expenses (about 6%) and the proportion of distribution costs to
sales has remained constant at 4.9% (20,763/420,000 × 100%).
These costs will be subject to external influences, such as a general rise in postage costs. Launch marketing
This is similar to the website costs as it is expected to fall once the business is established. Ties Only will need
to continue to market its website but this is likely to be cheaper than the initial big launch marketing campaign.
The negative impact on profitability will therefore reduce over time.
Other variable expenses
These have again increased in line with the sales volume and are 11.9% of sales (50,000/420,000 × 100%).
b) Current and future profits
An initial look at the accounts would identify a worrying total loss of $188,303 in the first two quarters.
However, much of this loss is due to the website development costs which will not be incurred again. Websites
do need to be maintained and continually improved, but this cost will be much lower. Launch marketing is
another initial cost which will fall rapidly. If we deduct these expenses, the business made an underlying profit
of $47,137 in Quarter 1 and $75,360 in Quarter 2, an encouraging upward trend.
The initial impact of the business has been very good. There is a threat from falling margins to consider but cost
control looks effective so the future is promising.
These figures illustrate that a short-term view of a new business is not necessarily a good
indicator of future performance.
c)
Non-financial performance indicators Average price of ties
Quarter 1: $420,000/27,631 = $15.20 Quarter 2: $680,000/38,857 = $17.50
In part (a) it was suggested that the fall in gross profit margin might be due to a price reduction. This data
provides evidence that this is not the case. There must therefore be an alternative explanation.
On-time delivery
This has dropped significantly from 95% to 89% and this is worrying. The service provided to customers is a
key differentiator, especially if the company is competing on quality, not price. Customers will go elsewhere if
their expectations are not met. Action will need to be taken to remedy this problem.
Sales returns
This is again a key indicator of quality and whether customers' expectations are being met. Returns have risen
from 12% to 18% and are now above the industry average of 13%. Returns are to be expected on internet sales
where the product may look different in reality, but a higher than average rate means that the internet is not
adequately describing and illustrating the products. Again, quality may be less than customers expect.
Alternatively, the pressure to dispatch orders may be resulting in errors or packaging problems. Either of these
reasons does not bode well for the business and action must be taken to remedy the problem.
System downtime
Customers who use shopping websites are usually time-pressured individuals who will not react well to delays
in loading pages. It is all too easy to immediately switch to a competitor's website so it is essential that system
downtime is kept to an absolute minimum to avoid lost sales.
It would be useful to compare the figures with an industry average but the important point is that system
downtime has doubled. This could be due to pressure on the website as a result of the volume of demand. As the
website development has been such a costly and important part of the business set-up, the owners of Ties Only
should have an urgent discussion with the website developers to come up with a solution.
Conclusion
Ties Only is doing well in terms of sales growth and potential profitability for a brand new business. However the
owners need to focus their attention on the accuracy of order delivery, website reliability and the quality of the
product. Further investigation needs to be made of the fall in gross profit margin.
32. Bedco manufactures bed sheets and pillowcases, which it supplies to a major hotel chain. It uses a just-in-time
system and holds no inventories.
The standard cost for the cotton which is used to make the bed sheets and pillowcases is $5 per m2.
Each bed sheet uses 2 m2 of cotton and each pillowcase uses 0.5 m2. Production levels for bed sheets and
pillowcases for November were as follows:
Bed sheets
Pillow cases
Budgeted production levels
Units
120,000
190,000
Actual production levels
Units
120,000
180,000
The actual cost of the cotton in November was $5.80 per m2. 248,000 m2 of cotton was used to make the bed sheets
and 95,000 m2 was used to make the pillowcases.
The world commodity prices for cotton increased by 20% in the month of November. At the beginning of the
month, the hotel chain made an unexpected request for an immediate design change to the pillowcases. The new
design required 10% more cotton than previously. It also resulted in production delays and therefore a shortfall in
production of 10,000 pillowcases in total that month.
The production manager at Bedco is responsible for all buying and any production issues which occur, although
they are not responsible for the setting of standard costs.
Required
(a) Calculate the following variances for the month of November, for both bed sheets and pillow cases, and in total:
(i)
(ii)
(iii)
(iv)
Total material price planning variance
Total material price operational variance
Total material usage planning variance
Total material usage operational variance
(3 marks)
(3 marks)
(3 marks)
(3 marks)
(b) Assess the performance of the production manager for the month of November. (8 marks)
(Total = 20 marks)
Solution
(a)
Original standard cost
Sheets
Pillow cases
Sheets
Pillow cases
(i)
2m2 × $5 per m2
0.5m2 × $5 per m2
2m2 × $6 per m2
0.55m2 × $6 per m2
$10 per unit
$2.50 per unit Revised standard cost
$12 per unit
$3.30 per unit
Material price planning variance
$
2
Original standard price of materials per m
5.0
Revised standard price
6.0
Material price planning variance per m2 ............................................................1.0 (A)
Actual quantity used/purchased (248,000 + 95,000)
343,000
Material price planning variance in $
$343,000 (A)
(ii)
Material price operational variance
$
6.0
5.8
0.2 (F)
343,000
$68,600 (F)
Revised standard price of materials per m2
Actual price paid
Material price operational variance per m2
Actual quantity used/purchased (248,000 + 95,000)
Material price operational variance in $
(iii)
Material usage
planning variance
This applies to
pillow cases only
(iv)
2
180,000 pillow cases should use: original standard (× 0.5)
pillow cases should use: revised standard (× 0.55)
m
90,000 180,000
99,000
Material usage planning variance in m2
Original standard price per m2
Material usage planning variance in $
9,000 (A)
$5
$45,000 (A)
Material usage operational variance
This applies to pillow cases only
m2
180,000 pillow cases should use: revised standard (× 0.55)
120,000 sheets should use (× 2)
Together they should use
They did use
Material usage operational variance in m2
Original standard price per m2
Material usage planning variance in $
Check:
Actual cost of materials: 343,000 m2 × $5.80
Original standard cost: (120,000 sheets ×
$10) + (180 pillow cases × $2.50)
99,000
240,000
339,000
343,000
4,000 (A)
$5
$20,000 (A)
$
$
1,989,400
1,650,000
Total materials cost variance
Variances:
Price planning
Usage planning
Price operational
Usage operational
339,400 (A)
343,000 (A)
45,000 (A)
68,600 (F)
20,000 (A)
339,400 (A)
(b)
The production manager is not responsible for setting the standard costs and is therefore not
responsible for any planning variances. They are responsible, however, for the operational variances (including the
price variance, since they have responsibility for materials purchasing).
The manager is also not responsible for the production shortfall of 10,000 pillow cases in the month, since this was
caused by the change in customer requirements. However, this did not affect the materials variances. (It is much more
likely to have affected labour efficiency or idle time variances in the month.)
Assessing performance on operational variances only, it would appear that the production manager has performed well.
Although the expected material price rose to $6 per m2, they were able to purchase materials at $5.80 per m2, which
'saved' $68,600 in purchase costs.
The materials usage operational variance was adverse in total, by 4,000 m2. The usage of materials on bed sheets
(248,000m2) was more than the expected 240,000 m2 for 120,000 sheets produced (120,000 × 2). On the other hand,
materials usage for pillow cases (95,000m2) was 4,000 m2 less than the expected usage of 99,000 m2 for the 180,000
pillow cases produced (180,000 × 0.55). The production manager should therefore be asked to explain the adverse
usage of materials in producing the bed sheets.
The large favourable variance for materials usage on pillow cases should also be explained, to make sure that the
pillow cases are being made properly to the new standard requirement.
Столкнувшись с такой проблемой Халык нужно было быстрее предпринимать решения. Хоть и
сайт и приложения давно существовали никто ими не пользовался , а из мобильных приложении
люди больше предпочитали оплату через ApplePay или SamsungPAy.Но Каспи , которые даже не
привязывается к другим платежным системам , ввел сһоплату через QR и завоевал весь рынок.
Чтобы решить данную проблему , халык полностью изменил интерфейс своего приложения
сделал его более удобным клиенту.Можно делать покупки через халык ,получая хороший
кэшбеке, сидя дома взять кредит , рассрочку или открыть депозит, инвестировать а деньги,
сделать страховку.
Халык начал сотрудничать с многими компаниями ,начисляя бонусы за покупку их продукции
в размере 10% ,или же за оплату QR 5 % 6 в то время 6как у каспи 0,25%.Так же ступив в Халык
клаб можно зарабатвать до 30% бонусов от покупки. Халык начал сотрудничать с государством
начисляя по 100 бонусов за каждые 10 баллов ребенку.Это сделано,чтобы школьники ,которые
уже до 16 лет открыли себе карточку при исполнении 16 так же оставались пользователями
банка.Так же имеются кэшбеки с покупок в магазине или страхование в халыке.Тем самым с
каждым годом все больше и больше людей возвращаются к Халыку.