Practice assessment
model answers
Professional Diploma Synoptic (PDSY)
Practice assessment 1
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Practice assessment model answers - PDSY
Task 1 (20 marks)
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Task 2 (15 marks)
Q
(a)
Answer
1 mark for identifying a weakness with a further mark for the explanation.
Weaknesses:
•
Cash budget should be linked to other relevant budgets (1) and prepared at the
same time (1)
•
The budget was prepared solely by Trevor (1). Without consultation with others
the cash budget is unlikely to be totally comprehensive (1)
•
Sales receipts have been calculated based on the previous year (1). The timing
and/or level of cash receipts may be completely different to those of the previous
year (1).
•
Sales receipts are based on previous year but costs based on current year (1).
Should be based on same year and so will lead to inaccuracies (1).
•
Direct material costs have been split according to the pattern of sales receipts
(1). The timing of the payments could be completely different (1).
•
Direct labour costs have been split equally over the year (1). The payments have
not been linked to the pattern of sales receipts. (1).
•
Overheads have been split equally over the year (1). The payments have not
been linked to the pattern of sales receipts. (1).
•
The payment of VAT has been based on the previous quarters sales receipts and
direct material payments (1). It is assumed that all will carry VAT at standard rate
and no allowance has been made for VAT on other expenses (eg overheads) (1).
•
Management bonuses have been split equally over the year (1). If the bonuses
are based on the operating profit for the year, they may vary and may only be
included in the last quarter. (1).
•
There is no allowance for any finance costs (1). The cash balance at the end of
quarter four is overdrawn and therefore interest costs should be incurred. (1).
•
Opening and closing balances for inventory receivables and payables have not
been considered. (1) This leads to an inaccuracy in planning working capital (1)
•
Prepared without competence and due care (1) indicates poor controls/ weak
corporate governance. (1)
Other sensible points could also earn marks.
Q
(b)
Answer
•
•
•
Clear segregation of duties for all finance related activities, for example
accounts and budget preparation
Produce regular reports on profits, cash, and financing
Use variance analysis to highlight and investigate any significant variances
between budgeted and actual figures
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•
•
•
Q
(c) (i)
Answer
(i)
•
Q
(c)
(ii)
All expenditure should have authorisation limits with the correct authorisation
signatories.
Regular control account reconciliations (for example, bank, inventories,
receivables, payables) should be carried out.
Calculate regular key performance indicators – financial and non-financial.
(maximum 2 marks)
Current method based on 25% of the operating profit
o Payable to managers only
o May cause conflicts with other staff members
o Based on profit, which may not be sustainable, but easy to measure
Answer
(ii)
•
(maximum 1 mark)
Alternative method (one only required):
o Financial – successful achievement of pre-agreed performance targets
o Non – financial - customer satisfaction / repeat / new customers
o Financial - base on contribution rather than profit
o Make bonus scheme available to all staff
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Task 3 (15 marks)
1 x mark for identification; 2 marks for explanation (maximum 3 marks per weakness)
Note: There are more suggested weaknesses shown below than are required to be given in the task.
Weakness 1: Tony Clark has little involvement in day to day purchasing (1). Failures in the
system/abuses to system use (1) could go unnoticed (1).
Weakness 2: No security for ordering stationery (1). Potential for anyone to commit fraud (1) by
making purchases for their own use in the company's name (1).
Weakness 3: Budget holders and the warehouse manager can raise orders and sign that the goods
or services have been received (1). Potential for fraud as there does not appear to be any check (1)
that these purchases are necessary or even for business use (1)
Weakness 4: Procedures do not include reference to checking that goods and services of the correct
standard have been received (1). SLP could be paying for unsatisfactory supplies (1) therefore being
unnecessarily costly (1)
Weakness 5: There is no cash limit to purchase orders that are within the approved budget (1).
Without a second signature on large purchases (1), there is scope for errors / poor judgement / fraud /
costly (1)
Weakness 6: Orders can be placed without agreeing a price (1). SLP is in a weak position to
negotiate price (1) after the goods or service have been received (1).
Weakness 7: Lack of authorisation of new accounts (1). Should be a policy for choosing new
suppliers (1) as there could be potential for fraud through collusion with suppliers (1).
Other suitable weaknesses may also be awarded marks.
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Task 4 (15 marks)
1 x mark for each correct cost;
1 x mark for each correct response
Indicative content:
• Proposed policy would ensure that all new products are profitable:
o Any price that is higher than marginal cost will contribute and therefore increase
profits
o The policy generates prices which are greater than total unit cost, including an
apportionment of fixed costs
o Therefore, all products should be profitable at any volume of sale
• Despite being profitable, the new policy could be damaging to the business:
o The pricing policy does not allow the sales director to respond to market conditions
and find the combination of profit and volume that will optimise contribution
o SLP is in a price competitive business
o If new products are not priced competitively they will only sell in small volumes.
o As ageing products decline they must be replaced by innovative new ones.
o The business will go into decline if the product range is not refreshed
0 marks: No response worthy of credit
1 – 2 marks: Limited range of impacts discussed, with some reference made to the proposed policy
would ensure all new products are profitable. Limited reference made to the new policy being
damaging to the business.
3 – 4 marks: Range of impacts discussed with some use of evidence to support all products being
profitable; some reference made to potential impacts to the business due to the competitive
environment.
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5 marks: To achieve full marks, the response will be well balanced including a wide range of factors
which demonstrates clear understanding that the proposed policy despite being profitable, would be
damaging to the business. Good use of evidence to support discussion.
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Task 5 (20 marks)
2 x marks for each correct ratio
2 x marks for each correct observation
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AAT is a registered charity. No. 1050724
Task 6 (15 marks)
•
•
•
•
•
•
New payroll system introduced
Jane has been with SL Products Ltd for 9 years
Jane is an experienced payroll clerk
New system allows Production Director to input and authorise team bonuses
Merville Ltd HR department helpful
Any other relevant point
•
•
•
•
•
•
•
•
Errors in the calculation of staff pay
Payroll team understaffed as Hazel not replaced
Sue too busy to assist Jane
Merville Ltd HR department slow to respond
Jane has only had partial training
Training of departmental heads has not taken place
Many features of the new payroll system not being used
Any other relevant point
•
•
•
•
•
•
Recruit an additional member to the payroll team
Provide full training to Jane and other relevant managers
Avoid £2500 a month fee by bringing benefit scheme administration in house
Use features of new payroll system not currently utilised
Consider whether it might be appropriate to outsource the payroll department
Any other relevant point
•
•
•
•
•
Jane leaving would put SLP at risk of not meeting its legal obligations to staff
Financial Accounts being incorrect
Over-payments to staff who may subsequently leave company
Risk of incorrect returns to HMRC and resultant penalties
Any other relevant point.
Recommendations
1 mark per recommendation
•
Start using full
features of new
payroll system
•
Recruit a new payroll
clerk / manager
•
Formal training
programme to be
completed
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Benefits
1 mark per benefit
(max 2 per recommendation)
• Increase efficiency
• Improved management
information
•
•
•
Increased resource should
help to reduce errors
Ease burden on Jane
Managers can take
advantage of features
within new system
1 mark
recommendation
1 mark per
benefit (max 2)
1 mark
recommendation
1 mark per
benefit (max 2)
1 mark
recommendation
1 mark per
benefit (max 2)
•
Bring administration
of Merville Ltd in
house
•
Any other relevant
issue
•
More accurate payroll
•
•
Save monthly fee
Opportunity to look at
merging employment terms
of staff
•
1 mark
recommendation
1 mark per
benefit (max 2)
1 mark
recommendation
1 mark per
benefit (max 2)
Colin is charging overpayments to the company accounts to avoid senior management becoming
aware of payroll problems
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