Candidates’ Performance
in the 2010 Examination
Paper 2
Overall Performance
• Fairly well
• Should make an effort to get a good
understanding of the concepts behind the
accounting principles and practices
• Should put more efforts in understanding
the question requirements
2
Overall Performance
Candidates are advised
• to read the question carefully
• to note the differences between separate parts
of a question
• to present answers logically step-by-step
• to understand the assumptions set in the
questions, the timing and details of the
transactions and make the answers
specific to the situational facts
3
Overall Performance
Question No.
Popularity
Performance in General
1
Well answered / Fair /
Poor / Good / Poor
2
Good / Well answered /
Good / Fair / Good / Poor
/ Poor
3
95.7%
Satisfactory / Poor / Poor /
Poor / Poor
90.3%
Good / Good / Poor / Fair
/ Fair
14.0%
Good / Fair /
Satisfactory / Poor
4
5
4
Question 1 (a), (b) & (c)
Process costing
• Not knowing the requirement (i.e. drawing
up the process account mechanically without
referring to the requirement)
• Wrong in calculating the equivalent units of
direct materials and transferred-in-costs
• Not knowing the result with reduced actual
loss (i.e. increased number of units produced
 decreased per unit fixed cost  more
units of goods sold  higher profit)
5
Question 1 (d) & (e)
Activity-based costing method
• Not knowing the differences between
production and services centers, thus
wrongly re-allocated the costs of Process A &
B to the pills of Heal and Cure
• Not presenting the answer in readable
manner
• General discussion to support activity-based
costing method than giving the reasons of
using activity-based costing in the case
6
Question 2 (a) - (f)
Standard absorption costing &
budgeting
• Quantity purchased rather than quantity
consumed should be used in calculating the
price variance of material
• Sales figures were wrongly replaced by the
receipts from sales (i.e. candidates just copy
the format given in the question to answer)
• Only 1 budgeted standard cost per unit
should be given (i.e. not correct in columnar
form)
7
Question 2 (a) - (f)
Standard absorption costing &
budgeting (cont’d)
• Quarterly income statement rather than
monthly income statement was required
• Not knowing the calculation of the
over/under absorbed production overheads
and the uncollectible debts
• Failed in understanding the mechanism of
absorption of production overheads (both in
monthly and yearly basis)
8
Question 2 (g)
Lease accounting
• Wrongly classify the finance lease to an
operating lease
• Not deducting the costs borne by the
manufacturer from the NPV of the total lease
payment
• Important factor – the company consumed
almost 100% of the machine’s expected
useful life
9
Question 3 ~ 95.7%
CVP & Budgeting
(a) Improper treatment of scrap (1 out of
every 11 litres of pre-inspection chemical)
(b) Misinterpret the 3000 litres of chemical
produced and sold include the sales of
scrap.
Wrong calculation of variable production
cost ( i.e. (TVC-scrap sale proceeds)/3000 )
and thus the contribution.
10
Question 3 (cont’d)
CVP & Budgeting
(c) Not understanding the changes proposed.
Refer to Q3(c).
(d) Poor result as wrong variable costs
calculated for original budget, proposal 1
and proposal 2.
(e) General discussion only, not mentioning the
additional fixed cost in proposal 1.
11
Question 4 ~ 90.3%
Limiting factor
(a) Not using the contribution margin in
ranking and not able to identify the direct
labour hour as the limiting factor.
(b) Some not considering the units made for
Carpentry Ltd as a part of the answer.
12
Question 4 (cont’d)
Inventory valuation
(c) Not understanding the question and not
presenting the answer (value of closing
inventory and total amount of inventory to
be written down) in appropriate manner.
Not knowing how closing inventory value
should be ascertained (Perpetual inventory
system vs. Physical stock taking)
Refer to Q4(c).
13
Question 4 (cont’d)
Inventory valuation
(d) Not able to give valid reasons for adopting
the weighted average method (i.e. only
mention the value is the average amount).
(e) Not knowing the mechanism of specific
identification method. Or only mention it
is suitable for items with high price.
14
Question 5 ~ 14.0%
Accounting concepts, assets /
revenue recognition &
provision of probable liability
• Not realize the importance of general
recognition criteria of development cost (i.e.
1 May 2009). Refer to Q5(a)(ii).
• Not able to explain the reasons to support
the correct accounting treatment .
• Down payment should not be recognized as
revenue.
15
THANK YOU
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