1. A2 Accounting
Unit June 2002 Paper
AQA Unit 7
Check out your answers

2. See Next Slide For triangle
Question 1a(i)
Key to this question …is to make use of your triangle and to recognise wording that shows that the actual output of units is DIFFERENT from the standard output
Where actual output and expected output are different …so that like is compared to like ..we must use the actual output figures as standard and actual
See
Next
Slide
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triangle

3. Key point
Because actual production was units ..standard hours will need to be adjusted to this
4 marks
Materials

4. Key point
Because actual production was units ..standard hours will need to be adjusted to this
4 marks
Labour

5. Question 1b
Explain why these sub-variances may have occurred
Award up to 2 marks for each reason ..providing the reason is developed
Material usage £12000 adv and price £20000 fav
Cheaper price* paid for material than expected due to a cheaper supplier*/discount/lower quality
More material used* may be due to material of a lesser quality
Unskilled labour* may be wasting more material than budgeted
4 marks
4 marks
Labour wage rate £45000 fav and efficiency £33750 adv
Cheaper rate* paid for labour than expected due to less skilled workers
More hours taken* may be due to a lesser level of skill
More unskilled labour* may be working less efficiently wasting more material
Cheaper rate affects staff motivation

6. Question 2a Calculate the contribution per unit
4 marks
Question 2b Calculate the contribution per labour hour per unit (NB question is taking you through limiting factor)
4 marks
Contribution per unit
Direct Labour hours

7. Question 2 b [cont] 1 mark 2 marks
State the optimum production plan which Donaldson could introduce which would maximise profit
Since Bass (£2.25 as opposed to Alto £2) has the higher contribution per unit Donaldson would maximise the production of Bass
1 mark
Limiting factor ..only 520,000 labour hours are available
So, make all 8,000 of Bass (8000 x 32 hours) will use 256,000 hours
2 marks
This will leave 264,000 hours for Alto ..(264,000/44 hours) gives production of 6,000

8. Q2
(c) Assess the effects this new production plan would have on the manufacturing companies in competition with Donaldson Ltd
Donaldson Ltd is able to satisfy the demand for Product Bass* (8,000), however is only able to satisfy one third (6,000) of their demand for Product Alto*
This will allow the competitors of Product Alto to raise their price above £390* due to limited supply*
The competitors of Product Bass may have to decrease their price to compete with Donaldson Ltd (**), or alternatively satisfy customer need by better service/quality of product etc **
7 marks

9. Question 3
(a) Calculate the annual net cash flows for each year, which are expected to result from the purchase of the machine
6 marks
(b) Using the expected annual net cash flows, calculate the net present value for the replacement machine
5 marks

10. State whether or not MV Wilkins should purchase the machine.
Question 3
State whether or not MV Wilkins should purchase the machine.
Give ONE reason for your answer
M V Wilkins should purchase * the machine as with the 10% cost of capital, there is a positive NPV*
2 marks

11. Question 4a
Prepare an overhead apportionment schedule apportioning the factory overheads to the appropriate departments
8 marks

12. Question 4b
Calculate the overhead absorption rates for each production department.
State the bases used and give ONE reason for your choice
6 marks

13. Key Point ..Production Budget is in UNITS not MONEY
Question 5(a)
(i) Prepare the production budget for each of the 6 months ended 31 October 2001
Key Point ..Production Budget is in UNITS not MONEY
12 marks

14. Question 5(a)
(ii) Write a memorandum to the managing director of Frost Ltd explaining 3 benefits of preparing a sales budget
2 marks for 4 components of Report Heading (To: From; Date; Subject
Make sure your information is related to SALES and not just general budgeting
Remember budget is a plan that enables the 4 C’s to be achieved (Compel/Co-ordinate/Control/Co-operate
Plans and co-ordinates production capacity
Plans amount of stock needed
Helps control the movement of cash
Plans the use of labour
Plans the quantity of labour needed
Compels performance evaluation of personnel
6 marks

15. Question 5(b)
Calculate the prime cost of production for the 6 months ended 31 October 2001
Key point ..remembering how to do a manufacturing account
6 marks

16. Question 5(c) 4 marks Calculate the total cost of production per unit
Simply continue your Manufacturing Account to find the Cost of Production
4 marks

17. Question 5(d) 2 marks 4 marks
(i) Briefly state the requirements of SSAP 9 for the valuation of stock
SSAP 9 states stock should be valued at the lower of cost and net realisable value
2 marks
(ii) Using SSAP 9, calculate the value of the finished goods as at 31 October 2001
4 marks

18. Question 5(e)
(e) Prepare the trading and profit and loss account for Frost Ltd for the 6 months ended 31 October 2001
6 marks