Examiner s report MA2 Managing Costs and Finance For CBE exams covering September 2017 to June 2018

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1 Examiner s report MA2 Managing Costs and Finance For CBE exams covering September 2017 to June 2018 General Comments The intention of this report is that, when considered in conjunction with previous reports, candidates at future sittings will have a resource which maximises their chance of success. The most effective way to use these reports is to consider both the technical content of each question, and the approach to answering the question noting that different question types will require slightly different approaches. In considering the technical content, candidates should make sure that they have a clear understanding of that content. Whilst not every candidate will use exactly the same approach, it is important to ensure that a logical and sequential approach is applied, based on relevant technical knowledge. The examination consists of 50 objective test questions, each worth 2 marks. The purpose of this report is to provide illustrations of questions which have especially posed problems for candidates. The three sample multiple-choice questions below cover different aspects of the syllabus. The approach to correctly answering each question is explained and the common incorrect approaches, along with the misunderstandings which they indicate, are highlighted. Answering objective test questions requires candidates to have both a clear understanding of the subject matter being examined and a logical approach. Sample Questions for Discussion Example 1 Which of the following statements, about presenting information, is/are TRUE? (1) In a component column chart, the width of each column will be the same (2) On a line graph, the dependent variable is on the x axis A Both 1 and 2 B 1 only C 2 only D Neither 1 nor 2 Examiner s report MA2 Sept June

2 Here is an example of a component column chart to aid with understanding the question: As illustrated in the component chart above, Statement 1 is therefore correct where the width of each column is correct. Whereas statement 2 is incorrect. The independent variable goes on the x-axis (the bottom, horizontal one) and the dependent variable goes on the y-axis (the left side, vertical one). The correct answer was therefore option B, that statement 1 only was true. Most candidates selected option A; that both statements were true or option D that neither statement was true; in error. Example 2 The following unit costs are incurred in the production of 1,000 units of a product in a period: $ per unit Variable costs 7.80 Semi-variable costs 5.30 Fixed costs 6.50 Total costs $3 70 per unit of the semi-variable costs are fixed costs. What total costs would be incurred for production of 1,200 units of the product in a period? A $23,520 B $21,480 C $21,900 D $21,160 Examiner s report MA2 Sept June

3 Very few candidates correctly split semi-variable costs and remembered to use the 1,000 units for fixed costs per unit as shown here: Variable costs per unit $ 7.8 Semi-variable costs per unit $ Total cost per unit $ Correct Answer Units 1,200 1,000 Option B Total cost $ 11,280 10,200 21,480 Most candidates forgot to multiply fixed costs by the original estimate based on 1,000 units. Thus calculating a total cost at $23,520 as displayed below by mistake. Variable costs per unit $ 7.80 Semi-variable costs per unit $ Total cost per unit $ Units 1,200 1,200 OptionA Total cost $ 11,280 12,240 23,520 Quite a few got the split of variable and fixed costs the wrong way around when splitting semivariable costs as follows: Variable costs per unit $ 7.80 Semi-variable costs per unit $ Total cost per unit $ Units 1,200 1,000 Option C Total cost $ 13,800 8,100 21,900 Examiner s report MA2 Sept June

4 A few candidates treated the whole of semi-variable as fixed costs by mistake: Variable costs per unit $ 7.80 Semi-variable costs per unit $ 5.30 Total cost per unit $ Units 1,200 1,000 Option D Total cost $ 9,360 11,800 21,160 Examiner s report MA2 Sept June

5 Example 3 A process with costs of $15,600 has resulted in 1,000 kilogrammes (kg) of product A and 4,000 kg of product B. Product A can be sold for $50 per kg, but only after further processing at a cost of $10 per kg. Product B can be sold for $20 per kg with no further processing. How much of the process costs will be apportioned to product A, using the net realisable value method? A $5,200 B $6,000 C $3,120 D $10,400 Only a few candidates correctly chose $40 per kg after deducting the further processing cost for product A as follows: $ per kg kg $ $ Correct Answer is Option A A 1, ,000 5,200 40,000/120,000*15,600 B 4, ,000 5, ,000 Some candidates chose option C which used the kilograms as the basis of apportionment by mistake: kg $ A 1,000 3,120 1,000/5,000*15,600 B 4,000 5,000 Some candidates chose option B where they used the $50 per kg for product A, ignoring the further processing cost in error: $ per kg kg $ $ A 1, ,000 6,000 50,000/130,000*15,600 B 4, ,000 Examiner s report MA2 Sept June

6 5, ,000 A select few chose option D where they used the total for product B as the basis of apportionment by mistake: kg $ per kg $ $ A 1, ,000 10,400 80,000/120,000*15,600 B 4, ,000 5, ,000 Summary The three multiple-choice questions illustrated in this report reveal a number of misunderstandings, confusion or a lack of knowledge amongst candidates regarding the particular topics being examined. In many cases this may be symptomatic of a more widespread problem which can only be overcome by a rigorous study program and by practicing objective test questions. Candidates preparing for future examinations should try to ensure that they develop a clear understanding of the different areas of the syllabus, read questions carefully and think logically when answering them. Examiner s report MA2 Sept June