Please write clearly in block capitals. Centre number Candidate number Surname Forename(s) Candidate signature A-level ACCOUNTING Unit 4 Further Aspects of Management Accounting Thursday 15 June 2017 Afternoon Time allowed: 2 hours Materials For this paper you must have: a calculator. For Examiner s Use Instructions Use black ink or black ball-point pen. Fill in the es at the top of this page. Answer all questions. You must answer the questions in the spaces provided. around each page or on blank pages. All workings must be shown and clearly labelled; otherwise marks for method may be lost. Do all rough work in this book. Cross through any work you do not want to be marked. Information The marks for questions are shown in brackets. The maximum mark for this paper is 90. You will be marked on your ability to: use good English organise information clearly use specialist vocabulary where appropriate. Question 1 2 3 4 TOTAL Mark *JUN17ACCN4* IB/G M/Jun17/E11 ACCN4
2 Answer all questions in the spaces provided. 1 Total for this question: 22 marks The following information has been extracted from the books of account of Barber Products Limited for the year ended 31 January 2017. 000 Carriage inwards on raw materials 6 Depreciation plant and machinery 24 Factory maintenance 12 Inventory at 1 February 2016 Finished goods 18 Raw materials 36 Work in progress 12 Inventory at 31 January 2017 Finished goods 24 Raw materials 32 Work in progress 18 Other factory overheads 113 Purchase of raw materials 365 Purchase of finished goods 14 Returns inwards 5 Revenue 1 053 Selling and distribution costs 110 Wages / salaries Administration and sales staff 24 Factory supervisor 31 Indirect labour 55 Manufacturing 186 *02* IB/G/Jun17/ACCN4
3 1 (a) Prepare an extract from the manufacturing account for the year ended 31 January 2017 to show the prime cost of manufacture. [4 marks] Barber Products Limited Manufacturing account (extract) for the year ended 31 January 2017 000 000 The directors have calculated that the total cost of factory overheads for the year ended 31 January 2017 was 235 000. Finished goods are transferred from the factory at cost plus 20%. 1 (b) Prepare an extract from the manufacturing account for the year ended 31 January 2017 to show the value of goods transferred from the factory during the year. [4 marks]. Prime cost Barber Products Limited Manufacturing account (extract) for the year ended 31 January 2017 000 000 Turn over *03* IB/G /Jun17/ACCN4
4 1 (c) Prepare an extract from the current assets section of the balance sheet at 31 January 2017 to show only the inventories section. Closing inventory of finished goods comprises only goods manufactured by the company. [2 marks] Barber Products Limited Balance sheet (extract) at 31 January 2017 Current assets 000 000 Barber Products Limited uses standard costing to monitor manufacturing performance. The following standard cost data is available for one unit of one of its products. Direct materials Direct labour 12 metres @ 3.45 per metre 3.5 hours @ 9.60 per hour The actual data for February 2016 were as follows: Direct materials 8 240 metres costing 27 604 Direct labour 2 420 hours costing 23 958 Production 680 units 1 (d) Calculate all material and labour sub-variances for February 2017. [8 marks] Direct material price variance *04* IB/G/Jun17/ACCN4
5 Direct material usage variance Direct labour rate variance Direct labour efficiency variance Extra space Question 1 continues on the next page Turn over *05* IB/G /Jun17/ACCN4
6 1 (e) State two factors that should be considered when setting the standard price for material. 1 [2 marks] 2 1 (f) State two factors that should be considered when setting the standard usage for material. [2 marks] 1 2 22 *06* IB/G/Jun17/ACCN4
7 Turn over for the next question DO NOT WRITE ON THIS PAGE ANSWER IN THE SPACES PROVIDED Turn over *07* IB/G /Jun17/ACCN4
8 2 Total for this question: 18 marks Asnar Wood Limited manufactures one product, an executive office desk. The following budgeted information is available: per unit Selling price 160 Direct material 50 Direct labour (at 12 per labour hour) 60 Variable production overheads 8 July 2017 August 2017 Forecast sales (units) 450 480 Forecast production (units) 520 410 Additional information 1. Fixed production overheads are forecast to be 96 000 per annum. 2. Fixed production overheads are absorbed on the basis of direct labour hours worked. 3. Production is forecast to be 6000 units per annum (500 units per month). 4. The directors forecast that there will be no inventory of finished goods at 1 July 2017. 2 (a) Prepare budgeted income statements for each of the months July 2017 and August 2017 using absorption costing. Workings [12 marks] [Includes 2 marks for quality of presentation] *08* IB/G/Jun17/ACCN4
9 Turn over *09* IB/G /Jun17/ACCN4
10 Asnar Wood Limited Budgeted income statement for the months of July 2017 and August 2017 July 2017 August 2017 The directors have calculated that the profit for July 2017 using marginal costing would be 10 900. 2 (b) Reconcile the marginal cost profit for July 2017 with the absorption cost profit or loss for July 2017. [2 marks] *10* IB/G/Jun17/ACCN4
11 The directors of Asnar Wood Limited are planning to expand their product range into four different items of office furniture. They have been advised that activity based costing may be the most appropriate costing system for the expanded business. 2 (c) Explain one advantage and one disadvantage of activity based costing. [4 marks] Advantage Disadvantage Extra space 18 Turn over for the next question Turn over *11* IB/G /Jun17/ACCN4
12 3 Total for this question: 24 marks Downey Products Limited manufactures a computerised control unit for use in heating installations. Demand for the product has declined due to the availability of less expensive imported units. In order to become more competitive, the directors plan to scrap the existing machinery and replace this with a new automated machine. They have the choice of two machines, both of which would enable the company to reduce the product selling price to 10% less than the competition. The company currently sells 1800 units per annum and the directors are confident that with the new machinery, sales in year 1 would be 2000 units increasing by a further 100 units in each subsequent year. The directors have the choice of two machines. The following data is available for each: Machine A Machine B Capital cost 200 000 100 000 Expected useful life 4 years 3 years Residual value 80 000 25 000 per unit per unit Unit selling price 160 160 Variable overheads (including direct labour) 120 130 Depreciation 30 25 The directors estimate that direct material costs and variable overhead costs will remain constant over the next four years, but direct labour costs will increase by 1 per unit each year, commencing with year 2. The directors intend to maintain the selling price at the current level for each of the next four years. 3 (a) Calculate the annual net cash inflow from operations for the lifetime of each machine. [8 marks] Machine A *12* IB/G/Jun17/ACCN4
13 Machine B 3 (b) Calculate the payback period for each machine. [2 marks] Machine A Machine B Turn over *13* IB/G /Jun17/ACCN4
14 3 (c) Calculate the net present value of each machine based on the company s cost of capital of 12%. The discount factors for 12% are as follows: Year Discount factor 1 0.893 2 0.797 3 0.712 4 0.636 Machine A [6 marks] Year Machine B Year *14* IB/G/Jun17/ACCN4
15 3 (d) Advise the directors which machine they should purchase based only on financial factors. [8 marks] 24 Turn over *15* IB/G /Jun17/ACCN4
16 4 Total for this question: 26 marks PR Support Limited is a service business providing administrative support to businesses. The company operates three separate departments: Payroll Market Research Financial Services. The directors are currently preparing budgets for the year ending 30 April 2018. The company s fixed overheads include the salaries of its employees. The company employs 4 staff in each department, a total of 12 employees. Each employee is paid a salary of 15 per hour, for working a total of 40 hours per week, for 48 weeks per annum. Any overtime required is paid at a premium of 50%. The company s other fixed overheads of 75 000 per annum are split equally between the three departments. In addition, each department incurs 7 per hour variable overhead costs. PR Support Limited charges clients 30 per hour for the services it supplies. The directors require a profit of 30 000 from each department in the year ending 30 April 2018. The Market Research department is budgeted to make a profit of 34 000 and the Financial Services department is budgeted to make a profit of 36 000 in this period. Due to inefficiencies and lack of available work, the Payroll department is budgeted to work at 95% capacity. However, the other two departments are budgeted to work at 100% capacity. 4 (a) Calculate the number of chargeable hours required in the Payroll department to produce a profit of 30 000 for the year ending 30 April 2018. [2 marks] *16* IB/G/Jun17/ACCN4
17 4 (b) Prepare a budgeted marginal cost statement for the Payroll department to show the profit for the year ending 30 April 2018. PR Support Limited Payroll department Budgeted marginal cost statement for the year ending 30 April 2018 [4 marks] Question 4 continues on the next page Turn over *17* IB/G /Jun17/ACCN4
18 The directors of PR Support Limited feel that the performance of the payroll department should be improved. They are currently reviewing two exclusive opportunities that have arisen. Option 1 An overseas company has offered to process all the work of the Payroll department for the year ending 30 April 2018 and beyond. The price that has been quoted to the directors is 21.00 per chargeable hour. The Payroll department would not be required and would be closed down. Option 2 The directors have the opportunity to take over all of the clients of a competitor. This will result in an additional 4200 chargeable hours per annum in the Payroll department. This extra business would require the department to take on a further two full-time employees and would involve the department working at over 100% capacity. The directors are aware that in order to keep their existing experienced staff and recruit qualified new staff, the company would have to increase the fixed salary in the department from 15 per hour to 18 per hour. 4 (c) Calculate the total contribution for the year ending 30 April 2018 from the contract if the directors decide to proceed with Option 1. Tick one only. [1 mark] A 69 120 B 65 664 C 15 360 D 14 592 *18* IB/G/Jun17/ACCN4
19 4 (d) Calculate the total budgeted wages of the Payroll department for the year ending 30 April 2018, if the directors decide to proceed with Option 2. [3 marks] 4 (e) Prepare a budgeted marginal cost statement for the Payroll department for the year ending 30 April 2018, if the directors decide to proceed with option 2. [4 marks] Turn over *19* IB/G /Jun17/ACCN4
20 4 (f) Advise the directors which option they should choose. Consider both financial and nonfinancial issues. Financial issues [12 marks] [Includes 2 marks for quality of written communication] Non-financial issues *20* IB/G M/Jun17/E1
21 Advice 26 END OF QUESTIONS *21* IB/G /Jun17/ACCN4
22 There are no questions printed on this page DO NOT WRITE ON THIS PAGE ANSWER IN THE SPACES PROVIDED *22* IB/G/Jun17/ACCN4
23 There are no questions printed on this page DO NOT WRITE ON THIS PAGE ANSWER IN THE SPACES PROVIDED *23* IB/G /Jun17/ACCN4
24 There are no questions printed on this page DO NOT WRITE ON THIS PAGE ANSWER IN THE SPACES PROVIDED Copyright Information For confidentiality purposes, from the November 2015 examination series, acknowledgements of third party copyright material will be published in a separate booklet rather than including them on the examination paper or support materials. This booklet is published after each examination series and is available for free download from www.aqa.org.uk after the live examination series. Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been unsuccessful and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team, AQA, Stag Hill House, Guildford, GU2 7XJ. Copyright 2017 AQA and its licensors. All rights reserved. *24* IB/G/Jun17/ACCN4