1st Year Examination Summer 2009

MANAGEMENT ACCOUNTING

PAPER, SOLUTIONS
and
EXAMINER’S REPORT
 NOTES TO USERS ABOUT THESE SOLUTIONS

The solutions in this document are published by Accounting Technicians Ireland. They are intended
to provide guidance to students and their teachers regarding possible answers to questions in our
examinations.

Although they are published by us, we do not necessarily endorse these solutions or agree with the
views expressed by their authors.

There are often many possible approaches to the solution of questions in professional examinations.
It should not be assumed that the approach adopted in these solutions is the ideal or the one
preferred by us.

This publication is intended to serve as an educational aid. For this reason, the published solutions
will often be significantly longer than would be expected of a candidate in an examination. This will
be particularly the case where discursive answers are involved.

The solutions are relevant to the tax rates in the year the Examination was sat. A copy of the tax
rates is enclosed with the solutions.

This publication is copyright 2009 and may not be reproduced without permission of Accounting
Technicians Ireland.

2
1st Year Examination : Summer 2009

PAPER : MANAGEMENT ACCOUNTING

Friday 22nd May 2009 - 9.30 a.m. to 12.30 p.m.

INSTRUCTIONS TO CANDIDATES

In this examination paper the €/£ symbol may be understood and used by candidates in Northern Ireland
to indicate the UK pound sterling and the € symbol may be understood by candidates in the Republic of
Ireland to indicate the Euro.

Answer ANY FIVE of the six questions.

If more than the required number of questions is answered, then only the requisite number, in the order
filed, will be corrected.

Candidates should allocate their time carefully.

All figures should be labelled, as appropriate, e.g. €/£'s, units etc.

Answers should be illustrated with examples, where appropriate.

Question 1 begins next page.

3
 Management Accounting Summer 2009 1st Year Paper

QUESTION 1

WRIGHT Ltd. makes and sells a single product which has the following projected sales and production data:-

January February March

Sales .............................. 10,000 units 15,000 units 12,000 units
Production ..................... 15,000 units 14,000 units 8,000 units

General Administration Overhead €/£200,000 €/£160,000 €/£220,000

Per unit Per unit Per unit

Sales Price ..................... 125 130 140
Direct Material .............. 30 30 30
Direct Labour ................ 40 40 45
Variable Overhead ......... 10 10 10

z Fixed Production Overhead is estimated to be €/£3,000,000 per annum and is absorbed at the rate of 50%
of direct labour costs.
z There is no opening stock.

Requirement:

Prepare a report detailing the following:-

(a) A statement of stock valuation for each month using:-

Absorption costing
Marginal costing
4 Marks

(b) A profit statement for each month using:-

Absorption costing
Marginal costing
14 Marks
(c) Briefly explain the difference between the reported profits.
2 Marks
Total 20 Marks

QUESTION 2

You have been asked to prepare a paper for the management team to clarify and explain a number of management
accounting terms, giving examples of their use in a practical situation. With the exception of yourself and the
Finance Director, most of the team members do not have significant accounting knowledge. Prepare a paper for
their attention providing an explanation, supported where relevant by a practical example, of the following
terminology:-

(a) Abnormal losses.

(b) Cost Codes.

(c) Short Term Decision Making.

(d) Economic Order Quantity.

(e) Pre-determined Overhead Absorption Rate.

Total 20 Marks

4
 Management Accounting Summer 2009 1st Year Paper

QUESTION 3

DIXIE Ltd. uses a standard costing system and has produced the following production information for a product
line for the month of April 2009.

Standard Cost
Direct Materials ................ 5 kg @ €/£15 / kg
Direct labour ..................... 3 hours @ €/£20 / hour

Total projected overheads .. €/£600,000 per annum

Fixed ................................. 40%
Variable ............................. 60%

The projected activity level of production and sales is 48,000 units and it is anticipated that these will be incurred
evenly over the year. The sales price is set using a mark-up of 50% on costs.

The actual data for the month of April is as follows:-

€/£
Sales ................................. 4,250 units 892,500
Production ......................... 4,400 units

Materials ........................... 21,000 kg 304,500

Labour ............................... 12,250 hours 269,500

Overhead ........................... Variable 28,500

Fixed 22,000

Requirement

(a) Calculate the budgeted selling price of the product for DIXIE Ltd.
2 Marks
(b) Prepare a statement showing the budgeted profit and the actual profit for month of April 2009.
2 Marks
(c) Calculate the following variances:-

(i) Sales price

(ii) Sales volume margin
(iii) Materials price
(iv) Materials usage
(v) Labour rate
(vi) Labour efficiency
(vii) Variable overhead
(viii) Fixed overhead
16 Marks
Total 20 Marks

5
 Management Accounting Summer 2009 1st Year Paper

QUESTION 4

BAMAR Ltd. produces 3 products and has provided the following operating information:-

Product Alpha Product Beta Product Delta

Sales - Volume ................... 2,000 5,000 10,000

Sales - Price per unit .......... €/£100 €/£50 €/£75
Production Overheads ........ €/£150,000 €/£200,000 €/£500,000

z Production overhead is 60% variable and 40% fixed.

z General company overheads are €/£225,000 and these are apportioned evenly between each product line.
z There are no stock-holdings.

Requirement

(a) On the basis of the information provided calculate the contribution and the net profit reported by each
product and by BAMAR Ltd. in total.
6 Marks
(b) Calculate the contribution/sales ratio for each product.
4 Marks
(c) Calculate the breakeven point for each product, expressed in sales value.
4 Marks

(d) Prepare a further statement showing the contribution and profit for each product and for the company, based
on all the following assumptions:-

Sales of products Alpha and Beta are ceased.

Sales and production of product Delta is increased by 10%.
Total fixed production overheads and general overheads are reduced by 5%.
4 Marks
(e) Advise the company if they should cease selling Products Alpha and Beta.
2 Marks
20 Marks

QUESTION 5

COUNTY CRYSTAL is a small manufacturing business which produces two distinct items of decorative
giftware, a VASE and a BOWL. The following information has been prepared following discussions for the
purposes of preparing a cash budget for the year ahead:-

Sales & Production Data VASE BOWL

Sales (units) .................... 15,000 7,500
Sales (Price per unit) ..... €/£45 €/£30

Variable Costs €/£ €/£

Materials ....................... 16 14
Labour .......................... 13 12

Overhead Costs €/£

Production Heat & light ......... 8,000 per annum, paid quarterly in arrears.
Fixed Production Overheads .. 3,000 per quarter, paid monthly in arrears.
Rent of premises ..................... 12,000 per annum, paid monthly in advance.
Managers' salaries .................. 48,000 per annum.
Other staff salaries .................. 42,000 per annum.

6
 Management Accounting Summer 2009 1st Year Paper

QUESTION 5 (Cont'd.)

(i) Sales and production are projected to be incurred evenly over the year.
(ii) 50% of sales are received in cash and get a 10% discount. The remaining 50% are on credit terms of one
month.
(iii) Materials costs are paid for two months in arrears.
(iv) Net labour and salary costs of 65% are paid in the month they are incurred, with employer costs paid in
the next month.
(v) Assume that there are no stock-holdings and that production is based on sales demand.
(vi) Opening Debtors of €/£20,000 were received in Month 1.
(vii) Opening Creditors were €/£60,000 - two thirds of this balance is payable in Month 1 and one third in
Month 2.
(viii) Employer salary and wage costs of €/£10,937 are outstanding from the previous month.
(ix) The bank account balance at the start of the year was overdrawn by €/£22,500.

Requirement

(a) Prepare a cash budget (cashflow forecast/projection) for COUNTY CRYSTAL, detailing projected
cashflows by month for the first three months of the year.
15 Marks
(b) Explain briefly why there is a difference between cashflows and reported profits.
5 Marks
20 Marks

QUESTION 6

ROB Ltd manufactures and sells two main products LOWE and DOWNE. The company has recently
implemented an activity based costing system and has provided you with the following information:-

LOWE DOWNE TOTAL

Production Cost (per unit)
Direct materials ............................. €/£20.00 €/£8.50
Direct Labour ................................ €/£42.00 €/£16.00

Budgeted production (units) ......... 200,000 500,000 700,000

No. of production runs .................. 5,000 6,000 11,000
No. of orders placed ...................... 1,000 20,000 21,000
Machine hours ............................... 80,000 20,000 100,000

Production overheads by Cost pool

€/£
Set Ups .......................................... 99,000
Materials handling ........................ 273,000
Inspection ...................................... 350,000
Machining ..................................... 1,680,000

Requirement

(a) Identify the cost drivers for each of ROB Ltd’s cost pools, and calculate an activity absorption rate for each
cost pool.
8 Marks
(b) Prepare a statement showing the:
(i) total overhead cost for the production of products LOWE and DOWNE
(ii) overhead cost per unit, and
(iii) total cost per unit
8 Marks
(c) Calculate the selling price for each product on the basis of:-
(i) 25% mark-up on total production
(ii) 40% margin on sales price 4 Marks
Total 20 Marks

7
z
 1st Year Examination : Summer 2009

MANAGEMENT ACCOUNTING
SOLUTIONS
Solution to question 1

(a) Statement of Stock Valuation

January February March

Opening Stock - 5,000 4,000
Production 15,000 14,000 8,000
Sales 10,000 15,000 12,000
Closing Stock 5,000 4,000

(i) Absorption Costing (ii) Marginal Costing

January February January February
Stockholding 5,000 4,000 5,000 4,000
Cost per unit €/£ €/£ €/£ €/£

Direct materials 30 30 30 30
Direct Labour 40 40 40 40
Variable Overhead 10 10 10 10
Fixed Overhead 20 20 - -
Total Cost per Unit €/£100 €/£100 €/£80 €/£80
Stock Valuation €/£500,000 €/£400,000 €/£400,000 €/£320,000

(b) Statement of Profit & Loss

Absorption Costing
January February March
€/£ €/£ €/£
Sales 1,250,000 1,950,000 1,680,000
Cost of Sales
Opening Stock - 500,000 400,000
Direct Materials 450,000 420,000 240,000
Direct Labour 600,000 560,000 360,000
Variable Overhead 150,000 140,000 80,000
Fixed Production Overhead 300,000 280,000 160,000
Closing Stock (500,000) (400,000) -
Cost of Goods Sold 1,000,000 1,500,000 1,240,000
Gross Profit 250,000 450,000 440,000
Under/(Over) absorbed
Fixed Prod'n O/head (50,000) (30,000) 90,000
General Overhead 200,000 160,000 220,000
Net Profit /(Loss) 100,000 320,000 130,000

8
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 1 (Cont’d)

(b) Marginal Costing

January February March
€/£ €/£ €/£
Sales 1,250,000 1,950,000 1,680,000
Cost of Sales
Opening Stock - 400,000 320,000
Direct Materials 450,000 420,000 240,000
Direct Labour 600,000 560,000 360,000
Variable Overhead 150,000 140,000 80,000
Closing Stock (400,000) (320,000) -
Cost of Goods Sold 800,000 1,200,000 1,000,000
Gross Profit 450,000 750,000 680,000
Fixed Prod'n Overhead 250,000 250,000 250,000
General Overhead 200,000 160,000 220,000
Net Profit - 340,000 210,000

(c)
Reported Profit / (Loss) January February March
€/£ €/£ €/£
Absorption Costing 100,000 320,000 130,000
Marginal Costing - 340,000 210,000
Difference 100,000 (20,000) (80,000)

The absorption costing figures are related to production and include a fixed overhead element (at the pre-
determined overhead absorption rate of €/£20 per unit) in the closing stock at the end of each month. This
results in a reported profit of €/£100,000 in the month of January, when production is higher than sales and
lower reported profits in subsequent months of a similar amount when production is lower than sales.

The marginal costing figures exclude the fixed overhead element in stock valuations and hence the stock
value is lower. Profit is therefore reported when the sales are recorded.

9
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 2

(a) Abnormal losses

Abnormal loss is a term normally used in process costing - that is costing of products which result from a
series of processes. During such production processes, certain losses can be inherent and cannot be
eliminated. For example, a percentage of liquids may evaporate during certain production processes or part
of the cloth cut to make a suit may be lost due to the style/cut of the suit. These losses, which occur under
efficient operating conditions, are described as normal losses. However, in addition to losses which cannot
be avoided, there are some losses which are not expected to occur under efficient operating conditions.
For example through improper mixing of ingredients or the incorrect cutting of cloth.
These losses are not an inherent part of the production process and are referred to as abnormal losses.
Abnormal losses are not included in the process cost, but are removed from the process account and written
off as a period cost to the profit & loss account.

(b) Cost Codes

Job cost management modules enable you to effectively manage jobs from revenue and cost perspective. To
do this effectively, we allow for a work breakdown, which we refer to as a cost code. User defined cost
codes can be established by type of job.
Cost Analysis by cost-code links each class of expense with budget. These reports may be selected by job
range, open or complete jobs, department, or division.

Features:

z Cost codes are user defined. They may be customized according to the needs and preferences. Different
code structures may be set up for each job.
z Balancing of jobs to general ledger is easy because nothing hits job cost without hitting general ledger.
z Reporting of labour burden cost allows a more accurate job cost by allowing one to see not only what
is paid to an employee, but also what the employee is costing in invisible cost.

(c) Short Term decision making

Short term decision making involves consideration of alternatives, qualitative and quantitative, with the
objective of maximising the contribution. It is often informed by opportunity costing.

Short term decisions normally relate to issues such as best use of resources or facilities (e.g. acceptance of
a special offer; termination of a product: limiting factors; make or buy decisions.
Example Company manufacturers 20,000 units of component, with the following costs:

Materials 5
Labour 10
Variable Overhead 2
Fixed Overhead 3
€/£20 per unit
The component can be purchased from another supplier for €/£18 per unit

Decision - while it would appear more cost effective to purchase the component from the other supplier.
Fixed costs will be incurred regardless, thus the relevant cost for decision making is the marginal cost of
production, as follows: -
Materials 5
Labour 10
Variable Overhead 2
€/£17 per unit

Solution to question 2 continued on next page

10
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 2 (Cont’d)

(d) Economic Order Quantity

The Economic Order Quantity (EOQ) is the calculated re-order quantity which will minimise costs,
considering the costs of stock-holding and the cost of ordering.

The EOQ is calculated as follows

2Co D Co - Ordering cost per order

S D - Demand per annum
S - Stockholding cost (per annum)

Example: Order cost - €/£200 per order

Annual demand - 25,000 units
Stockholding cost - 8% of price (€/£5/unit)

EOQ = 2 x 200 x 25,000 = 5,000 units

0.40

In order to calculate the EOQ, the costs of stockholding and ordering must be known and must be fixed.
The rate of demand and the price per unit must be known and should be constant. There should be no time
delay upon ordering.

The EOQ is a useful statistical calculation which can ensure cost effectiveness in materials purchasing and
stockholding.

(e) Predetermined Overhead absorption rate

The practicalities of costing & budgeting mean that in most circumstances, the actual overhead cost will not
be known until it has actually been incurred, but in order to accurately budget and cost, an estimate must be
made in advance. This estimate, which is charged to the actual production output, is based on budgeted
overhead costs and is known as the pre-determined overhead absorption rate.

The process involved in calculating a pre-determined overhead rate is firstly to estimate the total overhead
(a); then to estimate the activity level on which the overhead absorption rate is to be calculated (b); then
calculate by dividing (a) by (b).

Example:
Estimated overhead €/£150,000
Estimated units of production 75,000
Pre-determined overhead absorption rate €/£2 per unit

If the actual overhead transpires to be greater or less than €/£150,000, and/or production is greater or less
than 75,000, then this will result in an over or under absorption of the overhead.

I trust the foregoing is adequate for explanatory purposes but should further explanations/clarification be
necessary please feel free to contact me directly.

11
 Management Accounting Summer 2009 1st Year Solutions

QUESTION 3 DIXIE Ltd

(a) Sales Price

€/£
Direct Material 75.00
Direct labour 60.00
Variable Overhead (W1) 7.50
Fixed Overhead (W2) 5.00
Total Cost 147.50
Mark Up (50%) 73.75
Budgeted Sales Price 221.25

(b) Statement of Profit

Budgeted Actual
€/£ €/£ €/£ €/£
Sales (W3) 885,000 892,500
Cost of Sales
Direct Materials 300,000 304,500
Direct Labour 240,000 269,500
Variable Overhead 30,000 28,500
Fixed production O/head (W2) 20,000 590,000 22,000 624,500
Gross Profit 295,000 268,000

(c) Variances
(i) Sales price variance
(Actual Sales Quantity x Actual Price) - (Actual Sales Quantity x Standard Price)
(4,250 x 210) - (4,250 x 221.25)
892,500 - 940,312.50 = £/€47,812 adv
(ii) Sales volume variance
(Actual Sales Quantity x Standard Margin) - (Standard Sales Quantity x Standard Margin)
(4,250 x (73.75 + 5.00)) - (4,000 x (73.75 + 5.00))
334,687.50 - 315,000 = £/€19,688 fav
(iii) Material price variance
(Actual quantity of inputs x Actual price) - (Actual quantity of inputs x Standard Price)
(21,000 x 14.50) - (21,000 x 15.00)
304,500 - 315,000 = £/€10,500 fav
(iv) Materials usage variance
(Actual quantity of inputs x Standard price) - (Flexed quantity x Standard price)
(21,000 x 15.00) - (4,400 x 5 x 15)
315,000 - 330,000 = £/€15,000 fav
(v) Labour rate variance
(Actual Hours of input x Actual Rate) - (Actual Hours of input x Standard rate)
(12,250 x 22.00) - (12,250 x 20)
269,500 - 245,000 = £/€24,500 adv
(vi) Labour efficiency variance
(Actual Hours of input x Standard rate) - (Flexed hours x Standard rate)
(12,250 x 20) - (4,400 x 3 x 20)
245,000 - 264,000 = £/€19,000 fav
(vii) Variable overhead
(Flexed quantity x standard variable overhead absorption rate) - Actual expenditure
(4,400 x 7.50) - 28,500
33,000 - 28,500 = £/€4,500 fav
(viii) Fixed Overhead
Budgeted Overheads - Actual Overheads
20,000 - 22,000 = £/€2,000 adv
Workings on next page

12
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 3 (Cont’d)

Workings

Overhead Calculations

W1 600,000 x 60% = 360,000 Variable Overhead

360,000 / 48,000 = €/£7.50 per unit

W2 600,000 x 40% = 240,000 Fixed Overhead

... 240,000 / 48,000 = €/£5.00 per unit
... 240,000 / 12 = €/£20,000 per month

W3 4,000 x 221.25 = 885,000

13
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 4

(a) Statement of Contribution and Profit

Product Alpha Product Beta Product Delta Total

€/£ €/£ €/£ €/£
Sales 200,000 250,000 750,000 1,200,000
Variable Production Overhead 90,000 120,000 300,000 510,000
CONTRIBUTION 110,000 130,000 450,000 690,000
Fixed Production Overhead 60,000 80,000 200,000 340,000
Apportioned General Overhead 75,000 75,000 75,000 225,000
NET PROFIT/(LOSS) (25,000) (25,000) 175,000 125,000

(b) Contribution/sales ratio

Product Alpha Product Beta Product Delta Total
€/£ €/£ €/£ €/£
Sales 200,000 250,000 750,000 1,200,000
CONTRIBUTION 110,000 130,000 450,000 690,000
Contribution/Sales ratio 55% 52% 60%

(c) Breakeven Point Calculation

Product Alpha Product Beta Product Delta

€/£ €/£ €/£
Fixed Production Overhead 60,000 80,000 200,000
Apportioned General Overhead 75,000 75,000 75,000
Total Overheads 135,000 155,000 275,000
Contribution/Sales ratio 55% 52% 60%
Breakeven Point £245,455 £298,075 £458,333

(d) Revised Statement of Contribution and Profit

Product Delta & Total

€/£
Sales 825,000
Variable Production Overhead 330,000
CONTRIBUTION 495,000
Fixed Production Overhead (Note 1) 190,000
Apportioned General Overhead (Note 2) 213,750
NET PROFIT 91,250

Note 1
200,000 - 5% = £190,000

Note 2
225,000 - 5% = £213,750

(e) BAMAR Ltd should not cease sales of product Alpha and Beta as on the basis of current information, both
make a contribution of €/£50,000 to the general overheads of the company.

Even though, Product Delta has a higher contribution/sales ratio, despite other overhead savings and
increased sales, Product Delta does not make a similar profit.

Product Delta also has a higher breakeven point - which means that it could be viewed as a more risker
option. Offering Product Alpha and Beta spreads the risk of the company.

14
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 5

(a) COUNTY CRYSTAL - CASH BUDGET FOR THE THREE MONTHS

Month 1 Month 2 Month 3 TOTAL
Inflows €/£ €/£ €/£ €/£
Cash sales (W1) 33,750 33,750 33,750 101,250
Credit sales 20,000 37,500 37,500 95,000
Total Inflows 53,750 71,250 71,250 196,250
Outflows
Supplier (Materials) (W2) 40,000 20,000 28,750 88,750
Labour costs - net (W3) 15,438 15,438 15,438 46,314
Production Heat & Light - - 2,000 2,000
Fixed production Overhead 1,000 1,000 1,000 3,000
Rent of premises 1,000 1,000 1,000 3,000
Managers' salaries - net (W4) 2,600 2,600 2,600 7,800
Other staff salaries - net (W5) 2,275 2,275 2,275 6,825
Employer salary On-costs (W6) 10,937 10,937 10,937 32,811
Total Outflows 73,250 53,250 64,000 190,500
Net Inflow/(Outflow) (19,500) 18,000 7,250 5,750
Opening Balance (22,500) (42,000) (24,000) (22,500)
Closing Balance (42,000) (24,000) (16,750) (16,750)
Workings
1. VASE BOWL
Sales per month 1,250 625
Sales Price €/£45 €/£30
€/£56,250 €/£18,750 €/£75,000
Cash Sales per month 37,500
Less 10% (3,750)
Net Cash Sales - per month €/£33,750
Credit Sales - per month €/£37,500
2. VASE BOWL
Materials €/£16 €/£14
Production per month 1,250 625
€/£20,000 €/£8,750 €/£28,750
3. VASE BOWL
Labour €/£13 €/£12
Production per month 1,250 625
€/£16,250 €/£7,500 €/£23,750
65% - Net salary cost €/£15,438
4. Managers' salaries 48,000/12 = €/£4,000
65% €/£2,600
5. Other staff salaries 42,000/12 = €/£3,500
65% €/£2,275
6. Employer On-costs
Labour 35% 8,312
Manager 35% 1,400
Other salaries 35% 1,225 €/£10,937

(b) The main reasons for differences between profit and cashflow during a period are:
- there are costs that do not involve cash flow, for example, depreciation
- there may be changes in the level of sales debtors and creditors for purchases, which affect cashflow
but do not affect profits
- capital purchases have an immediate impact on cashflows, but are not charged against profits
- there may also be differences between profit and cashflows caused by changes in stock levels,
depending on the basis of the stock valuation.
15
 Management Accounting Summer 2009 1st Year Solutions

Solution to question 6

(a)
Cost pool Cost driver €/£
Set Ups No. of production runs 9.00 per run
Materials handling No. of orders placed 13.00 per order
Inspection Production units 0.50 per unit
Machining Machine hours 16.80 per machine hour

(b)
LOWE DOWNE TOTAL
€/£ €/£ €/£
Set Ups 45,000 54,000 99,000
Materials handling 13,000 260,000 273,000
Inspection 100,000 250,000 350,000
Machining 1,344,000 336,000 1,680,000
Total Overhead Cost 1,502,000 900,000 2,402,000

Per Unit 7.51 1.80

Direct Materials 20.00 8.50
Direct Labour 42.00 16.00
Total Cost per Unit €/£69.51 €/£26.30

(c)
LOWE DOWNE
€/£ €/£
Total Cost per Unit 69.51 26.30
Mark Up - 25% 17.38 6.58
(i) Selling Price €/£86.89 €/£32.88

Margin (/1-.0.40)
(ii) Selling Price €/£115.85 (W1) €/£43.83 (W2)

Workings

... 69.51 = 60% ... 69.51

W1 - Lowe - if margin = 40%
0.60
= 115.8
(
69.51
60
x 100
)
... 26.30 = 60% ... 26.30 = 43.83 26.30 x 100
W2 - Downe - if margin = 40%
0.60 (
60 )
z

16
 1st Year Examination Summer 2009

MANAGEMENT ACCOUNTING
Examiner’s Report

A relatively small number of candidates presented for this re-sit paper on the old syllabus and as a result it is not
possible to draw great significance for the statistical results. The pass rate was 67%, based on an average mark
of slightly over 50%. In general terms, those candidates who attempted five questions were successful and those
who did not attempt the requisite number struggled to achieve a pass mark.

Question 1 2 3 4 5 6
No attempting 28 16 28 23 27 28
Ave. % 13.1 % 10.9% 11.7% 11.7% 11.4% U.7%

The performance per individual question was as follows:

The questions were designed to assess the module objective and key learning outcome of the students knowledge
and technical competency in management accounting to support business functions, activities and decision
making.

Question 1

This question was a practical numerical assessment of marginal and absorption costing, which is an important
decision making tool. Overall this question attracted the highest average mark.

Question 2

This question was a narrative question which asked for an explanation and examples for a number of current
terms used in management accounting. Less than half the candidates attempted this question and it attracted the
lowest average mark as many did not attempt all five terms.

Question 3

This question assessed the subject area of variance analysis - a key element of the standard costing, budgetary
planning and control section of the syllabus. Some candidates produced the formulae without fully applying it
and some had difficulty with the relatively simple overhead variances.

17
 Management Accounting Summer 2009 1st Year Examiner’s Report

Question 4

Management accounting for decision making is an important part of this syllabus and this question examined cost
volume profit and breakeven analysis, leading to assessment of product continuation/cessation. The former parts
of the question were generally better answered than the later.

Question 5

This question asked the candidate to prepare a cash budget and then to note the differences between cashflows
and profits. This is a common application of management accounting skills, but was answered by around 50% of
candidates at this session. Layout was generally good although some errors were made in relation to sales
calculations, labour and material cashflows.

Question 6

This question examined overhead costing using activity based costing. Some candidates scored excellently well
in this question. while some others struggled to perform the calculations, particularly in parts (b) and (c).
z

18