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    Series 3 2010

    Uploaded by

    Apollo Yap
    s3

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    © All Rights Reserved
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    Series 3 2010

    Uploaded by

    Apollo Yap
    49 views6 pages
    s3

    Copyright

    © © All Rights Reserved

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    s3

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    49 views6 pages

    Series 3 2010

    Uploaded by

    Apollo Yap
    s3

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    of 6

    Series 3 Examination 2010

    CERTIFICATE IN ADVANCED BUSINESS CALCULATIONS


    Level 3
    Wednesday 2 June
    Subject Code: 3003
    Time allowed: 3 hours

    INSTRUCTIONS FOR CANDIDATES

    Answer all 8 questions.

    Write your answers in blue or black ink/ballpoint. Pencil may be used only for graphs, charts,
    diagrams, etc.

    All answers must be correctly numbered but need not be in numerical order.

    Workings must be shown.

    You must show all calculations, where applicable on the answer paper provided.

    You may use mathematical statistical tables.

    Your work should be accurate and neat.

    Your may use a calculator provided the calculator gives no printout, has no word display facilities,
    is silent and cordless. The provision of batteries and their condition is your responsibility.

    3003/3/10

    Page 1 of 6

    ASE 3003 3 10 1

    QUESTION 1
    Aubrey, Berry and Campbell each calculate their bank account interest using the Products Method, and
    assume a year length of 365 days.
    (a)

    Aubrey has 1,567.98 in his account for 9 days at a simple interest rate of 2.75% per annum.

    Calculate the interest for this period.


    (3 marks)
    (b)

    Berry expects to pay interest of 60.49 at 12% simple interest per annum on an overdraft of
    8,000.

    Calculate the number of days for which the overdraft was owed.
    (4 marks)
    (c)

    Campbell expects to receive interest of 181.33 over a period of 50 days on a balance of 42,700.

    Calculate
    (i)

    the rate of simple interest per day.

    (ii)

    the rate of simple interest per annum.

    (3 marks)
    (2 marks)
    (Total 12 marks)
    QUESTION 2
    Enrico buys 4,500 shares for 17.42 each and pays a commission of 36.
    The nominal value of each share is 5.
    (a)

    Calculate the cost of the shares, including commission.


    (2 marks)

    In the first year, the company pays a dividend of 6.5% of the nominal value of the shares.
    (b)

    Calculate the dividend paid to Enrico.


    (2 marks)

    In the second year, the company pays no dividend.


    At the end of the second year, Enrico sells 2,500 of the shares for 14.76 each.
    Enrico pays commission of 0.5% on the income from the sale.
    (c)

    Calculate the gain or loss to Enrico on the 2,500 shares.


    Include in your calculation:
    the cost of the 2,500 shares at purchase;
    the proceeds and commission on their sale;
    the dividend received on these shares;
    an appropriate proportion of the commission paid on the initial purchase of 4,500 shares.
    (6 marks)

    Enrico also buys 1,150 units in a unit trust for 31,303 and sells them after 3 years at 29 per unit.
    (d)

    Calculate the percentage increase in value per annum.


    (3 marks)
    (Total 13 marks)

    3003/3/10

    Page 2 of 6

    QUESTION 3
    An industrial product may be manufactured by two methods of production.
    Using Method X, fixed costs are 6,540,000 per period and variable costs are 57 per unit.
    Using Method Y, fixed costs are 7,800,000 per period and variable costs are 45 per unit.
    (a)

    Calculate the level of output per period for which the total costs are the same.
    (4 marks)

    (b)

    Calculate the total cost per period for Method X at this output.
    (2 marks)

    (c)

    State which method should be chosen for sales and production of 100,000 units per period.
    (1 mark)

    (d)

    Explain how your answer to (a) supports your answer to (c).


    (1 mark)

    Method X is chosen for production, and a selling price is set for break-even of 75,000 units per period.
    (e)

    Calculate:
    (i)

    the selling price.


    (3 marks)

    (ii)

    the profit for production and sales of 100,000 units per period.
    (2 marks)

    (Total 13 marks)
    QUESTION 4
    Mary is a retailer. In a given trading period her sales were 1,010,000 less sales returns of 24,500.
    During the trading period the average amount owed to Mary by her debtors was 51,300
    (a)

    Calculate the average credit given by Mary to her debtors, in days.


    (3 marks)

    (b)

    Give a brief explanation of the average credit given by Mary.


    (2 marks)

    Marys ratio for overhead expenses to net sales during the period was 14%.
    (c)

    Calculate the amount of overhead expenses during this period.


    (2 marks)

    During the trading period:


    the average credit taken by Mary from her creditors was 21 days;
    the average money owed by Mary to her creditors was 39,900;
    her purchases, before purchase returns, were 700,000.
    (d)

    Calculate:
    (i)

    Marys net purchases for the period.


    (2 marks)

    (ii)

    Marys purchase returns for the period.


    (2 marks)

    (Total 11 marks)

    3003/3/10

    Page 3 of 6

    QUESTION 5
    (a)

    Investment project P has a net present value at three discount factors as follows:
    Discount factor
    Net present value
    (i)

    12%
    706,000

    14%
    208,000

    15%
    (112,000)

    Explain why the difference between 706,000 and 208,000 is not twice the difference
    between 208,000 and (112,000).
    (1 mark)

    (ii)

    State which two of these three figures, when used to calculate the internal rate of return,
    would produce the most accurate estimate of the internal rate of return.
    (1 mark)
    An advisor estimates the internal rate of return as 14.5%.
    (iii)

    Explain why this figure cannot be accurate.


    (1 mark)

    (iv)

    State whether the true internal rate of return is more than or less than 14.5%.
    (1 mark)

    (b)

    Advisor A uses the following formula to calculate the average rate of return (ARR) of investment
    projects:
    ARR = Average annual income net of depreciation and repair and maintenance costs
    Initial cost of Project
    She estimates the following figures for Investment Project Q:
    Initial cost of Project Q

    3,200,000

    Total income net of depreciation and repair and maintenance costs


    Average rate of return

    5,280,000
    27.5%

    Calculate the expected length of Project Q in years.


    (3 marks)

    (c)

    Investment Project R has an initial cost of 1,900,000 and is anticipated to have a life of five years,
    no scrap value, and to give the following returns:

    Year 1 Net cash inflow


    300,000
    Year 2
    Net cash inflow
    500,000
    Year 3
    Net cash inflow
    800,000
    Year 4
    Net cash inflow
    600,000
    Year 5
    Net cash inflow
    300,000
    (i)

    Calculate the payback period of Project R.


    (3 marks)

    Advisor A calculates the net present value of Project R using a discounting factor of 7%.
    (ii)

    Copy and complete the following table, based on a discounting factor of 7%.
    Year 0 cash outflow
    Year 1 cash inflow
    Year 2 cash inflow
    Year 3 cash inflow
    Year 4 cash inflow
    Year 5 cash inflow

    Factor
    1,900,000
    1
    300,000
    0.935
    500,000
    ?
    ?
    0.816
    600,000
    0.763
    300,000
    0.713
    Net present value

    Present Value
    (1,900,000)
    280,500
    436,500
    652,800
    457,800
    213,900
    ?
    (3 marks)

    (Total 13 marks)
    3003/3/10

    Page 4 of 6

    QUESTION 6
    Simon is owed 16,700 by a bankrupt trader but is an unsecured creditor and receives only 3,340.
    Calculate:
    (a)

    the rate in the pound paid to unsecured creditors.


    (2 marks)

    (b)

    the amount paid to an unsecured creditor who is owed 9,376.50


    (2 marks)

    The assets of the business raised 36,850.


    The only secured creditor was the bank, which was owed 18,000.
    The cost of winding up the business was 5,900.
    (c)

    Using the additional information calculate the total amount owed to unsecured creditors.
    (3 marks)

    The following information relates to the business of the trader at the moment of insolvency.
    The values of items are those realised.
    Cash in hand
    Trade creditors
    Machinery
    Bank overdraft
    Trade debtors
    Value of stock
    Value of office equipment
    Value of vehicles

    54
    ?
    5,750
    18,000
    ?
    7,600
    3,950
    8,200

    Calculate:
    (d)

    the amount owed to trade creditors.


    (1 mark)

    (e)

    the total liabilities of the trader.


    (2 marks)

    (f)

    the amount owed to the trader by trade debtors, assuming no bad debts were suffered.
    (2 marks)

    (Total 12 marks)

    3003/3/10

    Page 5 of 6

    QUESTION 7
    A factory machine costs 2,060,000 and is expected to have a life of 5 years.
    An initial calculation is made, where it is depreciated by the diminishing balance method, and is expected
    to be worth 60% of its original value after one year.
    (a)

    State the rate of depreciation.


    (1 mark)

    (b)

    Calculate the expected residual value after 5 years.


    (2 marks)

    (c)

    Calculate the amount of depreciation during year 5.


    (3 marks)

    The owner now believes the scrap value will be 50,000.


    (d)

    Calculate the revised rate of depreciation using this scrap value.


    (4 marks)

    A friend suggests that the owner use the equal instalment method with the same scrap value of 50,000.
    (e)

    Calculate the difference between the two methods in the amount of depreciation for year 1.
    (3 marks)

    (Total 13 marks)
    QUESTION 8
    (a)

    An index of retail sales at January 2009 is shown below:


    Group
    Item W
    Item X
    Item Y
    Item Z

    Weight
    250
    330
    184
    236

    Index (Jan 2000 = 100)


    184.0
    152.4
    166.7
    88.4

    Calculate the composite weighted index of retail sales, at January 2009 with January 2000 = 100, for all
    items together.
    (6 marks)

    (b)

    For Product A for year 2009 with year 2008 as the base year:
    Quantity relative = 1.27
    Price relative
    = 0.92

    Calculate the increase in total income from the sales of Product A in year 2009 as a percentage of the
    total income from sales of Product A in year 2008.
    (3 marks)

    (c)

    An index of average earnings is shown below, with year 2001 as the base year.
    2005
    112.0120.5
    (i)

    2008

    Calculate the index of average earnings for 2008 with 2005 as the base year.
    (2 marks)

    (ii)

    State what this figure represents.


    (2 marks)

    (Total 13 marks)
    3003/3/10

    Page 6 of 6

    Education Development International plc 2010

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