• Document: : ACCA Paper F5 Performance Management
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Mock Examination : ACCA Paper F5 Performance Management Session : June 2011 Set byy : Mr Ian Lim Your Lecturer ‰ Mr Chow Kim Tai ‰ Mr Ian Lim Your Mailing Address : ______________________________________ ______________________________________ Your Contact Number : ______________________________________ I wish to have my script marked by my lecturer and ‰ collect the marked script at the SAA-GE Reception Counter ‰ have the marked script p returned to me by y mail (Please submit your script latest by 6th May 2011 for marking) SAA GLOBAL EDUCATION CENTRE PTE LTD Company Registration No. 201001206N 20 Aljunied Road, #01-04, CPA House, Singapore 389805 Tel: (65) 6744 9700 Fax: (65) 6744 9796 Website: www.saa.org.sg Email: acca@saa.org.sg F5 Performance Management Mock exam June 2011 ALL FIVE questions are compulsory and MUST be attempted Question 1 Montreal Ltd. manufactures firelighters under contract for a major supermarket chain. Under the contract Montreal receives a price of $1.70 per kilogram. The company normally produces 30,000 kilograms of firelighters for the supermarket chain each month, but it occasionally varies this quantity slightly if asked to do so. Montreal operates a standard absorption costing system. Fixed production overheads are budgeted at $9,600 per month. The standards for the direct materials required to produce a kilogram of firelighters are as follows: Direct Material Type “A” 0.6 kg.@ $0.25 per kilogram Direct Material Type “B” 0.45 kg.@ $0.40 per kilogram Direct Material Type “C” 0.15 kg. @ $0.80 per kilogram The only other cost is a cardboard packaging box, which Montreal purchases from a subcontractor at an agreed price of $0.05 per kilogram of firelighters sold. During January 2007 actual activity was as follows:  Montreal Ltd. produced 31,000 kilograms of firelighters and supplied them to the supermarket chain at the agreed price of $1.70 per kilogram.  Fixed overheads amounted to $11,520.  Direct materials purchased and used in production were: Direct Material Type “A”: 16,700 kg.@ $0.25 per kilogram Direct Material Type “B”: 11,900 kg.@ $0.42 per kilogram Direct Material Type “C”: 3,800 kg.@ $0.80 per kilogram  Cardboard packaging boxes were purchased at standard cost. REQUIRED: (a) Calculate the standard profit per kilogram of firelighters, and the company’s total budget and actual profits for January 2007. (3 marks) (b) Calculate the following variances and use them to reconcile the company’s total budget and actual profits for January:  Direct materials price, mix and yield variances.  Fixed overhead volume and expenditure variances.  Sales volume variance. (12 marks) (c) The management accountant of Montreal Ltd. has stated: “In interpreting these variances, we need to bear in mind that we carried out major preventive maintenance work on our production equipment at the beginning of January, and this greatly improved its efficiency in converting direct materials into finished product”. (i) Discuss whether the variances which you have calculated in answer to part (b) support this view. (3 marks) (ii) Briefly explain any changes which may be required to the company's standard costing system in consequence. (2 marks) ( 20 marks) Page 1 F5 Performance Management Mock exam June 2011 Question 2 Click Co is a photographic printing company. It prints photographs for customers, mainly the general public, generating sales revenue of $1,800,000 per annum. All of the company’s printing machines are hired rather than owned outright. The current rate of rejects (i.e. prints of unacceptable quality) is 10%. Click Co is now considering replacing the machines with more technically advanced ones, which would eliminate rejects altogether. The company’s standard costs for one photograph are as follows: $ $ Direct mat

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