Examination Answer Book – ACC100321N

This is an examination answer book for module ACC100321N. It includes questions and answers related to cost accounting and budgeting. The book also includes instructions for students and examiners.

Examination Answer Book – ACC100321N
Examination Module Number Total number of answer
books submitted
Module Title (as on Examination Paper) Total number of
questions attempted
Student Number Date:
/ /
For Examiner’s Use Only
Question Marks
Examiner Assessor
Instructions to Students
1. Enter the details required on this cover. Do not write in
the shaded section.
2. All calculations and rough work must be done in this
book. Cross through any rough work you do not wish
the examiner to mark.
3. All calculations and rough work must be done in this
book. Cross through any rough work you do not wish
the examiner to mark.
4. In the first column to the right, circle the question
number attempted in the book.
5. If additional books are used, write your student number
and examination paper number on each book and
secure together with the treasury tag provided.
6. Please indicate number of answer books used and
number of questions attempted in this examination in
the appropriate boxes above.
7. Students must not destroy or remove from the
examination venue any books or additional sheets. For
all purposes they remain the property of The University
of Northampton.
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2
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Total
%
Examiner’s signature
Page 1 of 10

1a
1b
Dropping sales of
Summercoat
£
Contribution from Hoodcoat 48750
Contribution from Raincoat 43750
Contribution from Wintercoat 53750
Total contribution 146250
Minus Fixed Costs 26250
Profit 120000
Page 2 of 10
£ £ £ £ £
Hoodcoat
Summer
coat
Rain
Coat
Winter
coat Total
Total costs 50,000 35,000 45,000 50,000 180,000
Variable costs 41250 26250 36250 41250 145000
Fixed Costs 8750 8750 8750 8750 35,000
Sales 90,000 29,000 80,000 95,000 294,000
Minus Variable Costs 41250 26250 36250 41250 145000
Contribution 48750 2750 43750 53750 149000
Minus Fixed Costs 35000
Profit 114000

1c
Yes it must be dropped from production as it is not even able to cover its fixed cost and thus if it is continued it
can result in losses to the firm which is not at all a good position for the company. Also if it is dropped from the
production it can lessen the burden on other elements and thus they can produce good results in the future if
there is no such burden on them in the long run.
Page 3 of 10

1d
It can be said that there are a number of aspects that has to be taken into consideration while taking a decision on
the future of summer coat and the first and foremost of them is that the company must increase its sales in an
urgent manner so that it can cover all of its cost especially the fixed cost which can help it to reach at least at the
breakeven point. Apart from that it can be said that the firm must try to reduce its overall cost so that the profit
can occur at a very low level instead of at a level when the sales is high and thus these measures can be taken by
the firm and can be evaluated so that it can assist the enterprise in making an appropriate decision regarding the
summer cost for the prolonged period.
Page 4 of 10

2a
a. Title?
Month? July August Septem
ber October Novem
ber
Decem
ber Total
£ £ £ £ £ £ £
Cash in
Capital 80,000
Cash sales 45000 65000 85000 130000 125000 150000 600000
Credit sales 45000 65000 130000 125000 365000
Total in 125000 65000 130000 195000 255000 275000 965000
Cash out
Fittings 90,000
Wages 10,000 10,000 10,000 10,000 10,000 10,000 60,000
Rent 7000 7000 7000 7000 7000 7000 42000
Other 40,000 40,000 40,000 40,000 40,000 40,000 240,000
Drawings 500 500 500 500 500 500 3000
Purchases 40000 50000 70000 90000 95000 345000
Total out 147500 97500 107500 127500 147500 152500 780000
Net Cash
flow -22500 -32500 22500 67500 107500 122500 185000
Balances
Opening 90,000 57500 80000 147500 255000
Closing 90,000 57500 80000 147500 255000 377500
Page 5 of 10

2b
Budgeted Profit and loss account of Naaz's business
Dr. Cr.
Particulars Amount Particulars Amount
Opening stock null
Purchases 465000 sales 1200000
wages 60000 closing stock 90000
Gross Profit 765000
1290000 1290000
Rent 42000 gross profit b/d 765000
depreciation on fittings 5000
other costs 240000
drawings 3000
Net Profit 475000
765000 765000
Page 6 of 10

2c
Budgeted Balance sheet of Naaz's business
Assets Amount Liabilities Amount
Fittings (90000-5000) 85000 Capital: 80000
Closing stock 90000 less: drawings 3000
Cash balance 377000 add: net profit 475000 552000
552000 552000
Page 7 of 10

2d
Page 8 of 10

It can be said that the firm is operating at a satisfactory level and thus it can be said there the company must
operate as it is going and by this it can achieve success and profitability in the long run scenario. It can be said that
the firm can operate at a higher level so that the losses can be converted into profit in the initial years as a whole.
Page 9 of 10

2e
Net profit margin shows the ability of the business to convert its sales revenue into the profit for the business
after deducting different direct and indirect costs. Following is the calculation for Naaz’s business:
Net profit margin = Net profit / Sales * 100
= 475000 / 1200000 * 100
=39.5%
Interpretation: the net profit margin of Naaz’s business is 39.5% which means that the business is viable and it is
able to save 40% of its revenue and only 60% is being used by different costs. A net profit margin of greater to
20% is considered good.
Current ratiohighlights the ability of the business to pay off its current liabilities using the current assets of the
business. a ratio of 2:1 is considered as an ideal current ratio.
Current Ratio = Current assets / current liabilities
= closing stock + cash balance / amount payable for December sales
= 467000 / 120000
= 3.89 : 1
Interpretation: the current ratio of the business of Naaz is 3.8 : 1 which is more than ideal ratio. The business is
easily able to meet its current liabilities but the business should invest these other liquid assts into more profitable
ways so that the business can work towards growth.
Page 10 of 10