Financial Accounting Exam Question 2022

FINANCIAL ACCOUNTING EXAM

Table of Contents
Question 4........................................................................................................................................3
Question 1........................................................................................................................................4
Question 5........................................................................................................................................5
Question 2........................................................................................................................................7
Reference List..................................................................................................................................9
2

Question 4
a)
Option 1
New s.p(selling price) = {10-(10*1%)} =9
V.c (variable cost) = 150000/20000 =7.5
New contribution = new s.p- v.c = 9-7.5 =1.5
Break even point = fixed cost/ contribution = 40000/1.5 =26667[rounded off]
Option 2
S.P(selling price) = 10
New V.c (variable cost) = 7.5+1.30 = 8.80
New contribution = new s.p- v.c = 10-8.80 = 1.20
Break even point = fixed cost/ contribution = 40000/1.20 = 33333[rounded off]
Option 3
s.p(selling price) = 10
V.c (variable cost) =7.5
New contribution = new s.p- v.c = 10 -7.5 =2.5
New fixed cost = 40000+ 15000 = 55000
Break even point = fixed cost/ contribution = 55000/2.5 = 22000
Option 4
s.p(selling price) = 10
V.c (variable cost) = 7.5
New contribution = new s.p- v.c = 10 -7.5 =2.5
New fixed cost = 40000+22500 =62500
Break even point = fixed cost/ contribution = 62500/2.5 = 25000
b) i.
Cost of machine 68500
Budget 50000
Shortage of fund (685000-50000) =18500
3

Total investment = {18500 + (18500*9/100) =21830
Ii. yield 475000
Less investment = 137000 @ 9% interest for 14 years = 12330 * 14 = 172620
Profit in 14 years 475000-(137000 + 172620) = 165380
Rate of return 165380/ 14 = 11812.85
Question 1
a)
“In the books of Brickbrack Ltd”
“Manufacturing Account”
For the year ended 31st December 2020
£ £
“Opening Stock of Raw
Materials”
5,000
“Add: Purchase” 60000
= 65,000
“Less: Closing stock of Raw
materials”
(3000)
“(Raw Materials Used in
Production)”
= 62,000
“Add: Direct labor Wages” 62,000
“(Prime Cost)” = 1,24,000
4

“Manufacturing
Overheads”
“Indirect Manufacturing
Labor”
2300
“Rent” 2500
“Depreciation of Plant and
equipment”
8000
“Electricity and gas” 1200
“Depreciation on building” 1000
“Total” 15,000
“Manufacturing cost during
the year” (Prime Cost +
Total)
1,39,000
“Add: Opening Stock of
Work In Progress”
4000
“Less: Closing stock of Work
in Progress”
3000
(1000)
“(Cost of Finished goods
Produced)”
1,38,000
5

Question 5
1) Total unit assumed 100 kg
Cost/ unit 2
Therefore the estimated cost of raw material is (100*2=200)
2) The standard direct labor is 1000
Payable 1/ hour
So the total payable= (1000*1=1000)
3) The variable direct labor is 1000
Payable 1/ hour
So the total payable= (1000*1=1000)
4) Total Budget on fixed oh 2000
The payable is 2/hour
So the Fixed is (2000*2=4000)
i)
a) formula of direct material price variance = “(standard price per unit of material ×
actual units of material consumed) – actual material cost.”
=(2*100)-50
=150
b) Formula of Direct material usage variance = “(standard quantity of material allowed
for production – actual quantity used) × standard price per unit of material”
=(2100-1000)*2
=2200
c) Formula of Total direct material variance = “(standard price per unit of material ×
actual units of material consumed) – actual material cost”
=(2*1000)-2100
=100
ii)
a) “Direct labor rate variance”= “(Actual hours worked × Actual rate) – (Actual hours
worked × Standard rate)”
=(250*4)-(10*4)
=960
6

b) “Direct labor efficiency variance”= “(Actual hours worked × Standard rate) –
(Standard hours allowed × Standard rate)”
(250*1)-(10*1)
=240
c) “Total direct labor variance” = “Total actual direct labor cost- Total standard Direct
labor cost”
=(60-40)
=20
Question 2
“In the books of IKEO Limited”
“Statement of Balance Sheet”
As on 31st December 2019
“Fixed Assets” £ £
“Plant and Machinery NBV” 21,000
“Premises NBV” 66,000
“Patents” 7,000
“Current Assets”
“Trade Receivable” 5,000
“Prepaid expense” 500
“Inventories” 10,000
“Cash and cash equivalent” 6000
Total 1,15,500
7

“Equity and Liability”
“Share Capital” 69,400
“Add: Net Profit” 22000
“Debenture” 15,000
“Bank Overdraft” 2,500
“Current Liability”
“Trade Payable” 6,000
“Outstanding Expense” 600
Total 1,15,500
8

Reference List
Journals
Baxamusa, M., Datta, S. and Jha, A., 2021. Does policy uncertainty increase relational risks?
Evidence from strategic alliances. Financial Management, 50(3), pp.645-689.
Bilovodska, O., Melnyk, Y., Alenin, Y. and Arkusha, L., 2020. Implementation of marketing
and legal tools in the process of commercialization for innovative products in strategic
management and entrepreneurship. International Journal for Quality Research.
CHELULEI, B.K., 2021. Board of Management participation in implementation of strategic
plans in primary schools in Eldoret East Sub-County, UasinGishu County, Kenya (Doctoral
dissertation, University of Eldoret).
Chernov, S.I., Gaiduchenko, S.O., Dobryn, S.V. and Kipa, M.O., 2019. Defining the
objectives of enterprise strategic management depending on the level of its financial
potential.
Cradazco, W., Niebles, W., Hernández, H., Hoyos, L. and De la Ossa, S., 2019. Strategic
Management for SMEs: For the Projection to Global Markets. Modern Applied
Science, 13(1), pp.99-105.
Jaworzynska, M., 2017. Using tools of strategic management in medical facilities of Lublin
region. Engineering Management in Production and Services, 9(2).
Johanson, J.E., Johnsen, Å.,Pekkola, E. and Reid, S.A., 2019. Strategic Management in
Finnish and Norwegian Government Agencies. Administrative Sciences, 9(4), p.80.
Kucukaltan, B., Saatcioglu, O.Y., Irani, Z. and Tuna, O., 2020. Gaining strategic insights into
Logistics 4.0: expectations and impacts. Production Planning & Control, pp.1-17.
Lu, Y. and Abeysekera, I., 2021. Do investors and analysts value strategic corporate social
responsibility disclosures? Evidence from China. Journal of International Financial
Management & Accounting, 32(2), pp.147-181.
Meral, Y., 2019. Strategic Management of Finance and Role of Documentary Credit.
In Handbook of Research on Global Issues in Financial Communication and Investment
Decision Making (pp. 395-416). IGI Global.
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