Questions and Answers of ISE Business Accounting

A Ian Spiro, formerly a taxi-driver, decided to establish a car-hire business after inheriting \(£ 50,000\).His business year would be divided into budget periods each being four weeks.He commenced
Draw up a cash budget for N. Morris showing the balance at the end of each month, from the following information for the six months ended 31 December 19X2:(a) Opening cash (including bank) balance
(a) Define the term equivalent production and state when the principle is used.(b) During May 1991, M Wurzel \& Co. Limited's output was 4,000 finished items plus 600 partly finished items. There
The accountant of Hook, Line and Sinker, a partnership of seven people, has asked your advice in dealing with the following items in the partnership accounts for the year to 31 May 19 X7.(a) (i)
The balance sheet of Planners Ltd on 31 March 19 X6 was as follows:The dividend on the preference shares is \(£ 9,000\) in arrears. A scheme of reconstruction was accepted by all parties and was
The following information relates to Kemp plc for the year to 31 March 19X9:\(£ \mathrm{~m}\)1 Dividends Proposed final ordinary dividend for the year to 31 March 19X8 paid on 31 August \(19
A Long Acre Ltd has just finished its second year of trading to 31 December 19X4. Balances per 8.1 need to be brought forward into this question. Tax rates are the same as for \(19 \mathrm{X} 3\).The
Which of the following two mutually exclusive alternatives should be selected if a 12 per cent interest rate is used for the calculation of net present value?Net cash flow Net cash flow Net cash flow
Using internal rate of return, which of the two projects in question 46.27 would be preferred?? p-968
Which of the following two mutually exclusive alternatives should be selected if a 10 per cent interest rate is used for the calculation of net present value?Net cash flow Net cash flow Year 0 Year
Assuming that all sales are for cash, what is the internal rate of return on the project in question 46.25 A?? p-968
The annual profit from a project is forecasted as:£ £Sales 80,000 Labour, materials, and overheads 20,000 Depreciation 15,000 35,000 Net profit before tax 45,000 The project requires that a new
What is the annualised amount of the net benefits from the project in question 46.21 A?? p-968
What is the internal rate of return on the project in question 46.21 A?? p-968
Using a discount rate of 10 per cent, what is the net present value of the project in question 46.21?? p-968
What is the payback on a project requiring £60,000 initial investment that has a net cash inflow of £40,000 in year 1, £25,000 in year two, and £15,000 in year three?? p-968
What is the annualised amount of the net benefits from the project in question 46.17?? p-968
What is the internal rate of return on the project in question 46.17?? p-968
Using a discount rate of 12 per cent, what is the net present value of the project in question 46,17?? p-968
What is the payback period on the following project cash flows? (Brackets indicate expenditure.)? p-968 Net cash flows 52 Year 0 (10,000) 1 8,000 2 4,000 5 2,000 4 1,000
If the interest rate is 10 per cent, what is the net present value of the net cash flows arising from the project in question 46.14?? p-968
The annual profit from a project is forecasted as:£Sales 110,000 Labour, materials, and overheads 30,000 Depreciation 20,000 50,000 Net profit before tax 60,000 Tax at 40% 24,000 Net profit after
Assuming an interest rate of 10 per cent, what is the net present value of the net of tax cash flows in question 46.12 for 19X2, 19X3, 19X4 and 19XS?? p-968
Assume the company in question 46.11 pays tax at 40 per cent, on 30 September each year, nine months after the end of its financial period. The company receives 25 per cent writing-down allowances on
The following project costs have been estimated relating to the upgrading of some equipment; all the costs are being incurred solely because of the project:19X2 &January 1 One year’s rent on
If the interest on the sinking fund in question 46.9 were at 10 per cent, how much would the annual payments into it be?
condition of a ten-year loan of £20,000 is that the borrower will pay equal annual amounts into a sinking fund so that it accumulates at the end of the ten years to the amount of the loan. The
In relation to the rental income, what rate of interest does the offer made in question 46.7 represent?
Should you accept an offer of £15,000 for your rights over the next four years to the£4,000 annual rent from shop premises you own and have leased to a local company? You could invest the £15,000
A Shares bought on 1 January 19X2 for £2,000 were sold on 31 December 19XS for £3,158.What was the rate of annual compound interest on the investment?? p-968
If the interest on the investment in question 46.4 had been compounded every six months, how much interest would have been earned over the five years?? p-968
If £1,000 is invested for five years at 12 per cent compound per annum, how much interest is earned over the five years?? p-968
Interest of £1,000 is charged and included in a loan of £3,000. The loan has to be repaid at£750 per quarter over the next 12 months. What is the real rate of interest of the loan?? p-968
A What is the real rate of interest of discounting the bill of exchange in question 46.1?? p-968
know the difference between operating and finance leases and be able to calculate the relevant figures for use in financial statements?? p-968
be able to calculate the annualised amount of a series of cash flows and select between alternative projects on that basis? p-968
know what an annuity is and be able to calculate the value of ordinary annuities? p-968
understand and compute the effects of taxation upon capital project appraisal? p-968
(IRR), and payback of a series of cash flows be able to choose between alternative projects on the basis of NPV, IRR and payback? p-968
be able to calculate and compare the net present value (NPV), internal rate of return? p-968
be able to calculate the present value of a series of cash flows? p-968
know what is meant by and be able to calculate the annual percentage rate (APR)? p-968
understand the difference between simple and compound interest? p-968
know why interest rates are important in financial decision making? p-968
You are required to calculate the overhead variances from the following data.(a) Budgeted for \(£ 6,000\) variable overhead and 1,000 machine hours.\(\begin{array}{lr}\text { Actual overhead } & £
A You are required to calculate the overhead variances in the following cases:(a) Budgeted for \(£ 37,000\) fixed overhead. The actual fixed overhead turns out to be \(£ 36,420\).(b) Budgeted for
You are required to calculate the overhead variances of Joseph Ltd. The budget is prepared as:(a) Total budgeted variable overhead \(£ 400,000\).(b) Total budgeted fixed overhead \(£ 160,000\).(c)
A You are required to calculate the overhead variances of Raymond Ltd. The budget is prepared as:(a) Total budgeted variable overhead \(£ 100,000\).(b) Total budgeted fixed overhead \(£
The Grange Company had the following results for the year to 31 March 19X1. A single product - a toggle - was made by the company.The standard cost of manufacturing each unit was \(£ 1.50\).What are
A Corporec PLC manufactures a detergent in one of its plants. The information for the year to 30 September \(19 \mathrm{X} 2\) was as follows:The standard cost of manufacturing a litre was \(£
The following data was collected for Molton Ltd for the year ended 31 March 19X3.Calculate price, volume and mix variances for \(19 \times 3\). Product Budget Budget Selling sales price units %
A The following information relates to Burton Company for the year to 30 June 19X6:Calculate price, volume and mix variances for \(19 \times 6\). Product Budget Sales Budget Budget Actual Sales
Singleton has been operating for some years as a manufacturer of a single product, and after several years' growth has decided to form a company Singleton Ltd.His accountant advised him that in an
A (Note: this question covers material from both Chapters 43 and 44.) HGW Limited produces a product called a Lexton. The standard selling price and the manufacturing costs of this product are as
Cover up the schedule you constructed as your answer to \(45.1(i)\) and look instead at the break-even chart constructed as the answer to 45.1(ii). Answer the following:(a) What are the total costs
A Look at your schedule in answer to 45.1(i) and answer the following:(a) What are the total costs at production levels of (i) 4,000 units; (ii) 7,000 units; (iii) 9,000 units; (iv) 5,500 units? You
From your break-even chart for 45.1(ii) calculate the profit or loss that will be made at levels of (i) 3,000 units; (ii) 10,000 units; (iii) 4,000 units; (iv) 7,000 units; (v) 8,500 units.
A From the schedule in 45.1(i) calculate the profit or loss that would be made at levels of (i) 3,000 units; (ii) 10,000 units; (iii) 4,000 units; (iv) 7,000 units; (v) 8,500 units (this last figure
Polemic Ltd manufacture and sell a single product. The following information is available for three financial years ending 30 September.\section*{Additional information}1 When the management of
A The relationship between income/cost/volume suggests that there are four ways by which profit can be increased. These are:1 Increase unit selling price.2 Decrease unit variable cost.3 Decrease
A You are employed by Monarch Ltd which manufactures specialist hydraulic seals for the aircraft industry. The company has developed a new seal with the following budgeted data.Certain departmental
Magwitch Limited's finance director produced the following forecast break-even chart for the year ending 31 May 19X1:During the year the company produced and sold 20,000 units, and both revenue and
(a) How does a system of standard costing enable a business to operate on the principle of management by exception?(b) Some of the following materials and labour variances have been wrongly
A Calculate the materials variances from the following data. (i) Material E: (ii) Material F: (iii) Material G: (iv) Material H: (v) Material I: (vi) Material J: Standard price per metre Standard
A Calculate the labour variances from the following data: Standard Actual Standard Actual hours hours wage rate wage rate (i) Job I 150 142 2.0 2.2 (ii) Job J 220 234 1.9 1.7 (iii) Job K 50 48 2.0
A Central Grid plc manufactures tungsten parts which pass through two processes, machining and polishing, before being transferred to finished goods. The management of the company have in operation a
Borrico Ltd manufacture a single product and they had recently introduced a system of budgeting and variance analysis. The following information is available for the month of July 19X1:2 Standard
A Makers Ltd assembles computer games machines. Standard costs have been prepared as follows:The standard direct labour rate is \(£ 5\) per hour.During May 19X5, 5,000 Gamesmasters were sold at \(£
Rimham plc prepares its budgets annually and as the accountant you are responsible for this task. The following standard data is available:- In order to meet the needs of an expansion programme the
Richard Toms has agreed to purchase the business of Norman Soul with effect from 1 August \(19 \times 7\). Soul's budgeted working capital at 1 August \(19 \mathrm{X} 7\) is as follows:In addition to
A A company's estimated pattern of costs and revenues for the first four months of \(19 \times 7\) is as follows:1 One-quarter of the materials are paid for in the month of production and the
D Smith is to open a retail shop on 1 January \(19 \mathrm{X} 4\). He will put in \(£ 25,000\) cash as capital. His plans are as follows:(i) On 1 January \(19 \mathrm{X} 4\) to buy and pay for
Cooper is going to set up a new business on 1 January 19X8. He estimates that his first six months in business will be as follows:(i) He will put \(£ 10,000\) into a bank account for the firm on 1
(a) What is meant by the terms:(i) Budget(ii) Operating budget(iii) Master budget?(b) The information below relates to the business of Madingley Ltd:Notes:(i) Generally, materials are paid for two
The following information has been extracted from the books of Issa Ltd for the financial year ended 31 December \(19 \times 0\).The company had commenced the preparation of its budget for the year
The balance sheet of Gregg Ltd at 30 June 19 X6 was expected to be as follows:All sales will be on credit, and debtors will pay their accounts two months after they have bought the goods.(iii)
The following information relates to the actual sales of Griffton Ltd during the last four months of its financial year.The budgeted information below relates to the next financial year commencing 1
Bedford Ltd is a manufacturing business with several production departments. Benjamin Kent, the manager of the machining department, submitted the following figures for the firm's annual budget for
A The summarised balance sheet of Newland Traders at 30 May \(19 \mathrm{X} 7\) was as follows:Selling and materials prices at 30 May \(19 \times 7\) provide for a gross profit at the rate of 25 per
A Len Auck and Brian Land trade as partners in Auckland Manufacturing Company making components for minicomputers. To cope with increasing demand the partners intend to extend their manufacturing
Ukridge comes to see you in April 19X3. He is full of enthusiasm for a new product that he is about to launch on to the market. Unfortunately his financial recklessness in the past has led him into
Herbert Limited make a single product, whose unit budget details are as follows:2 Credit sales will account for 60 per cent of total sales. Debtors are expected to pay in the month following sale for
A Mtoto Ltd operate as wholesale 'cash and carry' stores and in addition to its main store have two other depots. The company's summarised balance sheet as at 31 August \(19 \mathrm{X} 1\) was as
David Llewelyn has been advised by his bank manager that he ought to provide a forecast of his cash position at the end of each month. This is to ensure that his cash inputs will be sufficient to
The managing director of Pumpkin Ltd was reviewing the results of the company for the financial year ended 31 March 19X0. The following summarised information was available:Note: There were no other
A Belinda Raglan owns a clothing factory. Trading over the last two years has been very successful and she feels that having achieved good results it is now time to request an increase in the
In a firm there are four types of jobs performed in separate production departments A, B, C and D. In addition there are three service departments, K, L and M. Costs have been allocated to the
In the firm mentioned in Question 38.1 what would be the costs of the following jobs given that the direct labour costs per hour are: Job 351: Dept A Job 352: Dept B Job 353: Dept C Job 354: Dept D
A In a firm there are five types of jobs performed in separate production departments \(P, Q, R\), \(\mathrm{S}\) and \(\mathrm{T}\). In addition there are two service departments \(\mathrm{F}\) and
A In the firm mentioned in Question 38.3 X what would be the costs of the following jobs, given that the direct labour rate per hour is Dept \(\mathrm{P} £ 1.9 ; \mathrm{Q} £ 2.5 ; \mathrm{R} £
(a) Explain the difference between the terms overhead allotment, overhead apportionment, and overhead absorption.(b) Why are estimated figures used in calculating overhead absorption rates?(c) The
A Kalmo Ltd offers a subcontracting service in assembly, painting and packing. Components are supplied by customers to the company, the required operations are then carried out, and the completed
(a) What is meant by the term, 'specific order costing'?(b) In what ways does specific order costing differ from process costing?(c) The Acme Shelving Co. Ltd manufactures shelving brackets in
A Horden Products Ltd manufactures goods which could involve any or all of three production departments. These departments are simply entitled A, B and C. A direct wages cost percentage absorption
For the year ended 31 December 19X9 the sales of units are expected to be:The opening stock at 1 January \(19 \mathrm{X} 9\) will be 140 units. The closing stock desired at 31 December \(19
(a) For each of the following, state three reasons why a firm may wish to keep:(i) a minimum stock level of finished goods, and(ii) an even level of production in the face of fluctuating demand.(b)
Drake Ltd's cost and revenues for the current year are expected to be:It was expected that 2,000 units would be manufactured and sold, the selling price being \(£ 11\) each.Suddenly during the year
A Hawkins Ltd expects its cost per unit, assuming a production level of 100,000 per annum, to be:Selling price is \(£ 7.5\) per unit.The following propositions are put to the managing director. Each
Assume that by coincidence two firms have exactly the same costs and revenue, but that Magellan L.td uses a marginal costing approach to the valuation of stock-in-trade in its final accounts,
A Your firm has been trading for three years. It has used a marginal costing approach to the valuation of stock-in-trade in its final accounts. Your directors are interested to know what the recorded

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