uestion:

1. IN A STOCK ACQUISITION ACCOUNTED FOR BY THE EQUITY METHOD, A PORTION OF THE PURCHASE PRICE OFTEN IS ATTRIBUTABLE TO GOODWILL OR TO SPECIFIC ASSETS OR LIABILITIES. HOW OR UNDER WHAT BASIS ARE THESE AMOUNTS DETERMINABLE AT ACQUISITION AND HOW ARE THESE AMOUNTS ACCOUNTED FOR IN SUBSEQUENT PERIODS.

1. 1. 150 accounting interview questions and answers Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 2. 2. Useful materials: interviewquestions360.com/freeebook150accountinginterview questionsandanswers interviewquestions360.com/freeebooktop18secretstowin everyjobinterviews 3. 3. The interview questions below can be used for positions: accounting manager, accounting assistant, accounting coordinator, accounting specialist, accounting supervisor, accounting controller, accounting consultant, accounting executive, accounting technician, fund accountant, cost accountant, project accountant... 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Useful materials: interviewquestions360.com/freeebook150accountinginterview questionsandanswers interviewquestions360.com/freeebooktop18secretstowin everyjobinterviews You can ref top 25 accounting interview questions and answers (excerpt from list: 150 accounting interview questions and answers) as below: 6. 6. 1.What do you consider to be three key skills of a great accountant? When answering such questions, people tend to name their own skills. Interviewers are aware of it. Anyway, a good accountant should definitely pay attention to details, have good math skills, analytical thinking and an ability to think one step forward. Choose some of it and you'll be on your way to sell yourself in an interview. Useful materials: interviewquestions360.com/freeebook 150accountinginterviewquestionsandanswers interviewquestions360.com/freeebook top18secretstowineveryjobinterviews 7. 7. 2.Which accounting applications are you familiar with? Discuss the applications you have worked with. Focus on how you implemented the application, the steps taken during the conversion and integration of the accounting system and the training of staff to use the application. Highlight your familiarity with the application by discussing what specifically you used it for. Useful materials: interviewquestions360.com/freeebook150accounting interviewquestionsandanswers interviewquestions360.com/freeebooktop18secretsto wineveryjobinterviews 8. 8. 3.Describe the advantages and disadvantages of the different accounting packages you have used. Focus on how the packages supported and simplified company specific processes, and how they met your exact business requirements. Display your knowledge of how the packages differ in areas such as price, complexity and functionality. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsand answers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 9. 9. 4.Give me examples of the accounting reports you have prepared. Demonstrate your experience in maintaining accounting principles, practices and procedures to ensure 10. 11. 12. 13. 14. 15. accurate and timely financial statements and reporting. Discuss your ability to meet tight deadlines and undertake a multitude of accounting activities. Show your understanding of generally accepted and statutory accounting principles. . Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 10. 5.Describe any accounting process that you have developed or revised. Highlight how you have monitored and analyzed work processes to develop more efficient procedures and use of resources while still maintaining accurate and quality work outputs. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 11. 6.What do you consider to be the biggest challenge facing the accounting profession today? A sample answer to accounting interview questions like this is: In response to the changing market accountancy professionals have to provide more management and consulting services, in addition to financial management. They have to assume a greater advisory role and develop more complex and flexible accounting systems. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 12. 7.What was the toughest accounting task you had to solve in your career so far? Accounting is tough. If you have ever done it, you know what I am talking about. When answering these sort questions, you should focus on challenges that you faced successfully, and tasks that helped your previous employers/clients to save some money, or to avoid legal troubles. Useful materials: interviewquestions360.com/freeebook150accounting interviewquestionsandanswers interviewquestions360.com/freeebooktop18secretsto wineveryjobinterviews 13. 8.How do you ensure you make no mistakes in work? People make mistakes. But when we speak about accounting, a mistake can prove extremely costly. There are thousands of examples in the US that second what I just said. As a good accountant, you should be able to avoid making mistakes. And how? You should say that you always double check everything, use both software and calculator and that you always consult any problematic decisions with other members of the department. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 14. 9.What software packages for accountants are you familiar with? Clever accountants work with software applications. It's more accurate, faster and simply more reliable than traditional \"pen and paper\" method. Therefore, it is good to suggest that you have some experience with software packages. In an ideal case, you should pick a well known and country specific software, for example the Canadian Quickbooks Online For Accountants, if you apply for a job in Canada. In many cases, you can try the trial version of the software for free - you should do this, to be better prepared for practical tasks in an interview. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsand answers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 15. 10.When you hear an expression creative accounting, what do you imagine? Creative accounting has various meanings for various people. Some of us imagine illegal practice behind it. Some other just imagine atypical unorthodox methods we use to save money. Anyway, the right answer here is definitely that for you, creative accounting means saving money of your clients, using unorthodox, but 100% legal methods of recording transactions. By the way, you should be able to elaborate on your answer with an example of an application of creative accounting. Useful materials: interviewquestions360.com/free 16. 17. 18. 19. 20. 21. 22. 23. ebook150accountinginterviewquestionsandanswers interviewquestions360.com/free ebooktop18secretstowineveryjobinterviews 16. 11.What knowledge do you have in relevant government laws and state regulations? You can mention experience with taxes (taxes owed and tax return) and relevant government regulations, your work with the tax authorities and Internal Revenue Service, and any experience with government record keeping. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 17. 12. Are you qualified (and experienced) in analytical and logical thinking? This is best answered with examples of specific relevant responsibilities: analysis of business operations, financial advice based on projections of current and future revenues and expenses, specific problems solved, analysis and development of budgets, etc. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 18. 13. What experience do you have working in a computerized environment? Describe tasks done with applications like Microsoft Office, as well as services like client support and representation through the internet, online research and communication with colleagues, development and documentation of accounting and recordkeeping systems, etc. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsand answers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 19. 14. Are you able to compile and interpret accounting data and reports? Talk about any reports and data analyses that you have done, including financial analyses and reports, evaluation, inventorying, reports on equipment and real estate, documentation of accounting systems, management of account tables and entries, etc. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 20. 15. Tell me about your people skills: can you maintain a healthy relationship with colleagues and clients alike? You can describe anything that has to do with client service or cooperation at work: team projects, team problem solving, client representation and support, auditing services, etc. Useful materials: interviewquestions360.com/freeebook150 accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop 18secretstowineveryjobinterviews 21. 16.Define dual aspect term in accounting? As the name implies, the dual aspect concept states that every transaction has two sides. For example, when you buy something, you give the cash and get the thing. Similarly, when you sale something, you lose the thing and gets the money. So this getting and losing is basically two aspects of every transaction. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsand answers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 22. 17.What is project implementation? Project implementation involves six steps in total such as: Identify Need Generate and Screen Ideas Conduct Feasible Study Develop the Project Implement the Project Control the Project Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 23. 18.What is Trial Balance? What does an accurate Trial Balance suggest? Trial Balance is a summary of all the balances of various ledger accounts and Cash/Book accounts of an organisation at any given date. For the preparation of Trial Balance the entire Ledger accounts and Cash book/Bank book are required to be balanced to get the closing balance. Assets and Expenses accounts having debit balance are posted on debit side whereas Income and Liability accounts having credit balance are posted on credit side of the Trial 24. 25. 26. 27. Balance. An accurate Trial Balance is an evidence that all the transactions are recorded and posted in the General Ledger account as per the accounting principles. It also ensures arithmetical accuracy of the process of ledger posting. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 24. 19.What are the reasons which cause pass book of the bank and your bank book not tally? Cheques deposited into the bank but not yet collected Cheques issued but not yet presented for payment Bank charges Amount collected by bank on standing instructions of the concern. Amount paid by the bank on standing instructions of the concern. Interest debited by the bank Interest credited by the bank Direct payment by customers into the bank account Dishonour of cheques Clerical errors Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 25. 20.What steps would you take to locate the errors in case Trial Balance disagrees? In case Trial Balance disagrees, following steps should be taken to locate the errors: Totalling of all the subsidiary books and trial balance should be checked carefully. Opening balances of all the accounts are properly brought down in the current year's books of account. Ledger accounts have been properly balanced and the balances of ledger accounts have been correctly shown in the trial balance. To locate some errors the difference in the trial balance in halved. Another way is dividing the difference in the trial balance by 9. If the difference gets divisible without leaving any reminder that indicates the transposition of the amounts. To locate certain other errors, current year trial balance can be compared with the trial balance of the previous year. Useful materials: interviewquestions360.com/freeebook150 accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop 18secretstowineveryjobinterviews 26. 21. Why should the we hire you as accounting position? This is the part where you link your skills, experience, education and your personality to the job itself. This is why you need to be utterly familiar with the job description as well as the company culture. Remember though, it's best to back them up with actual examples of say, how you are a good team player. It is possible that you may not have as much skills, experience or qualifications as the other candidates. What then, will set you apart from the rest? Energy and passion might. People are attracted to someone who is charismatic, who show immense amount of energy when they talk, and who love what it is that they do. As you explain your compatibility with the job and company, be sure to portray yourself as that motivated, confident and energetic person, ever ready to commit to the cause of the company. Useful materials: interviewquestions360.com/freeebook150accountinginterviewquestionsandanswers interviewquestions360.com/freeebooktop18secretstowineveryjobinterviews 27. 22. What do you know about our company? Follow these three easy research tips before your next job interview: 1) Visit the company website; look in the \"about us\" section and \"careers\" sections 2) Visit the company's LinkedIn page (note, you must have a LinkedIn account its free to sign up) to view information about the company 3) Google a keyword search phrase like \"press releases\" followed by the company name; you'll find the most recent news stories shared by the company Remember, just because you have done your \"homework\DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO. Financial Pillar F1 - Financial Operations 22 May 2014 - Thursday Morning Session Instructions to candidates You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or subquestions). ALL answers must be written in the answer book. Answers written on the question paper will not be submitted for marking. You should show all workings as marks are available for the method you use. ALL QUESTIONS ARE COMPULSORY. Section A comprises 10 sub-questions and is on pages 3 to 5. Section B comprises 6 sub-questions and is on pages 6 to 9. Section C comprises 2 questions and is on pages 12 to 15. References to IFRS in this paper refer to International Financial Reporting Standards or International Accounting Standards as issued or adopted by the International Accounting Standards Board. The country 'Tax Regime' for the paper is provided on page 2. Maths tables and formulae are provided on pages 17 and 18. The list of verbs as published in the syllabus is given for reference on page 19. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate the questions you have answered. F1 - Financial Operations You are allowed three hours to answer this question paper. TURN OVER The Chartered Institute of Management Accountants 2014 COUNTRY X - TAX REGIME FOR USE THROUGHOUT THE EXAMINATION PAPER Relevant Tax Rules for Years Ended 31 March 2007 to 2014 Corporate Profits Unless otherwise specified, only the following rules for taxation of corporate profits will be relevant, other taxes can be ignored: Accounting rules on recognition and measurement are followed for tax purposes. All expenses other than depreciation, amortisation, entertaining, taxes paid to other public bodies and donations to political parties are tax deductible. Tax depreciation is deductible as follows: o 50% of additions to property, plant and equipment in the accounting period in which they are recorded; o 25% per year of the written-down value (i.e. cost minus previous allowances) in subsequent accounting periods except that in which the asset is disposed of; o No tax depreciation is allowed on land. The corporate tax on profits is at a rate of 25%. No indexation is allowable on the sale of land. Tax losses can be carried forward to offset against future taxable profits from the same business. Value Added Tax Country X has a VAT system which allows entities to reclaim input tax paid. In country X the VAT rates are: Zero rated Standard rated Exempt goods May 2014 0% 15% 0% 2 Financial Operations SECTION A - 20 MARKS [You are advised to spend no longer than 36 minutes on this section] ANSWER ALL TEN SUB-QUESTIONS IN THIS SECTION Instructions for answering Section A: The answers to the ten sub-questions in Section A should ALL be written in your answer book. Your answers should be clearly numbered with the sub-question number and then ruled off, so that the markers know which sub-question you are answering. For multiple choice questions, you need only write the sub-question number and the letter of the answer option you have chosen. You do not need to start a new page for each sub-question. Question One 1.1 Define the meaning of the term \"an indirect tax\". (2 marks) 1.2 List TWO main sources of tax rules in a country. (2 marks) 1.3 A withholding tax is: A B C D tax deducted at source before payment to a recipient in a foreign country. tax on profits that is then paid out net as a dividend to equity shareholders. tax paid to local tax authorities with an amount withheld from payment. tax withheld from employees' salaries with salaries paid to them net of tax. (2 marks) 1.4 During the VAT period ended 31 March 2014, EDF raised sales invoices (including VAT at standard rate) totalling $74,750. EDF incurred expenses during the period of $57,000, excluding VAT. All expenses incurred VAT at standard rate. Calculate the VAT due for the period. (2 marks) TURN OVER Financial Operations 3 May 2014 1.5 The tax rules of Country X allow an entity ceasing to trade to carry back terminal losses against the previous two years' profits. CT ceased trading on 31 March 2014, having incurred a trading loss of $75,000 for the year ended 31 March 2014. CT's profits for the previous 3 years were as follows: Year to 31 March: Taxable trading profit 2011 $95,000 2012 $40,000 2013 $25,000 Assuming that CT had paid all tax due up to 31 March 2013, calculate the tax refund that CT can claim for its terminal loss. (2 marks) 1.6 (i) (ii) (iii) (iv) Power to arrest individuals. Power of entry and search of premises. Power to exchange information with other tax authorities. Power to confiscate assets of the entity. Which TWO of the above are statutory powers that a tax authority may be granted to ensure compliance with tax regulations? A B C D (i) and (iii) (i) and (iv) (ii) and (iii) (ii) and (iv) (2 marks) 1.7 The IASB's Conceptual Framework for Financial Reporting (2010) (Framework) lists five elements of financial statements. Two of the elements are assets and liabilities, list the other three. (2 marks) 1.8 An external audit of VH's financial statements has discovered that a customer who, at 31 March 2014, owed VH $250,000 was declared bankrupt on 8 April 2014. VH has not provided for the bad debt in its financial statements for the year ended 31 March 2014. This is regarded as material but not pervasive. Assuming that the auditors find everything else satisfactory, which ONE of the following is the appropriate audit report for the auditors of VH to issue? A B C D The external audit report should be a modified report, with a qualified \"except for\" opinion. The external audit report should be an unmodified report with an emphasis of matter paragraph relating to the bad debt. The external audit report should be a modified report, with a disclaimer of opinion. The external audit report should be a modified report, with an adverse opinion. (2 marks) May 2014 4 Financial Operations 1.9 Under the current structure of regulatory bodies, which organisation is responsible for reviewing international reporting standards and issuing revised international reporting standards? A B C D IFRS Advisory Council IFRS Interpretations Committee International Accounting Standards Board IFRS Foundation (2 marks) 1.10 Which of the following is the correct meaning of \"rollover relief\"? A B C D A trading loss can be carried forward and used to reduce tax in a future profitable year. A capital loss incurred on the disposal of an asset can be carried forward to a future tax year. An entity ceasing to trade, carrying back a trading loss to set off against previous years' profits. A gain arising from the sale of an asset is deferred provided the entity reinvests the proceeds of the sale in a replacement asset. (2 marks) (Total for Section A = 20 marks) Reminder All answers to Section A must be written in your answer book. Answers or notes to Section A written on the question paper will not be submitted for marking. End of Section A Section B starts on the next page TURN OVER Financial Operations 5 May 2014 SECTION B - 30 MARKS [You are advised to spend no longer than 9 minutes on each sub-question in this section.] ANSWER ALL SIX SUB-QUESTIONS IN THIS SECTION - 5 MARKS EACH Question Two (a) LKO is a listed entity with five geographic segments, and reports segmental information under IFRS 8 Operating Segments in its financial statements. Financial information is reported to LKO's chief operating decision maker on a geographical basis. Each geographical region has separate risk characteristics. The results for the year ended 31 March 2014 are as follows: Europe Internal revenue External revenue Total revenue Segment profits Segment assets $m 100 90 190 14 210 North America $m 530 530 18 330 Middle East $m 340 340 7 230 Asia $m 10 720 730 119 1,040 Other $m 30 90 120 34 590 Total $m 140 1,770 1,910 192 2,400 Required: Explain with reasons which of LKO's geographical segments will be classified as reportable operating segments according to IFRS 8 Operating Segments. (Total for sub-question (a) = 5 marks) May 2014 6 Financial Operations (b) On 1 April 2013 IUJ acquired 100% of the equity shares of A and B as follows: Cost of acquisition Fair value of net assets at date of acquisition A $000 850 750 B $000 610 500 At 31 March 2014 IUJ carried out an impairment review of the goodwill arising on both acquisitions. At 31 March 2014: the goodwill in A was NOT impaired but had actually increased in value by $40,000. the goodwill in B had been impaired by $20,000. Required: (i) Explain how IUJ should account for the changes in goodwill values at 31 March 2014 and (ii) Calculate the goodwill that will be included in its statement of financial position at 31 March 2014. (Total for sub-question (b) = 5 marks) (c) UY prepares its financial statements to 31 March each year. UY discontinued production of one of its products on 31 October 2013 and declared the factory producing those products surplus to its requirements. UY agreed the sale of the factory completing all legal requirements of the sale by 1 March 2014. The final payment for the sale was received on 15 April 2014. UY made a substantial loss on the sale. The chairman of UY's management board does not want the loss to be recognised in the period ended 31 March 2014. The Chairman has instructed UY's Finance Director (a CIMA qualified accountant) to treat the factory as unsold at 31 March 2014 as all the cash was not received until 15 April 2014. Required: Explain the ethical issues that the Finance Director may face as a result of the Chairman's instruction. (Total for sub-question (c) = 5 marks) Section B continues on the next page TURN OVER Financial Operations 7 May 2014 (d) The International Accounting Standards Board's (IASB) Conceptual Framework for Financial Reporting (2010) (Framework) identifies two fundamental qualitative characteristics and four enhancing qualitative characteristics of financial statements. Required: Explain the two fundamental qualitative characteristics of financial statements as identified in the IASB's Framework. (Total for sub-question (d) = 5 marks) May 2014 8 Financial Operations Information for questions 2e and 2f. DTX is resident in Country X for tax purposes. DTX purchased machinery costing $776,000 on 1 April 2012, which qualified for tax depreciation allowances. On 1 April 2013 the machinery was damaged and $119,000 was written off its carrying value. DTX charges depreciation on a straight line basis over 8 years, with no residual value. DTX had profits of $341,000 for the year ended 31 March 2013 and $416,000 for the year ended 31 March 2014. These profits are after charging depreciation and before adjusting for tax allowances. (e) Required: Calculate DTX's corporate income tax due for the years ended 31 March 2013 and 31 March 2014. (Total for sub-question (e) = 5 marks) (f) Required: (i) Calculate the amount of income taxes charged to DTX's statement of profit or loss for the years ended 31 March 2013 and 31 March 2014. (ii) Calculate the deferred tax balance that will appear in DTX's statement of financial position at 31 March 2013 and 31 March 2014. (Total for sub-question (f) = 5 marks) (Total for Section B = 30 marks) End of Section B Section C starts on page 12 Financial Operations 9 May 2014 This page is blank May 2014 10 Financial Operations This page is blank TURN OVER Financial Operations 11 May 2014 SECTION C - 50 MARKS [You are advised to spend no longer than 45 minutes on each question in this section.] ANSWER BOTH QUESTIONS FROM THIS SECTION - 25 MARKS EACH Question Three The trial balance for XCB at 31 March 2014 was as follows: 7% Loan notes Administrative expenses Cash & cash equivalents Purchases Distribution costs Dividends paid Equity shares $1 each, fully paid at 31 March 2014 Interest paid Inventory at 31 March 2013 Operating licence Operating licence amortisation at 31 March 2013 Patent Patent amortisation at 31 March 2013 Plant & Equipment Property rentals paid Provision for legal claim Accumulated depreciation at 31 March 2013: Plant & Equipment Vehicles Allowance for doubtful trade receivables Restructuring costs Retained earnings at 31 March 2013 Sales revenue Share premium at 31 March 2014 Trade payables Trade receivables Vehicles Notes (xi) (iv) (ix) (xi) (iii) (viii) (viii) (vii) (vii) $000 $000 1,012 1,112 1,217 6,526 629 105 1,500 35 337 400 64 80 24 2,105 72 (x) (i) 17 737 116 42 (v) (vi) 90 938 8,356 285 564 (xii) (ix) 689 258 13,655 13,655 Notes: (i) Non-current assets are depreciated as follows: Plant & equipment: 20% per annum straight line Vehicles: 25% per annum reducing balance Depreciation of plant and equipment is charged to cost of sales, and depreciation of vehicles is a distribution cost. XCB's accounting policy for amortisation and depreciation is to charge a full year in the year of acquisition and none in the year of disposal. (ii) Tax due for the year to 31 March 2014 is estimated at $10,000. (iii) The closing inventory at 31 March 2014 was $438,000. (iv) An interim dividend was paid in February 2014; no final dividend is proposed. May 2014 12 Financial Operations (v) The allowance for doubtful trade receivables is to be increased to 10% of closing trade receivables. (vi) The restructuring costs in the trial balance represent the cost of the final phase of a fundamental restructuring of the entity. (vii) On 1 April 2010 XCB purchased a patent for a secret recipe and manufacturing process for one of its products. Due to recent economic difficulties in the market, XCB has carried out an impairment review of its patent. At 31 March 2014 the patent was found to have the following values: Value in use Fair value less cost to sell $42,000 $36,000 The patent is being amortised over 10 years. (viii) XCB paid for a 25 year licence to operate using a well respected and highly advertised international business name. The licence cost XCB $400,000 on 1 April 2009. (ix) On 1 October 2013, XCB issued 500,000 equity shares at $150 each. All proceeds had been received and correctly accounted for by the year end. (x) At 31 March 2013 XCB had an outstanding legal claim alleging that XCB's product had caused injury to a customer. At 31 March 2013 XCB was advised that it would probably lose the case. A provision of $17,000 was set up at 31 March 2013. During 2014 new evidence was discovered and the case against XCB was dropped. As there is no liability the directors have decided that the provision is no longer required. (xi) The loan notes are 10-year loans that were raised on 1 April 2013. XCB incurred no other interest charges in the year to 31 March 2014. (xii) The sales revenue for the year to 31 March 2014 includes $20,000 received from a new customer. The $20,000 was a 10% deposit for an order of $200,000 worth of goods. XCB is still waiting for the results of the new customer's credit reference and at 31 March 2014 had not despatched any goods. Required: Prepare the statement of profit or loss and a statement of changes in equity for XCB for the year ended 31 March 2014 and a statement of financial position at that date, in accordance with the requirements of International Financial Reporting Standards. Notes to the financial statements are not required, but all workings must be clearly shown. Do not prepare a statement of accounting policies. (Total for Question Three = 25 marks) TURN OVER Financial Operations 13 May 2014 Question Four WZQ's financial statements for 2013/2014 include the following: WZQ Statement of profit or loss and other comprehensive income for the year ended 31 March 2014 Note $000 Revenue 58,292 Cost of sales (27,605) Gross Profit 30,687 Administrative expenses (7,246) Distribution costs (2,410) Profit from operations 21,031 Finance cost (2,461) Profit before tax 18,570 Income tax expense (1,646) Profit for the period 16,924 Other comprehensive income - items that will not be reclassified subsequently to profit or loss Revaluation gain on properties (ii) 3,750 20,674 WZQ Statements of financial position at 31 March Note Non-current assets Property, plant and equipment Deferred development expenditure Current assets Inventories Trade receivables Investments Cash in hand and at bank Total Assets Equity and liabilities Equity Equity shares Share premium Revaluation reserve Retained earnings Total equity Non-current liabilities Long term loans Deferred tax Finance lease payable Current liabilities Total equity and liabilities (i);(ii);(iii)&(iv) (v) (vi) (vii) (ix) 2014 $000 $000 104,450 88,680 2,150 106,600 2,548 4,664 2,901 0 237 7,802 114,402 27,350 10,835 3,750 39,119 (iv) (viii) 26,350 1,258 1,491 3,780 5,046 350 712 91,228 9,888 101,116 18,350 1,835 0 24,732 81,054 (x) 2013 $000 $000 44,917 49,250 890 29,099 438 50,578 4,249 5,621 114,402 101,116 Notes: (i) Property, plant and equipment are comprised of: 2014 $000 62,120 42,330 Property Plant and equipment 2013 $000 52,000 36,680 Plant and equipment with a carrying value of $196,000 was sold during the year for $365,000. Any gain/loss on disposal is included in profit or loss. May 2014 14 Financial Operations (ii) Properties were revalued on 31 March 2014. (iii) Depreciation charged during the year to 31 March 2014 was $1,040,000 for property and $4,115,000 for plant and equipment. (iv) WZQ acquired new plant and equipment on a finance lease on 1 April 2013, debiting $1,500,000 to plant and equipment at that date. The total interest on finance leases for the year was $143,000. (v) Deferred development expenditure at 31 March 2013 comprised two projects as follows: Project A $2,260,000 - completed. Amortisation commenced on 1 April 2013 at 10% per year. Project B $288,000 - on 1 April 2013, WZQ decided to discontinue project B. During the year ended 31 March 2014, WZQ capitalised expenditure on a new project, Project C. (vi) The current asset investment, disposed of during the year, was a 30 day government bond. (vii) WZQ issued 9,000,000 $1 equity shares at a premium of $1 on 31 December 2013. (viii) Current liabilities: 2014 $000 1,250 1,166 1,490 343 4,249 Trade payables Loan interest payable Tax payable Finance lease payable Total current liabilities 2013 $000 1,850 2,024 1,620 127 5,621 (ix) A final dividend for the year ended 31 March 2013 was paid during the year ended 31 March 2014. (x) WZQ repaid $25,000,000 of its long term loans during the year. Required: Prepare WZQ's statement of cash flows, using the indirect method, for the year ended 31 March 2014 in accordance with IAS 7 Statement of Cash Flows. Notes to the financial statements are not required, but all workings must be clearly shown. (Total for Question Four = 25 marks) (Total for Section C = 50 marks) End of Question Paper Maths Tables and Formulae are on Pages 17 and 18 Financial Operations 15 May 2014 This page is blank May 2014 16 Financial Operations MATHS TABLES AND FORMULAE Present value table Present value of $1, that is (1 + r)-n where r = interest rate; n = number of periods until payment or receipt. Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 Interest rates (r) 4% 5% 6% 0.962 0.952 0.943 0.925 0.907 0.890 0.889 0.864 0.840 0.855 0.823 0.792 0.822 0.784 0.747 0.790 0.746 0.705 0.760 0.711 0.665 0.731 0.677 0.627 0.703 0.645 0.592 0.676 0.614 0.558 0.650 0.585 0.527 0.625 0.557 0.497 0.601 0.530 0.469 0.577 0.505 0.442 0.555 0.481 0.417 0.534 0.458 0.394 0.513 0.436 0.371 0.494 0.416 0.350 0.475 0.396 0.331 0.456 0.377 0.312 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.277 0.258 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087 Interest rates (r) 14% 15% 16% 0.877 0.870 0.862 0.769 0.756 0.743 0.675 0.658 0.641 0.592 0.572 0.552 0.519 0.497 0.476 0.456 0.432 0.410 0.400 0.376 0.354 0.351 0.327 0.305 0.308 0.284 0.263 0.270 0.247 0.227 0.237 0.215 0.195 0.208 0.187 0.168 0.182 0.163 0.145 0.160 0.141 0.125 0.140 0.123 0.108 0.123 0.107 0.093 0.108 0.093 0.080 0.095 0.081 0.069 0.083 0.070 0.060 0.073 0.061 0.051 17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037 19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.079 0.062 0.052 0.044 0.037 0.031 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 Financial Operations 17 May 2014 Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for n years 1 (1+ r ) n r Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1% 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 10.368 11.255 12.134 13.004 13.865 14.718 15.562 16.398 17.226 18.046 2% 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 10.575 11.348 12.106 12.849 13.578 14.292 14.992 15.679 16.351 3% 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 10.635 11.296 11.938 12.561 13.166 13.754 14.324 14.878 Interest rates (r) 4% 5% 6% 0.962 0.952 0.943 1.886 1.859 1.833 2.775 2.723 2.673 3.630 3.546 3.465 4.452 4.329 4.212 5.242 5.076 4.917 6.002 5.786 5.582 6.733 6.463 6.210 7.435 7.108 6.802 8.111 7.722 7.360 8.760 8.306 7.887 9.385 8.863 8.384 9.986 9.394 8.853 10.563 9.899 9.295 11.118 10.380 9.712 11.652 10.838 10.106 12.166 11.274 10.477 12.659 11.690 10.828 13.134 12.085 11.158 13.590 12.462 11.470 7% 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 9.108 9.447 9.763 10.059 10.336 10.594 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 8.851 9.122 9.372 9.604 9.818 9% 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 7.161 7.487 7.786 8.061 8.313 8.544 8.756 8.950 9.129 10% 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 11% 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 6.750 6.982 7.191 7.379 7.549 7.702 7.839 7.963 12% 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 5.938 6.194 6.424 6.628 6.811 6.974 7.120 7.250 7.366 7.469 13% 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025 Interest rates (r) 14% 15% 16% 0.877 0.870 0.862 1.647 1.626 1.605 2.322 2.283 2.246 2.914 2.855 2.798 3.433 3.352 3.274 3.889 3.784 3.685 4.288 4.160 4.039 4.639 4.487 4.344 4.946 4.772 4.607 5.216 5.019 4.833 5.453 5.234 5.029 5.660 5.421 5.197 5.842 5.583 5.342 6.002 5.724 5.468 6.142 5.847 5.575 6.265 5.954 5.668 6.373 6.047 5.749 6.467 6.128 5.818 6.550 6.198 5.877 6.623 6.259 5.929 17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 4.836 4.988 5.118 5.229 5.324 5.405 5.475 5.534 5.584 5.628 18% 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 5.353 19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4.339 4.486 4.611 4.715 4.802 4.876 4.938 4.990 5.033 5.070 5.101 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 4.675 4.730 4.775 4.812 4.843 4.870 FORMULAE Annuity Present value of an annuity of $1 per annum, receivable or payable for n years, commencing in one year, discounted at r% per annum: 1 1 PV = 1 n r [1 + r ] Perpetuity Present value of $1 per annum, payable or receivable in perpetuity, commencing in one year, PV = discounted at r% per annum: 1 r May 2014 18 Financial Operations LIST OF VERBS USED IN THE QUESTION REQUIREMENTS A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb. LEARNING OBJECTIVE Level 1 - KNOWLEDGE What you are expected to know. Level 2 - COMPREHENSION What you are expected to understand. VERBS USED DEFINITION List State Define Make a list of Express, fully or clearly, the details/facts of Give the exact meaning of Describe Distinguish Explain Communicate the key features Highlight the differences between Make clear or intelligible/State the meaning or purpose of Recognise, establish or select after consideration Use an example to describe or explain something Identify Illustrate Level 3 - APPLICATION How you are expected to apply your knowledge. Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate Level 4 - ANALYSIS How are you expected to analyse the detail of what you have learned. Level 5 - EVALUATION How are you expected to use your learning to evaluate, make decisions or recommendations. Financial Operations Analyse Categorise Compare and contrast Put to practical use Ascertain or reckon mathematically Prove with certainty or to exhibit by practical means Make or get ready for use Make or prove consistent/compatible Find an answer to Arrange in a table Construct Discuss Interpret Prioritise Produce Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between Build up or compile Examine in detail by argument Translate into intelligible or familiar terms Place in order of priority or sequence for action Create or bring into existence Advise Evaluate Recommend Counsel, inform or notify Appraise or assess the value of Advise on a course of action 19 May 2014 Financial Pillar Operational Level Paper F1 - Financial Operations May 2014 Thursday Morning Session May 2014 20 Financial Operations Performance Pillar P2 - Performance Management Thursday 29 August 2013 Instructions to candidates You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, make annotations on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or subquestions). ALL answers must be written in the answer book. Answers written on the question paper will not be submitted for marking. You should show all workings as marks are available for the method you use. ALL QUESTIONS ARE COMPULSORY. Section A comprises 5 questions and is on pages 2 to 4. Section B comprises 2 questions and is on pages 6 to 9. Maths tables and formulae are provided on pages 11 to 14. The list of verbs as published in the syllabus is given for reference on page 15. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered. P2 - Performance Management DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO TURN OVER The Chartered Institute of Management Accountants 2013 SECTION A - 50 MARKS [You are advised to spend no longer than 18 minutes on each question in this section.] ANSWER ALL FIVE QUESTIONS IN THIS SECTION. EACH QUESTION IS WORTH 10 MARKS. YOU SHOULD SHOW YOUR WORKINGS AS MARKS ARE AVAILABLE FOR THE METHOD YOU USE. Question One The standard selling price and costs per unit of a new product for the first period are shown below: Selling price Materials Labour (see below) Variable overheads Fixed overheads (see below) $ 750 300 200 100 120 6 kg at $50 per kg 20 hours at $10 per hour 25 machine hours at $4 per machine hour Labour hours The labour hours are the average labour hours per unit based on the budgeted output for the period of 128 units and the assumption that a 90% learning curve will apply throughout the period. The learning index for a 90% learning curve is -0.152. Fixed overheads The fixed overheads are specific fixed overheads for this product and the absorption rate was based on the budgeted output for the period of 128 units. Required: (a) Calculate the sensitivity of the budgeted profit for the period for this product to a change in the price per kg of materials. (2 marks) (b) Calculate the budgeted labour hours for the first unit of this product to be produced. (4 marks) (c) Calculate the sensitivity of the budgeted profit for the period for this product to a change in the rate of learning. (4 marks) Note: all workings must be shown. (Total for Question One = 10 marks) Performance Management 2 September 2013 Question Two A factory uses a standard absorption costing system. The fixed production overhead absorption rate is based on labour hours. Extracts from the budgeted and actual results for the previous period are shown below: Budget 1,500 $300,000 600 Output (units) Fixed production overhead Labour hours Actual 1,600 $310,000 580 Required: (a) Calculate: (i) (ii) The fixed production overhead expenditure variance The fixed production overhead volume variance (3 marks) The factory is thinking of introducing an activity based costing system. An analysis of the fixed production overheads for the previous period showed that included in the budgeted fixed production overheads of $300,000 was $72,000 for materials handling. Costs for materials handling are incurred when materials are shipped from the storage area to the processing plant. Further analysis revealed: Materials handling costs Number of material shipments Total quantity of materials shipped Budget $72,000 90 360 tonne Actual $69,000 85 348 tonne Required: (b) Calculate using activity based costing principles: (i) (ii) The materials handling shipment expenditure variance The materials handling shipment efficiency variance (7 marks) (Total for Question Two = 10 marks) Section A continues on the next page TURN OVER September 2013 3 Performance Management Question Three Required: Discuss how activity based costing could improve the linkage between cost control and responsibility accounting at each of the four levels of the activity based costing hierarchy of activities. (Total for Question Three = 10 marks) Question Four Required: Compare and contrast feedforward and feedback controls by using a budgeting system to explain your points. (Total for Question Four = 10 marks) Question Five Many service organisations, for example banks, have outsourced their customer liaison and support service operations to \"inbound call centres\". Inbound call centres deal with product support or information enquiries from customers. Required: Explain, in the context of the modern business environment, the advantages and disadvantages of outsourcing customer liaison and product support to \"inbound call centres\". (Total for Question Five = 10 marks) (Total for Section A = 50 marks) End of Section A. Section B starts on page 6 Performance Management 4 September 2013 This page is blank September 2013 5 Performance Management SECTION B - 50 MARKS [You are advised to spend no longer than 45 minutes on each question in this section.] ANSWER BOTH QUESTIONS IN THIS SECTION. EACH QUESTION IS WORTH 25 MARKS. YOU SHOULD SHOW YOUR WORKINGS AS MARKS ARE AVAILABLE FOR THE METHOD YOU USE. Question Six A company produces three products (X, Y and Z) from the same resources (but in different quantities). Extracts from the original budget for Month 11 are shown below: X Selling price ($ per unit) Total cost ($ per unit) Labour hours per unit Machine hours per unit Production and sales (units) Y 24 20 0.5 1 10,000 41 20 1.5 2 6,000 Z 42 35 1.5 0.75 10,000 Variable costs are 40% of the total cost of each unit. Fixed costs are absorbed at the rate of 150% of variable costs based on the budgeted production quantities as shown above. It has now become known that during Month 11 essential maintenance work will have to be carried out. This will limit the availability of resources to: Labour hours: Machine hours: 12,500 hours 30,000 hours Required: (a) Produce, using marginal costing principles, a columnar statement that shows the profit maximising production plan for Month 11 and the resulting profit or loss. (9 marks) (b) Calculate the three shadow prices for labour hours. Your answer must state the range of labour hours that each shadow price covers. (5 marks) Question six continues on the opposite page Performance Management 6 September 2013 Marketing intelligence has now revealed that a new competitor is about to enter the market in Month 11 with a product that is much better than Product Y. It has therefore been decided that production of Product Y will stop immediately. The competitor will also sell products that will have an impact on the demand for Products X and Z. Further work by the Marketing Department has revealed the relationships between the selling price and the monthly demand for Product X, and also for Product Z, as shown in the table below. There is no relationship between Product X and Product Z other than they use the same resources. The products must be produced separately, each in batches of 1,000 units. Demand (units) 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 Selling price ($) Product X Product Z 28 66 27 60 26 54 25 48 24 42 23 36 22 30 21 24 The table should be interpreted as follows: If the selling price of Product X was set at $28 then up to 2,000 units could be sold. To sell more than 2,000 units it would be necessary to reduce the price. For example, if the price was reduced to $25 per unit up to 8,000 units could be sold. The only selling prices that would be used are those shown in the table. Required: (c) Calculate: (i) The revised optimum production plan for Products X and Z. (9 marks) (ii) The total contribution that the plan in (c)(i) would earn. (2 marks) (Total for Question Six = 25 marks) Section B continues on page 8 TURN OVER September 2013 7 Performance Management Question Seven HPR harvests, processes and roasts coffee beans. The company has two divisions: Division P is located in Country Y. It harvests and processes coffee beans. The processed coffee beans are sold to Division R and external customers. Division R is located in Country Z. It roasts processed coffee beans and then sells them to external customers. Countries Y and Z use the same currency but have different taxation rates. The budgeted information for the next year is as follows: Division P Capacity External demand for processed coffee beans Demand from Division R for processed coffee beans External market selling price for processed coffee beans Variable costs Annual fixed costs 1,000 tonnes 800 tonnes 625 tonnes $11,000 per tonne $7,000 per tonne $1,500,000 Division R Sales of roasted coffee beans Market selling price for roasted coffee beans 500 tonnes $20,000 per tonne The production of 1 tonne of roasted coffee beans requires an input of 1.25 tonnes of processed coffee beans. The cost of roasting is $2,000 per tonne of input plus annual fixed costs of $1,000,000. Transfer Pricing Policy of HPR Division P must satisfy the demand from Division R for processed coffee beans before selling any to external customers. The transfer price for the processed coffee beans is variable cost plus 10% per tonne. Taxation The rate of taxation on company profits is 45% in Country Y and 25% in Country Z. Performance Management 8 September 2013 Required: (a) (i) Produce statements that show the budgeted profit after tax for the next year for each of the two divisions. Your profit statements should show sales and costs split into external sales and internal transfers where appropriate. (8 marks) (ii) Discuss the potential tax consequences of HPR's current transfer pricing policy. (6 marks) (b) Produce statements that show the budgeted contributions that would be earned by each of the two divisions if HPR's head office changed its policy to state that transfers must be made at opportunity cost. Your statements should show sales and costs split into external sales and internal transfers where appropriate. (6 marks) (c) Explain TWO behavioural issues that could arise as a result of the head office of HPR imposing transfer prices instead of allowing the divisional managers to set the prices. (5 marks) (Total for Question Seven = 25 marks) (Total for Section B = 50 marks) End of question paper Maths tables and formulae are on pages 11 to 14 September 2013 9 Performance Management This page is blank Performance Management 10 September 2013 PRESENT VALUE TABLE ( Present value of 1 unit of currency, that is 1+ r periods until payment or receipt. )n where r = interest rate; n = number of Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1% 0.990 0.980 0.971 0.961 0.951 0.942 0.933 0.923 0.914 0.905 0.896 0.887 0.879 0.870 0.861 0.853 0.844 0.836 0.828 0.820 2% 0.980 0.961 0.942 0.924 0.906 0.888 0.871 0.853 0.837 0.820 0.804 0.788 0.773 0.758 0.743 0.728 0.714 0.700 0.686 0.673 3% 0.971 0.943 0.915 0.888 0.863 0.837 0.813 0.789 0.766 0.744 0.722 0.701 0.681 0.661 0.642 0.623 0.605 0.587 0.570 0.554 4% 0.962 0.925 0.889 0.855 0.822 0.790 0.760 0.731 0.703 0.676 0.650 0.625 0.601 0.577 0.555 0.534 0.513 0.494 0.475 0.456 Interest rates (r) 5% 6% 0.952 0.943 0.907 0.890 0.864 0.840 0.823 0.792 0.784 0.747 0.746 0705 0.711 0.665 0.677 0.627 0.645 0.592 0.614 0.558 0.585 0.527 0.557 0.497 0.530 0.469 0.505 0.442 0.481 0.417 0.458 0.394 0.436 0.371 0.416 0.350 0.396 0.331 0.377 0.312 7% 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.475 0.444 0.415 0.388 0.362 0.339 0.317 0.296 0.277 0.258 8% 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 0.429 0.397 0.368 0.340 0.315 0.292 0.270 0.250 0.232 0.215 9% 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 0.388 0.356 0.326 0.299 0.275 0.252 0.231 0.212 0.194 0.178 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 0.350 0.319 0.290 0.263 0.239 0.218 0.198 0.180 0.164 0.149 Periods (n) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 11% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 0.317 0.286 0.258 0.232 0.209 0.188 0.170 0.153 0.138 0.124 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 0.287 0.257 0.229 0.205 0.183 0.163 0.146 0.130 0.116 0.104 13% 0.885 0.783 0.693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 0.261 0.231 0.204 0.181 0.160 0.141 0.125 0.111 0.098 0.087 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 0.237 0.208 0.182 0.160 0.140 0.123 0.108 0.095 0.083 0.073 Interest rates (r) 15% 16% 0.870 0.862 0.756 0.743 0.658 0.641 0.572 0.552 0.497 0.476 0.432 0.410 0.376 0.354 0.327 0.305 0.284 0.263 0.247 0.227 0.215 0.195 0.187 0.168 0.163 0.145 0.141 0.125 0.123 0.108 0.107 0.093 0.093 0.080 0.081 0.069 0.070 0.060 0.061 0.051 17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 0.178 0.152 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.043 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 0.162 0.137 0.116 0.099 0.084 0.071 0.060 0.051 0.043 0.037 19% 0.840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 0.148 0.124 0.104 0.088 0.079 0.062 0.052 0.044 0.037 0.031 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 0.135 0.112 0.093 0.078 0.065 0.054 0.045 0.038 0.031 0.026 September 2013 11 Performance Management Cumulative present value of 1 unit of currency per annum, Receivable or Payable at the end of each year for n years Periods (n) 1 2 3 4 5 1 (1+ r ) n r 1% 0.990 1.970 2.941 3.902 4.853 2% 0.980 1.942 2.884 3.808 4.713 3% 0.971 1.913 2.829 3.717 4.580 4% 0.962 1.886 2.775 3.630 4.452 Interest rates (r) 5% 6% 0.952 0.943 1.859 1.833 2.723 2.673 3.546 3.465 4.329 4.212 7% 0.935 1.808 2.624 3.387 4.100 8% 0.926 1.783 2.577 3.312 3.993 9% 0.917 1.759 2.531 3.240 3.890 10% 0.909 1.736 2.487 3.170 3.791 6 7 8 9 10 5.795 6.728 7.652 8.566 9.471 5.601 6.472 7.325 8.162 8.983 5.417 6.230 7.020 7.786 8.530 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 4.355 4.868 5.335 5.759 6.145 11 12 13 14 15 10.368 11.255 12.134 13.004 13.865 9.787 10.575 11.348 12.106 12.849 9.253 9.954 10.635 11.296 11.938 8.760 9.385 9.986 10.563 11.118 8.306 8.863 9.394 9.899 10.380 7.887 8.384 8.853 9.295 9.712 7.499 7.943 8.358 8.745 9.108 7.139 7.536 7.904 8.244 8.559 6.805 7.161 7.487 7.786 8.061 6.495 6.814 7.103 7.367 7.606 16 17 18 19 20 14.718 15.562 16.398 17.226 18.046 13.578 14.292 14.992 15.679 16.351 12.561 13.166 13.754 14.324 14.878 11.652 12.166 12.659 13.134 13.590 10.838 11.274 11.690 12.085 12.462 10.106 10.477 10.828 11.158 11.470 9.447 9.763 10.059 10.336 10.594 8.851 9.122 9.372 9.604 9.818 8.313 8.544 8.756 8.950 9.129 7.824 8.022 8.201 8.365 8.514 Periods (n) 1 2 3 4 5 11% 0.901 1.713 2.444 3.102 3.696 12% 0.893 1.690 2.402 3.037 3.605 13% 0.885 1.668 2.361 2.974 3.517 14% 0.877 1.647 2.322 2.914 3.433 Interest rates (r) 15% 16% 0.870 0.862 1.626 1.605 2.283 2.246 2.855 2.798 3.352 3.274 17% 0.855 1.585 2.210 2.743 3.199 18% 0.847 1.566 2.174 2.690 3.127 19% 0.840 1.547 2.140 2.639 3.058 20% 0.833 1.528 2.106 2.589 2.991 6 7 8 9 10 4.231 4.712 5.146 5.537 5.889 4.111 4.564 4.968 5.328 5.650 3.998 4.423 4.799 5.132 5.426 3.889 4.288 4.639 4.946 5.216 3.784 4.160 4.487 4.772 5.019 3.685 4.039 4.344 4.607 4.833 3.589 3.922 4.207 4.451 4.659 3.498 3.812 4.078 4.303 4.494 3.410 3.706 3.954 4.163 4.339 3.326 3.605 3.837 4.031 4.192 11 12 13 14 15 6.207 6.492 6.750 6.982 7.191 5.938 6.194 6.424 6.628 6.811 5.687 5.918 6.122 6.302 6.462 5.453 5.660 5.842 6.002 6.142 5.234 5.421 5.583 5.724 5.847 5.029 5.197 5.342 5.468 5.575 4.836 4.988 5.118 5.229 5.324 4.656 4.793 4.910 5.008 5.092 4.486 4.611 4.715 4.802 4.876 4.327 4.439 4.533 4.611 4.675 16 17 18 19 20 7.379 7.549 7.702 7.839 7.963 6.974 7.120 7.250 7.366 7.469 6.604 6.729 6.840 6.938 7.025 6.265 6.373 6.467 6.550 6.623 5.954 6.047 6.128 6.198 6.259 5.668 5.749 5.818 5.877 5.929 5.405 5.475 5.534 5.584 5.628 5.162 5.222 5.273 5.316 5.353 4.938 4.990 5.033 5.070 5.101 4.730 4.775 4.812 4.843 4.870 Performance Management 12 September 2013 FORMULAE PROBABILITY A B = A or B. A B = A and B (overlap). P(B | A) = probability of B, given A. Rules of Addition If A and B are mutually exclusive: If A and B are not mutually exclusive: P(A B) = P(A) + P(B) P(A B) = P(A) + P(B) - P(A B) Rules of Multiplication If A and B are independent: If A and B are not independent: P(A B) = P(A) * P(B) P(A B) = P(A) * P(B | A) E(X) = (probability * payoff) DESCRIPTIVE STATISTICS Arithmetic Mean x = x n x= fx f (frequency distribution) Standard Deviation SD = ( x x ) 2 n SD = fx 2 x 2 (frequency distribution) f INDEX NUMBERS Price relative = 100 * P1/P0 Price: Quantity: Quantity relative = 100 * Q1/Q0 P w 1 Po w x 100 Q w 1 Qo x 100 w TIME SERIES Additive Model Series = Trend + Seasonal + Random Multiplicative Model Series = Trend * Seasonal * Random September 2013 13 Performance Management FINANCIAL MATHEMATICS Compound Interest (Values and Sums) Future Value S, of a sum of X, invested for n periods, compounded at r% interest n S = X[1 + r] Annuity Present value of an annuity of 1 per annum receivable or payable for n years, commencing in one year, discounted at r% per annum: PV = 1 1 1 r [1 + r ] n Perpetuity Present value of 1 per annum, payable or receivable in perpetuity, commencing in one year, discounted at r% per annum: PV = 1 r LEARNING CURVE b Yx = aX where: Yx = the cumulative average time per unit to produce X units; a = the time required to produce the first unit of output; X = the cumulative number of units; b = the index of learning. The exponent b is defined as the log of the learning curve improvement rate divided by log 2. INVENTORY MANAGEMENT Economic Order Quantity 2C o D EOQ = Ch where: Co Ch D = = = cost of placing an order cost of holding one unit in inventory for one year annual demand Performance Management 14 September 2013 LIST OF VERBS USED IN THE QUESTION REQUIREMENTS A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb. LEARNING OBJECTIVE Level 1 - KNOWLEDGE What you are expected to know. Level 2 - COMPREHENSION What you are expected to understand. VERBS USED DEFINITION List State Define Make a list of Express, fully or clearly, the details/facts of Give the exact meaning of Describe Distinguish Explain Communicate the key features Highlight the differences between Make clear or intelligible/State the meaning or purpose of Recognise, establish or select after consideration Use an example to describe or explain something Identify Illustrate Level 3 - APPLICATION How you are expected to apply your knowledge. Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate Level 4 - ANALYSIS How are you expected to analyse the detail of what you have learned. Level 5 - EVALUATION How are you expected to use your learning to evaluate, make decisions or recommendations. September 2013 Analyse Categorise Compare and contrast Put to practical use Ascertain or reckon mathematically Prove with certainty or to exhibit by practical means Make or get ready for use Make or prove consistent/compatible Find an answer to Arrange in a table Construct Discuss Interpret Prioritise Produce Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between Build up or compile Examine in detail by argument Translate into intelligible or familiar terms Place in order of priority or sequence for action Create or bring into existence Advise Evaluate Recommend Counsel, inform or notify Appraise or assess the value of Advise on a course of action 15 Performance Management Performance Pillar Management Level Paper P2 - Performance Management September 2013 Performance Management 16 September 2013