AFO+ +Mock+Test

Student Number (from your student ID card – 8 digits)
Date of Birth
University of Hertfordshire
2020/21 Mock Test
Accounting and Finance in the Organisation

7BSP0389
Time Allowed: 2 Hours
Note: Answer three out of the four questions

Instructions to candidates
You have 2 hours to complete the test.
Download the test workbook and save it on your computer using your student ID as the file name
Complete the spaces provided on the front page worksheet with details of your student ID and da
As you complete the test, you MUST save your work at regular intervals to prevent you losing your
Note: You must upload the workbook containing your answers on completion.
dent ID as the file name.
f your student ID and date of birth
prevent you losing your work.
Question 1
Max Plc is global a retailer of office stationery and has been in business for many years.
For the year ended 30th September 2019, the assistant accountant has extracted the trial balance below.
£'000 £'000
Opening Inventory at 1st October 2018 690
Equity 3,750
Purchases 5,150
Sales 9,420
Administrative Expense 300
Sales Returns 225
Wages and Salaries 720
Rates 370
Discount Allowed 90
Purchases Returns 250
Postages & Packaging 150
Loan from Metro Bank at 10% interest (Due in 2030) 6,500
Loan interest paid 350
Fuel Motor Vehicles 520
Motor Vehicles at cost 4,000
Fixtures and Fittings at cost 6,000
Accumulated Depreciation at 1st October 2018:
Motor Vehicles 1,600
Fixtures and Fittings 1,800
Trade payables 950
Trade receivables 2,722
Bank 3,520
Retained earnings at 1st October 2018 537
24,807 24,807
Additional Information as at 30th September 2019

i) Closing inventory at 30th September 2019 was valued at £320,000
ii) The depreciation charge for the non-current assets for the year amounted to:
- Fixtures & Fittings £600,000
- Motor Vehicles £400,000
Required:
a) Prepare the Income Statement for Max Plc for the year ended 30th September 2019
b) Prepare the Statement of Financial Position for Max Plc as at 30th September 2019
c) Explain the importance of preparing an income statement to the shareholders of Max Plc
10 marks
10 marks
5 marks
Total 25 marks
Question 2
Crost Limited manufactures and sells safety shoes. The selling price per pair of shoes is £85 with a total variable cost of £65 pe
The annual fixed cost of Crost Limited is £400,000 with an estimated annual demand of 25,000 pairs of shoes.
Required:
a) Calculate the contribution per pair of shoes
b) Calculate the break-even number of shoes
c) Calculate the margin of safety of shoes in percentage terms
d) Calculate the total profit made by Crost Limited for selling 25,000 shoes
e) Assuming the selling price falls by 15% and the variable cost falls by 6%, what would be the change
in total profit if Crost Limited makes and sells 27,500 pairs of shoes next year instead of 25,000 pairs of shoes
f) Explain the following terms with examples?

i) Relevant cost
ii) Irrelevant cost
tal variable cost of £65 per pair of shoes.
of shoes.
2 marks
2 marks
4 marks
4 marks
8 marks
5 marks
Total 25 marks
Question 3
The Chief Executive of Rees Limited is faced with making a choice between investing in Project Demo or Project Cremo.
As the management accountant of Rees Limited you are required to advise the Chief Executive which option is financially viab
Below are the details of both investments:
Project Demo
Year 0 Year 1 Year 2 Year 3 Year 4
£'000 £'000 £'000 £'000 £'000
Capital Expenditure 2,800
Disposal 350
Sale Revenue 1,500 970 990 600
Operating Cost 190 240 460 320
10% Present value factor 1 0.909 0.8264 0.7513 0.683
Project Cremo
Year 0 Year 1 Year 2 Year 3 Year 4
£'000 £'000 £'000 £'000 £'000
Capital Expenditure 2,800
Disposal 720
Sale Revenue 1,750 770 1500 900
Operating Cost 390 220 760 600
11% Present value factor 1 0.9009 0.8116 0.7312 0.6587
Required:
a) Calculate the Net Present Value (NPV) of Project Demo
b) Calculate the Net Present Value (NPV) of Project Cremo
c) Based on the NPVs calculated above, which of the projects is financially viable and why?
d) Calculate the payback periods of the project selected
e) Why is NPV better than payback period as an investment appraisal technique?
mo or Project Cremo.
hich option is financially viable.
8 marks
8 marks
2 marks
3 marks
4 marks
Total 25
Question 4
The owner of Kroos Limited has approached for help in preparing the budget for his company.
Below is the information he has supplied to you about the business.
i) The bank account of Kroos Ltd shows a balance of £750,000 on 30th April 2017.
ii) Sales to customers are made on the following terms:
a) 70% is paid in the month of sales
b) 20% is paid in the month following the sales
c) The balance is paid two months after the sales
iii) Sales of Kroos Ltd for the year 2017 amounted to:
March April May June July August

£'000 £'000 £'000 £'000 £'000 £'000
9,300 8,250 11,250 10,500 15,000 16,000
iv) Suppliers of Kroos allowed them to pay for their purchases in two installments:
a) 40% in the month of purchases
b) The balance is paid one month after purchases
Below are the purchases for the year 2017:
April May June July August
£'000 £'000 £'000 £'000 £'000
10,800 9,400 6,500 8,700 7,200
v) Kroos Ltd has plans to expand the business in 2018 by building an additional warehouse.
Kroos Ltd is due to receive a bank loan of £500,000 from their bankers in August 2017 towards this project.
vi) The cost of equipment in the new warehouse will be £400,000. This is expected to be paid in two equal installments on the
vii) Kroos currently spends £90,000 on light and heating every month. This cost is
expected to reduce by 10% on 1st June 2017 but will increase by 15% from 1st of August 2017.
viii) The insurance premium is £100,000 every month.
ix) Kroos Ltd spends £1,000,000 on wages and salaries every month. From the 1st of June 2017,
there will be an increase of 7% in the wages and salaries of the employees of Kroos Ltd.
x) The owner of Kroos Ltd plans to withdraw £500,000 monthly from the business for his personal use.
Required:
a) Prepare a cash budget for Kroos Ltd for four months ending 31st August 2017
b) Explain three reasons why businesses prepare budgets
o equal installments on the 1st of July and August 2017
22 marks
3 marks
Total 25 marks

AFO+ +Mock+Test

Uploaded by

Copyright:

Available Formats

AFO+ +Mock+Test

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

AFO+ +Mock+Test

Uploaded by

Copyright:

Available Formats

Student Number (from your student ID card – 8 digits)

2020/21 Mock Test

Accounting and Finance in the Organisation

Time Allowed: 2 Hours

Note: Answer three out of the four questions

Additional Information as at 30th September 2019

b) Calculate the break-even number of shoes

c) Calculate the margin of safety of shoes in percentage terms

f) Explain the following terms with examples?

March April May June July August

You might also like