Rationale This question examines candidates' ability across several of the learning outcomes in area B of the P2 syllabus.

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1 May 200 Exam General omments Section, the multiple choice section was generally well attempted by candidates. Of the three 25 mark questions, question two, the project management question generally gained most marks. Question three, the consolidation question, was often very well answered by the stronger candidates though many candidates gained few marks on this question. With regard to question two, the management accounting question, many candidates appeared to have spent too much time on numbers, when discussion and interpretation gained the most marks. Question (a) (b) (c) Using customer based profitability analysis, evaluate each of GM Ltd's three customers. dvise GM Ltd, with reasons, which customer is the most profitable. (8 marks) iscuss the key factors that should be considered when deciding whether or not to discontinue supplying a customer who is contributing relatively little profit in comparison with other customers in GM Ltd. (5 marks) GM Ltd is interested in the introduction of Just-in-Time (JIT). dvise GM Ltd on the advantages and disadvantages that could result from using this method. (6 marks) (d) There is the possibility of introducing a new product, plastic moulded garden units, into GM Ltd's range and producing them in the existing factory. Explain how target and lifecycle costing may be relevant to the management team in making this decision to adopt the new product to improve profitability. (6 marks) (Total for Question Five = 25 marks) Rationale This question examines candidates' ability across several of the learning outcomes in area of the P2 syllabus. Suggested pproach The majority of the marks within this question were awarded for discussion, explanation and supporting decision making. andidates who gained a high proportion of marks appreciated that the numbers were relatively easy to complete but the discussion was expected to be insightful with regard to planning and strategy. It required a comprehensive knowledge of strategic cost planning and analysis in the quest for sustainable competitive advantage. Often, too little time was allocated to the written sections with regard to marks awarded. The hartered Institute of Management ccountants Page

2 May 200 Exam Marking Guide (a) ontribution ontribution margin (%) Profit per customer Profit margin per customer (%) Order iscussion (b) mark per key factor (c) Explanation of JIT ½ mark for each advantage and disadvantage (d) mark per relevant point made Marks 4 Max 8 Max 5 5 Max 6 Max 6 Please refer to published answers for relevant factors and points, etc. Maximum marks awarded 25 Examiner s omments Many candidates spent too much time on calculations to the detriment of discussion which carried more marks. The hartered Institute of Management ccountants Page 2

3 May 200 Exam Question 2(a) escribe the ways in which the proposed project in PT Hospital differs from 'business as usual' work. (0 marks) Rationale This question examines candidates' comprehension of the specific attributes of a project. It tests learning outcome (a) 'identify a project, a program and their attributes' of the E2 syllabus. Suggested pproach nswers should describe the specific attributes of the proposed project in PT Hospital that distinguish it from business as usual work. To gain a pass mark, answers must develop to beyond a list of attributes, but rather should describe the attributes. Good answers will use the scenario to provide some specific examples. Marking Guide Marks Project lifecycle Other attributes e.g. Specific purpose Scope efined start and end time Temporary process Non-routine work Schedule of tasks ost/budget constraints Unique/non repetitive Other Maximum marks awarded 0 Up to 2 Question 2(b) Explain the different stages that would be involved in the project management process to design and implement the new pay and reward system for PT Hospital. (5 marks) Rationale This question assesses candidates' understanding of the different stages involved in the process of project management. It tests learning outcome (d) 'identify the characteristics of each phase in the project process' of the E2 syllabus. Suggested pproach The answer should develop with reference to the different stages involved in the process of project management. Weak answers will simply describe the stages of the project. Good answers will develop the outline of the different stages with specific reference to the design and implementation on the new pay and reward system for PT Hospital. The hartered Institute of Management ccountants Page 3

4 May 200 Exam Marking Guide Marks Initiation and identification of need Planning Executing/Implementing ontrolling/managing the ongoing project ompleting/post audit etc. Up to 4 Up to 4 Up to 4 Up to 4 Up to 4 Maximum marks awarded 5 Examiner s omments Many candidates performed quite well on this question. Poorer answers were insufficiently developed and were not applied to the scenario provided. The hartered Institute of Management ccountants Page 4

5 May 200 Exam Question 3 Prepare the consolidated cash flow statement of the X group for the financial year ended 30 June 2009 in the form required by IS 7 Statement of cash flows, and using the indirect method. Notes to the cash flow statement are NOT required, but full workings should be shown (25 marks) Rationale The question related to syllabus area of the F2 syllabus.and learning outcome (a) 'prepare a complete set of consolidated financial statements in a form suitable for publication for a group of companies'. omplications include the acquisition during the financial year of a majority shareholding in a new subsidiary in exchange for a combination of shares or cash. Suggested pproach alculate net cash from operating activities by taking into account adjustments for profit on disposal of property, depreciation and finance cost, and by adjusting the movements in working capital and for interest and income tax paid. alculate cash flows from investing activities Present cash flow statement in the format required by IS 7 Marking Guide Marks djustments to profit alculation of working capital movements alculation of interest and income tax paid alculation of cash flows from investing activities alculation of cash flows from financing activities Presentation of cash flow statement Maximum marks awarded Examiner s omments This question was done very well by some candidates but also very badly in some cases. ommon errors included failure to take the acquisition into account in calculating movements in working capital items and the inclusion of non cash items in the cash flow statement. For example, many candidates included the profit on the sale of the property rather than the proceeds of sale in cash flows from investing activities. The hartered Institute of Management ccountants Page 5

6 May 200 Exam Question 4 Question 4. company manufactures three products using the same machine which has limited time available. The following cost and selling price details relate to the three products: Product E F G $/unit $/unit $/unit Selling price irect material irect labour Variable overhead Fixed overhead Profit Minutes per unit Minutes per unit Minutes per unit Machine time The correct rank order for the three products so that the company maximises its profits as measured using throughput accounting is EGF GEF GFE FGE The answer is The hartered Institute of Management ccountants Page 6

7 May 200 Exam Question 4.2 company uses a standard absorption costing system and adjusts for any under or over absorbed overheads at the end of each period. The company produces only one type of product. The unit standard costs were the same in both March and pril. ata for pril included: udget ctual Sales volume 90,000 units 85,000 units Production volume 80,000 units 78,000 units Total fixed production overheads $400,000 $395,000 Selling price per unit $ $4 Variable production costs per unit $4 $4 The sales volume profit variance for pril was $35,000 adverse $0,000 adverse $50,000 adverse $4,000 adverse (90,000-85,000) x standard profit per unit = 5,000 x $2 The answer is Question 4.3 The following data relate to a manufacturing company. t the beginning of pril there was no inventory. uring pril, 2,000 units of Product Y were produced but only,750 were sold. The financial data for Product Y for pril were as follows: $ Materials 32,000 Labour 2,600 Variable production overheads 9,400 Fixed production overheads 22,500 Variable selling costs 6,000 Fixed selling costs Total costs for Product Y 9,300 0,800 The value of inventory of Product Y at the end of pril using a marginal costing approach was: $6,750 $5,575 $9,563 $7,500 Marginal cost values the inventory at the variable production cost of 54,000. /8 of production cost was in inventory /8 of 54,000 = 6,750 The answer is The hartered Institute of Management ccountants Page 7

8 May 200 Exam Question 4.4 company is considering a short-term pricing decision for a contract that would utilise some material that it has held in inventory for some time. The company does not foresee any other use for the material. The work would require,000 kgs of material. There are 800 kgs of material in inventory, which were bought some time ago at a cost of $3 per kg. The material held in inventory could currently be sold for $3.50 per kg. The current purchase price of material is $4.50 per kg. The relevant cost of material for the company to use when making its pricing decision for the contract is closest to $3,700 $3,500 $4,500 $3, kg x resale price of $3.50 = $2, kg x purchase price of $4.50 = $900 Total = $3,700 The answer is Question 4.5 In the typical hierarchical organisation, the requirement for a lower level manager to report to a higher level manager in the chain of command is known as: uthority Empowerment elegation ccountability The answer is Question 4.6 ecisions about acquisitions and mergers occur at which ONE of the following levels of strategy? Functional usiness orporate ompetition The answer is The hartered Institute of Management ccountants Page 8

9 May 200 Exam Question 4.7 Organisational conflict between different levels in the organisation s hierarchy is known as what type of conflict? The answer is Vertical conflict Question 4.8 Identify each of the different team roles as defined by elbin for the following: (i) Gives attention to detail and is concerned with meeting deadlines (ii) Supports other members of the team and helps to promote harmony (iii) Imaginative and good at coming up with ideas and suggestions (3 marks) The answer is (i) ompleter/finisher, (ii) Team Worker, (iii) Plant Question 4.9 J operates a defined benefit pension plan for its employees. The fair value of the plan assets at June 2008 was $3,00,000. J made contributions of $300,000 to the plan in the year to 3 May 2009 and the expected return on assets has been calculated at $90,000. The pension plan paid out a total of $225,000 in benefits in the period and the fair value of the plan assets at 3 May 2009 was $3,340,000. The actuarial gain or loss in respect of the pension plan assets of J s defined benefit pension plan for the year ended 3 May 2009 is: $25,000 loss $25,000 loss $25,000 gain $25,000 gain Pension plan assets $000 FV of plan assets at June ,00 ontributions made 300 Expected return on assets 90 enefits paid (225) ctuarial loss (balancing figure) (25) FV of plan assets at 3 Mat ,340 The answer is The hartered Institute of Management ccountants Page 9

10 May 200 Exam Question 4.0 MX had 5 million $ ordinary shares in issue at May On 30 September 2008 MX issued a further 2 million $ ordinary shares at par. Profit before tax for the year ended 30 pril 2009 was $650,000 and the related income tax charge was $20,000. The basic earnings per share of MX for the year to 30 pril 2009 is: 6.9 cents per share 7. cents per share 0.5 cents per share 3.5 cents per share Post tax earnings Weighted average number of shares in issue: May - 30 September 5 million shares x5/2 months October - 30 pril 7 million shares x 7/2 months Earnings per share $440,000/6,66,000 $440,000 2,083 4,083 6,66 7. cents per share The answer is Question 4., and EF are listed entities operating in the same business sector. t 3 ecember 2009 their P/E ratios were reported as follows: EF 9.3 Which ONE of the following statements about these P/E ratios is correct? is regarded by the market as the riskiest of the three entities has the highest earnings per share of the three entities represents the safest investment because its P/E lies approximately midway between the other two EF s share price may be relatively lower than that of and because of an adverse effect such as a profit warning. The answer is The hartered Institute of Management ccountants Page 0

11 May 200 Exam Question 4.2 The Global Reporting Initiative created a Sustainability Reporting Framework, which provides details of disclosures that entities should include in their corporate reports. Which ONE of the following is not specified in that framework as an area for which disclosures should be provided? Economic Environmental Segmental Social Rationale The answer is Question One sub-questions. to.0 test candidates knowledge of a wide variety of topics within the syllabus through the use of objective test questions (OTQs). Suggested pproach/marking Guide Sub-questions 4. to 4.2. Except for 4.8 where mark was awarded for each component these sub-questions have been constructed on the basis that there is only one correct answer. Marking is therefore on the basis of 2 marks for a correct answer and 0 marks for an incorrect answer. Marks 0 or 2 Examiner s omments Many candidates scored a pass on this question. The hartered Institute of Management ccountants Page