Certificate in Advanced Business Calculations

ASE3003
Level 3
Monday 8 April 2013
Time allowed: 3 hours

Information

There are 8 questions in this examination.

Total marks available: 100

Instructions

Do not open this paper until you are told to do so by the supervisor.
Answer all questions.
Write your answers in blue or black ink/ballpoint. You can only use a pencil for graphs, charts, diagrams, etc.

Please ensure your answers are written clearly.

Begin your answer to each question on a new page.
All answers must be correctly numbered but need not be in numerical order.
Workings must be shown.
You can use mathematical and statistical tables.
You may use a calculator provided the calculator gives no printout, has no word display facilities, is silent and
cordless. The provision of batteries and their condition is your responsibility.

ASE3003/2/13

Page 1 of 7

Education Development International plc 2013

QUESTION 1
Ellie uses the products method to check the interest on her savings account. She calculates that she is
receiving interest at the rate of approximately 0.015% per day.
Calculate:
(a)

the annual rate of simple interest paid to Ellie

(b)

the interest earned on a balance of 12,000:

(2 marks)

(i)

for two days

(ii)

for two years.

(2 marks)
(2 marks)

From 1 January 2003 to 31 December 2012, the value of Ellies house increased from 200,000 to
320,000.
(c)

Calculate the rate of increase per annum based on simple interest.

(3 marks)

Ellie believes that the increase is approximately 4.8% per annum based on compound interest.
(d)

Provide a calculation to show if Ellie is correct.

(e)

State whether the true rate of compound interest is more than or less than 4.8%
per annum.

(3 marks)

(1 mark)

(Total 13 marks)
QUESTION 2
Simon bought unit trusts and invested for income. He invested 150,000 in a unit trust with an offer price
of 75 per unit, and sold the units after 3 years at the same price. During this period he received income
from the units of 38,400. This income was not reinvested in units.
Calculate:
(a)

the number of units purchased

(b)

the percentage yield per annum

(c)

the (3 year) income per unit.

(2 marks)
(3 marks)
(2 marks)

Simon had to pay the following charges:

Fee on purchase: 0.1% of the sum invested
Fee on sale: 0.25% of the sum received from the sale
Fund management fees of 1,350
Calculate:
(d)

the total charges paid

(e)

the total charges as a percentage of the original investment

(f)

Simons income net of fees.

(2 marks)
(2 marks)
(2 marks)

(Total 13 marks)
ASE3003/2/13

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Education Development International plc 2013

QUESTION 3
Product A has variable costs of 160 per unit of product and fixed costs of 2,100,000 per period.
Unit costs of production during a trading period are as follows:
Components
Labour
Production overheads
Distribution expenses

85
60
105
50

The cost of components varies directly with the number of units produced.
80% of the labour costs vary directly with the number of units produced.
The production overheads do not vary irrespective of how many units are produced.
(a)
(b)
(c)

Calculate the percentage of distribution expenses that vary directly with the number of
units produced.
(4 marks)
Calculate the fixed costs per unit.
(2 marks)
Calculate the number of units produced in the trading period.
(2 marks)

Product A breaks even on production and sales of 16,800 units per period.
(d)

Calculate the selling price of Product A.

(e)

Calculate the total cost of production at break even.

(3 marks)
(2 marks)
(Total 13 marks)

ASE3003/2/13

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Education Development International plc 2013

QUESTION 4
(a)

At the end of the year 2012 the following information applied to Company X:
Current liabilities
Current ratio
Acid test ratio

7,400,000
2.4 : 1
1.15 : 1

Calculate:
(i)

the current assets

(ii)

the stock held by Company X at that time.

(iii)

Give one reason why you think the liquidity of Company X is healthy.

(2 marks)
(2 marks)

(1 mark)
(b)

During 2012 the following information relates to Trader Y:

Net sales
Cost of goods sold
Initial stock value
Final stock value
Overhead expenses

1,930,000
1,460,000
113,000
103,000
180,000

Calculate:
(i)

gross profit

(ii)

net profit

(iii)

net purchases

(iv)

the average period of time (in days) that items remain in stock.

(2 marks)
(2 marks)
(2 marks)
(3 marks)

(Total 14 marks)

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Education Development International plc 2013

QUESTION 5
Advisor Alice uses the following formula to calculate the average rate of return (ARR) of investment
projects:
ARR = Average annual revenue returns net of depreciation and repair and maintenance costs
Initial cost of Project
She estimates the following figures for Investment Project P:
Initial cost of Project P

6,500,000

Total revenue returns of Project P over its lifetime

(before deducting depreciation and repair and maintenance costs)
Average depreciation and repair and maintenance costs per annum
Average rate of return
(a)

10,300,000
150,000
17.5%

Calculate:
(i)

the average annual revenue returns net of depreciation and repair and
maintenance costs
(2 marks)
(ii)
the expected lifetime of Project P in years.
(3 marks)
Investment Project Q has a Net Present Value (NPV) at three discount factors as follows:
Discount factor
(b)

12%

14%

Net present value

700,000
Calculate the internal rate of return:

200,000

(i)

15%
(25,000)

using the NPV figures for 12% and 14%

(2 marks)

(ii)

using the NPV figures for 12% and 15%.

(2 marks)

(c)

State:
(i)

why the two calculations do not give exactly the same answer

(ii)

which two of the three NPV figures should be used to give the most accurate answer.

(1 mark)
(1 mark)

(Total 11 marks)

ASE3003/2/13

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Education Development International plc 2013

QUESTION 6
Chung is owed 8,500 by Trader T, who is declared bankrupt.
Chung finds he is an unsecured creditor and eventually receives only 1,870 in payment.
Calculate:
(a)

the rate in the which is payable to unsecured creditors

(b)

the amount received by an unsecured creditor who is owed 5,450

(c)

the amount owed to an unsecured creditor who is paid 6,160.

(2 marks)
(2 marks)
(2 marks)
The total owed to unsecured creditors by Trader T is 120,000.
She also owes 50,000 to secured creditors.
The expenses of winding up the business are 6,900.
(d)

Calculate the value of the traders assets achieved at liquidation.

(3 marks)

(e)

Express this value of the assets as a percentage of the liabilities before liquidation.
(3 marks)
(Total 12 marks)

QUESTION 7
A factory machine that costs 4,600,000 is expected to have a life of 5 years and a scrap value of
approximately 300,000.
Depreciation is first calculated on the basis of the equal instalment method.
Using this method it is expected to depreciate each year by 18.7% of its original value.
Calculate:
(a)

the amount of depreciation each year

(b)

the book value after 3 years

(c)

the total depreciation over the period of the first 3 years.

(2 marks)
(2 marks)
(2 marks)
As an alternative, depreciation is calculated on the basis of the diminishing balance method.
Using this method it is expected to depreciate each year by 42.5% of its value at the start of that year.
(d)

Calculate:
(i)

the amount of depreciation in the first year

(ii)

the book value after 3 years.

(2 marks)
(2 marks)
(e)

State, with workings, the method for which the scrap value is closest to 300,000.
(3 marks)
(Total 13 marks)

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Education Development International plc 2013

QUESTION 8
(a)

Company M sold 68,000 monitors in year 2011 and 78,880 monitors in year 2012.
Calculate the quantity relative for year 2012 with 2011 as the base year.
(2 marks)

(b)

The number of monitors sold by Company M fell by 15% from year 2010 to year 2011.
(i)

Express the quantity sold in 2011 as a quantity relative based on year 2010.

(ii)

Calculate the number of monitors sold in 2010.

(1 mark)
(2 marks)

(c)

In year 2012 Company M cut the price of its monitors by 5% of the year 2011 price.

Express the income from sales of monitors in 2012 as an index, based on the income from
sales of monitors in year 2011 = 100.

(2 marks)

(d)

The cost of components for the monitors sold by Company M was as follows:
201170 per monitor
201275 per monitor
Calculate the average cost of components per monitor sold in the period 2011 to 2012
inclusive.

(4 marks)

(Total 11 marks)

ASE3003/2/13

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Education Development International plc 2013