Pearson LCCI

Advanced Business Calculations

Level 3

Monday 13 June 2016 Paper Reference

Time: 3 hours ASE3003

You must have:
An answer book

Instructions
•• Use
Do not open this examination paper until you are told to do so by the supervisor.
black/blue ink or ball-point pen
– pencil can only be used for graphs, charts, diagrams, etc.
• Ensure your answers are written clearly.
• Begin your answer to each question on a new page.
• Write on both sides of the page.
• All answers must be correctly numbered but need not be in numerical order.
• If you need more space, use the additional sheets provided. Write your name,
candidate number and question number on each sheet and attach them to the
inside of your answer book. State, on the front of your answer book, the number
of additional sheets attached.
•
•
Answer all questions.
Workings must be shown.

Information
•• TT heheretotalaremark for this paper is 100.
eight questions in this question paper.
• T–heusemarks for each question are shown in brackets
this as a guide as to how much time to spend on each question.
•• YY ouou may use mathematical and statistical tables.
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.

Advice
•• RC ead each question carefully before you start to answer it.
heck your answers carefully if you have time at the end.
Turn over

P51713A
©2016 Pearson Education Ltd.

1/1/1/1/1
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 Answer ALL questions.
1 Adnan invests €19,000 in an account that pays 4.65% compound interest per
annum.
(a) Calculate the balance in the account after 3 years.
(2)
Taking a year as 365 days, Adnan calculates that the annual percentage rate of
compound interest is equivalent to a rate of 0.012% compound interest per day.
(b) Calculate:
(i) a more accurate figure for the rate of compound interest per day
(2)
(ii) the annual percentage rate of interest equivalent to a rate of 0.012%
compound interest per day
(2)
(iii) the interest on €19,000 after 300 days, based on a rate of 0.012% compound
interest per day
(3)
(iv) the interest on €19,000 after 300 days, based on a rate of 0.012% simple
interest per day.
(2)

(Total for Question 1 = 11 marks)

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2 £100 of 5½% Government Stock can be bought for £83.75. A bank invested £304,850
in the stock.
(a) Calculate the nominal value of the stock bought by the bank.
(2)
The bank held the stock for 4¼ years.
(b) Calculate the:
(i) total interest received
(2)
(ii) percentage yield represented by the total interest received.
(2)
An investor bought 42,000 Ordinary Shares (nominal value £5.00) at £3.75 each.
(c) Calculate the cost of the 42,000 shares.
(2)
Broker’s commission is 0.15% of the nominal value of the 42,000 shares.
(d) Calculate the:
(i)
broker’s commission
(2)
(ii) total cost of the shares, including commission.
(2)

(Total for Question 2 = 12 marks)

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3 A factory manufactures two main products, Product A and Product B.
The owner calculates that, if 3,000 units of Product A are produced in a trading year,
then the unit costs for Product A will be as follows:
£
Components 90
Labour 55
Production overheads 72
Distribution expenses 60

80% of the labour costs vary directly with the number of units produced.
20% of the labour costs do not vary with the number of units produced.
(a) Calculate the:
(i) total cost of production of 3,000 units
(2)
(ii) cost of labour if 6,000 units are produced.
(2)
Product B has fixed costs of £2,500,000 and variable costs per unit of £140 during
a trading year. It is sold to wholesalers at £265 per unit.
(b) For Product B, calculate the number of units that must be sold:
(i) in order to break even
(3)
(ii) to provide a profit of £500,000.
(3)
In a different factory, Product C can be manufactured using two different methods
of production.
Using Method X, fixed costs are £1,700,000 and variable costs are £112 per product.
Using Method Y, fixed costs are £2,600,000 and variable costs are £88 per product.
(c) Calculate the level of output (number of units) for which the total costs of the two
methods are the same.
(3)

(Total for Question 3 = 13 marks)

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4 The following information relates to a retailer’s business at the end of the second year
of trading.
£
Annual sales 183,200
Annual purchases 127,250
Sales returns 11,000
Purchases returns 2,680
Opening stock 18,000
Closing stock 16,500
General expenses 9,600
Postage figure omitted
Telephone and internet 2,015
Advertising 3,050
Van expenses 12,420
(a) Calculate the:
(i)
gross profit
(3)
(ii) gross profit as a percentage of the net sales.
(2)
The total of overhead expenses for the year is £27,640.
(b) Calculate the:
(i)
net profit
(2)
(ii) cost of postage
(2)
(iii) rate of stock turnover per annum.
(4)

(Total for Question 4 = 13 marks)

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5 A business owner has a choice of two investment projects, Project X and Project Y.
The estimated cash inflows and outflows in pounds (£) are as follows:
Project X Project Y
Cost (Year 0) (700,000) (750,000)
Year 1 cash inflow 150,000 (130,000) (outflow)
Year 2 cash inflow 250,000 480,000
Year 3 cash inflow 300,000 480,000
Year 4 cash inflow 300,000 200,000

There are no cash inflows or outflows for either project after year 4.
(a) Calculate the payback period for Project Y in years and months.
(3)
The payback period for Project X is 3 years.
(b) Advise the business owner which project, if any, is the better investment.
Give a reason.
(2)
The project chosen must earn a return of at least 13%. The following table gives the
discount factors for the first four years based on a discount rate of 13%.
Year 1 0.885
Year 2 0.783
Year 3 0.693
Year 4 0.613

(c) Calculate the net present value for Project Y, based on a discount rate of 13%.
(5)
The net present value for Project X is £20,300, based on a discount rate of 13%.
(d) Advise the business owner further, with reasons.
(3)

(Total for Question 5 = 13 marks)

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6 A bankrupt trader owed £25,600 to secured creditors and £136,900 to unsecured
creditors.
The assets of the business realised £47,125.
(a) Calculate the business assets as a percentage of the liabilities.
(3)
The costs of winding up the business were £3,728. These are considered secured
creditors, additional to the £25,600 originally owed to secured creditors.
(b) Calculate the:
(i) total amount paid to secured creditors
(2)
(ii) total amount paid to unsecured creditors
(2)
(iii) rate in the pound paid to unsecured creditors, in pounds sterling
(2)
(iv) amount paid to an unsecured creditor who was owed £4,000
(2)
(v) amount owed to an unsecured creditor who was paid £715.
(2)

(Total for Question 6 = 13 marks)

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7 A machine that costs £370,000 is estimated to have a life of four years and a scrap
value of £25,000.
Using the diminishing balance method, the rate of depreciation is approximately
49% per annum.
(a) Calculate a more accurate figure for the rate of depreciation.
(4)
The following (incomplete) depreciation schedule is based on the diminishing
balance method and a rate of depreciation of 49%.

Year Yearly Cumulative Book Value

Depreciation Depreciation At Year End
0 370,000
1 181,300 188,700
2 92,463 273,763
3 47,156
4 25,031

(b) Copy and complete the table.

(3)
(c) Calculate, using the equal instalment method, the:
(i) depreciation in the first year
(2)
(ii) percentage of the cost to be written off each year
(2)
(iii) book value at the end of year 3.
(2)

(Total for Question 7 = 13 marks)

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8 Company A and Company B sell widgits.
Company A sold 400,000 widgits in 2014 and 420,000 widgits in 2015.
(a) Calculate the quantity relative for sales of widgits (number of units) for Company
A for 2015 with 2014 as the base year.
(2)
The following table shows the sales and unit prices for Company A and Company B in
2014 and 2015. The table is incomplete.

2014 2015
Company A Company B Company A Company B
Price Sales Price Sales Price Sales Price Sales
£1.89 400,000 £1.80 540,000 £1.99 420,000 £2.07 ?

(b) Calculate the:

(i) income from sales of widgits for Company A in 2014
(2)
(ii) index number for income from sales of widgits for Company A in 2015 with
2014 as the base year.
(3)
The index number for income from sales of widgits for Company B in 2015, with 2014
as the base year, is 103.5
(c) Calculate the:
(i) sales of widgits (number of units) for Company B in 2015
(3)
(ii) quantity relative of sales of widgits (number of units) for Company B for 2015
with 2014 as the base year.
(2)

(Total for Question 8 = 12 marks)

TOTAL FOR PAPER = 100 MARKS

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