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GCE JUN 2006 : (A2 7) Finance

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Centre Number 71 Candidate Number ADVANCED General Certificate of Education 2006 GCE Applied Business assessing Finance A6B11 Assessment Unit A2 7 [A6B11] THURSDAY 22 JUNE, MORNING TIME 1 hour 30 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number in the spaces provided at the top of this page. Write your answers in the spaces provided in this question paper. Answer all three questions. INFORMATION FOR CANDIDATES The total mark for this paper is 80. Quality of written communication will be assessed in all questions. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. ADVICE TO CANDIDATES You are advised to take account of the marks for each part question in allocating the available examination time. If you do not have sufficient space to complete your answers, you may use the additional pages at the back of the booklet. A6B1S6 1683 For Examiner s use only Question Number 1 2 3 Total Marks Marks BLANK PAGE A6B1S6 1683 2 [Turn over Study the information below and answer the questions that follow. 1 Wendy is a manager in a local company called V-Games Limited , which produces and sells the GoPad , a video games console aimed at a wide range of consumers. The console is in competition with widely known brands such as the Sony Playstation, the Nintendo GameCube, and X-Box. Wendy is in the process of reviewing production costs of the GoPad and has provided you with the following costing data, summarised in Table 1. Table 1: GoPad Cost Data Direct Material 1,000,000 Direct Labour 2,000,000 Total Production Overheads 2,000,000 Direct Labour Hours 500,000 Direct Machine Hours 400,000 In addition, Wendy supplies you with some data related to Batch 999, which she selected at random for audit purposes. This is summarised in Table 2. Table 2: Batch 999 GoPad Cost Data Direct Material 60,000 Direct Labour 30,000 Total Production Overheads Direct Labour Hours Direct Machine Hours A6B1S6 1683 7,500 7,500 3 [Turn over (a) Using the information presented in Table 1, you are required to calculate the direct material overhead rate (percentage) based on the following formula: Examiner Only Marks Remark Total Production Overheads 100% Total Material Costs 100% Direct Material Overhead Rate: % [3] (b) Using the information presented in Table 1, you are required to calculate the machine hour overhead rate based on the following formula: Total Production Overheads Total Machine Hours Machine Hour Overhead Rate: [3] A6B1S6 1683 4 [Turn over (c) Using the information presented in Table 2, you are required to calculate the overheads which should be charged to production Batch 999, using the direct material overhead rate (percentage): Examiner Only Marks Remark Materials Charged to Batch 999 Direct Material Overhead Rate: Overhead Cost Charged to Batch 999: [3] (d) Using the information presented in Table 2, you are required to calculate the overheads which should be charged to production Batch 999, using the machine hour overhead rate: Machine Hours used in Batch 999 Machine Hour Overhead Rate: Overhead Cost Charged to Batch 999: [3] A6B1S6 1683 5 [Turn over (e) Discuss the extent to which the following two methods of overhead absorption are suitable for use by V-Games Limited. Examiner Only Marks Remark (i) Direct Material Overhead Rate ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ___________________________________________________ [4] A6B1S6 1683 6 [Turn over (ii) Machine Hour Overhead Rate Examiner Only Marks Remark ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ___________________________________________________ [4] A6B1S6 1683 7 [Turn over Study the information below and answer the questions that follow. 2 Dave is a financial analyst advising Antrim Coast Bus Tours Limited on the purchase of a new bus. He supplies you with the following data (Table 3) relating to two options under consideration: Table 3: Financial Data Panel A: Bus 1 Bus 2 Initial Investment 50,000 50,000 Year 1 35,000 20,000 Year 2 30,000 20,000 Year 3 25,000 24,000 Year 4 30,000 46,000 Year 1 0.909 0.909 Year 2 0.826 0.826 Year 3 0.751 0.751 Year 4 0.683 0.683 Cash Flows: Panel B: Discount Factors (10%) A6B1S6 1683 8 [Turn over (a) Dave had started to calculate the Net Present Value (NPV) for each bus, when he had to take leave of absence to attend a training course, leaving some of the calculations unfinished. In the meantime, Matt (the Managing Director) was planning the next month s bus tours and wanted to know which bus to purchase. Examiner Only Marks Remark In order to assist Matt, you are required to complete the following tables which Dave had started. (i) Bus 1: NPV Calculations Year Cash Inflows ( ) Discount Factor (10%) 1 35,000 0.909 2 30,000 0.826 3 25,000 0.751 4 30,000 0.683 Initial Investment Present Value ( ) 50,000 Net Present Value ( ) [5] (ii) Bus 2: NPV Calculations Year Cash Inflows ( ) Discount Factor (10%) 1 20,000 0.909 2 20,000 0.826 3 0.751 4 Present Value ( ) 0.683 Initial Investment 50,000 Net Present Value ( ) [7] A6B1S6 1683 9 [Turn over (b) Matt had requested that the Payback Period be calculated in addition to the NPV, in order to assist his decision making. Examiner Only Marks Remark Using the data presented in Table 3 (page 8), you are required to calculate the Payback Period for each bus. (i) Bus 1: Payback Period Use this space to show your answer: [2] A6B1S6 1683 10 [Turn over (ii) Bus 2: Payback Period Examiner Only Marks Remark Use this space to show your answer: [2] (c) Advise Matt which proposal you think is best in financial terms. _________________________________________________________ _________________________________________________________ _________________________________________________________ [3] A6B1S6 1683 11 [Turn over (d) Evaluate the following two methods of investment appraisal used by Antrim Coast Bus Tours Limited. Examiner Only Marks Remark (i) Payback Period ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ [7] A6B1S6 1683 12 [Turn over (ii) Net Present Value Examiner Only Marks Remark ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ [7] A6B1S6 1683 13 [Turn over 3 Sources of Business Finance and Invest NI Examiner Only Marks Remark (a) (i) Explain three possible sources of finance available to a sole trader. _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ _____________________________________________________ [6] A6B1S6 1683 14 [Turn over (ii) Explain three possible sources of finance available to Public Limited Companies. Examiner Only Marks Remark ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ ______________________________________________________ [6] A6B1S6 1683 15 [Turn over Study the information below and answer the question that follows. Investment in supporting economic development projects by Invest NI leads to significant leverage of private sector funds and will help create more wealth, more jobs and enhanced economic activity this is a key priority for creating a sustainable private sector economy in future . . . Source: Adapted from Business Telegraph, Monday 18th April, 2005, Author: Robin Morton. (b) Evaluate the role of Invest NI in assisting business activities within Northern Ireland. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ A6B1S6 1683 16 [Turn over Examiner Only _________________________________________________________ Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ [15] A6B1S6 1683 17 [Turn over Examiner Only Extra page (if needed) Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ A6B1S6 1683 18 [Turn over Examiner Only Extra page (if needed) Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ A6B1S6 1683 19 [Turn over Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. S 8/05 700 302507(85) [Turn over

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Additional Info : Gce Applied Business June 2006 Assessment Unit A2 7 - Finance
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