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GCE JUN 2009 : (A2 7) Finance

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Centre Number 71 Candidate Number ADVANCED General Certificate of Education 2009 GCE Applied Business assessing Finance A6B11 Assessment Unit A2 7 [A6B11] FRIDAY 12 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 questions 2(f) and 3(d). 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. 3758 For Examiner s use only Question Number 1 2 3 Total Marks Marks BLANK PAGE 3758 2 [Turn over Study the information below and answer the questions that follow. 1 Ann runs a small cafeteria located near the M1 motorway at Sprucefield. The following is a trial balance for the business for the financial year ended 31 December 2008: Dr Opening Capital Sales Purchases Opening Stock Marketing Expenses Administration Expenses Distribution Costs Loan Interest Premises Vehicles (at cost) Equipment (at cost) Loans Creditors Debtors Bank Cr 20 000 40 000 15 000 1 000 2 000 3 000 4 000 1 000 20 000 1 000 20 000 15 000 2 000 5 000 5 000 77 000 77 000 Notes: 1. 2. 3. 4. Closing Stock is valued at 1000. Marketing Expenses due and unpaid amounted to 300. Administration Expenses prepaid were 1000. Equipment and Vehicles are to be depreciated at a rate of 10% per annum, using the equal instalment method of depreciation. (a) Ann enlists your help in preparing the financial statements. Using the information above, use pages 4 and 5 to prepare the financial statements for the financial year ended 31 December 2008, in accordance with generally accepted accounting principles. 3758 3 [Turn over Ann s Trading, Profit and Loss Account for the year ended 31 December 2008 3758 4 [Turn over Ann s Balance Sheet as at 31 December 2008 Examiner Only Marks Remark [18] 3758 5 [Turn over (b) Assume that Ann is due to retire next year, and plans to sell the business as a going concern. Evaluate the extent to which the information contained in the financial statements would be of use to Ann in selling the business. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [8] 3758 6 [Turn over BLANK PAGE (Questions continue overleaf) 3758 7 [Turn over Study the information below and answer the questions that follow. 2 Dave owns H2O , a privately-run health club business located on the outskirts of Antrim. The health club has built up a good reputation over the years and many customers return on a regular basis. H2O offers a high quality service at what Dave considers to be a competitive price. The facilities provided for customers include use of a dry sauna, steam room, jacuzzi, gym, sun-bed and coffee bar. Currently an entrance fee of 30.00 per customer is charged, which allows customers access to all facilities. This price attracts an average of 200 customers per week. For health and safety reasons, the health club can accommodate only 250 customers per week. The variable costs ( 2000) are associated with the entry of 200 customers per week. The fixed costs are estimated at 3000 per week. A local newspaper has printed a story indicating that the local council intends to provide similar facilities in the nearby leisure centre. Dave is currently investigating options to guarantee the long-term survival of the business. A summary of the options open to Dave are: 1. Do nothing, that is, leave the entrance fee unchanged; 2. Respond to customer feedback which has indicated that customers on low incomes (e.g. students and customers who are unemployed) are likely to use the facilities more often, if the entrance fee is lowered to 25.00 per customer. This is likely to: A. maintain customer numbers at the current average per week; or B. lead to an increase in the number of customers per week, up to the maximum allowable for health and safety reasons. Dave thinks that carrying out a break-even analysis might provide some insight into the best way forward. You are required to: Examiner Only Marks Remark (a) Calculate, for H2O : (i) The variable cost per customer: ____________________________________________________ [1] You may use this space for your calculations: 3758 8 [Turn over (ii) The number of customers currently required each week in order to break even: Examiner Only Marks Remark ____________________________________________________ [2] You may use this space for your calculations: (iii) The current weekly level of profit which would accrue, based on an average of 200 customers using the facilities each week: ______________________________________________________ ______________________________________________________ ______________________________________________________ ____________________________________________________ [3] You may use this space for your calculations: 3758 9 [Turn over (b) Re-calculate the break-even point (in terms of the number of customers per week) for H2O , if the current entrance fee is lowered to 25.00 per customer. Examiner Only Marks Remark _______________________________________________________ [2] You may use this space for your calculations: (c) Re-calculate the weekly anticipated net profit/loss for H2O , if the entrance fee was lowered to 25.00 per customer and an average of 200 customers continued to use the facilities per week: _______________________________________________________ [2] You may use this space for your calculations: (d) Re-calculate the weekly anticipated net profit/loss for H2O , if the entrance fee was lowered to 25.00 per customer, and the number of customers using the facilities increased to the maximum capacity allowable under health and safety regulations: _______________________________________________________ [2] You may use this space for your calculations: 3758 10 [Turn over (e) Using the relevant information, select and justify the most profitable option open to H2O : Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [6] 3758 11 [Turn over (f) Evaluate the usefulness of break-even analysis to a business such as H2O : Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [12] 3758 12 [Turn over BLANK PAGE (Questions continue overleaf) 3758 13 [Turn over Study the information below and answer the questions that follow. 3 GEN Limited produces and sells diesel generator sets from a production plant located in Armagh. The firm has recently won a large order to supply generator sets to a Saudi Arabian firm called MATGO, based in the Middle East. The order has been valued at 500 000. The plant is mostly automated, enabling the direct labour content of production to be kept to a minimum. Activities are sub-divided into three operations, Production, Assembly and Painting. Each diesel generator set requires one hour s production time, half an hour s assembly time and half an hour s painting time. The direct labour costs are 6.50 per hour for Production, 6.00 per hour for Assembly and 6.00 per hour for Painting. The total number of Stores Issue Notes issued to the Production Department was 600 whilst the number issued to the Assembly and Painting Departments was 200 each. Management have agreed that this will be the basis upon which to allocate the Stores Department costs to other departments. A total of 52 000 machine hours were recorded in the company in relation to this contract, and were sub-divided between the various departments as shown in Panel A below: Panel A: Machine Hours Department Production 30 000 Assembly 11 000 Painting 11 000 Total 3758 Number of Machine Hours 52 000 14 [Turn over (a) Complete Table 1 to show the production overhead analysis and apportionment of overheads for the Saudi Arabian contract. Examiner Only Marks Remark [10] Table 1 Production Overhead Analysis and Apportionment Table Overhead Basis of Apportionment Indirect material Indirect wages Health/safety costs Rates Depreciation Energy costs Water charges Canteen expenses Direct Direct Direct Area Plant cost Power use Area No. of staff Stores Total Cost ( ) Production Assembly Dept. ( ) Dept. ( ) 13 000 12 000 16 000 13 000 19 000 14 000 16 000 12 000 8 000 6 000 6 000 6 000 10 000 7 000 5 000 6 000 54 000 3 000 3 000 5 000 4 000 3 000 5 000 4 000 4 000 31 000 Painting Dept. ( ) Stores Dept. ( ) 1 000 2 000 4 000 2 000 4 000 1 000 5 000 1 000 20 000 1 000 1 000 1 000 1 000 2 000 1 000 2 000 1 000 Stores issues Total overheads You may use this space for your calculations: 3758 15 [Turn over (b) Complete Table 2 to show the appropriate rates of overhead recovery for (i) the Production Department; (ii) the Assembly Department; and (iii) the Painting Department. All calculations must be shown in the box provided. [6] Examiner Only Marks Remark Table 2: Overhead Absorption Rates Production Dept. Assembly Dept. Painting Dept. Machine Hours Total Overheads ( ) Overhead Rate per Machine Hour ( ) You may use this space for your calculations: (c) Explain what is meant by the term Overhead Absorption Rate . _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ________________________________________________________ [2] 3758 16 [Turn over (d) Explain three ways in which European Union (EU) funding can be used to develop the economy in Northern Ireland. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [6] 3758 17 [Turn over (Extra page if needed) Examiner Only Marks Remark _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ 3758 18 [Turn over (Extra page if needed) Examiner Only Marks Remark _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ 3758 19 [Turn over 3758 938-001-1 20 [Turn over [Turn over

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Additional Info : Gce Applied Business June 2009 Assessment Unit A2 7 - Finance
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