Oxford Cambridge and RSA
Thursday 15 June 2017 – Afternoon
A2 GCE ACCOUNTING
F014/01/RB Management Accounting
RESOURCE BOOKLET
* 6 8 7 6 8 0 1 6 4 9 *
To be given to candidate at the start of the examination
Duration: 2 hours
INSTRUCTIONS TO CANDIDATES
• The information required to answer Questions 1–4 is contained within this Resource
Booklet.
INFORMATION FOR CANDIDATES
• The quality of your written communication will be taken into account in marking your
answers to the two sub-questions marked with an asterisk (*).
• In one of these questions, the focus will be on your ability to present numerical
information legibly and in an appropriate accounting format. In the other, you will
be assessed on the legibility and style of writing, the clarity and coherence of your
arguments and the accuracy of your spelling, punctuation and grammar.
• This document consists of 8 pages. Any blank pages are indicated.
INSTRUCTION TO EXAMS OFFICER / INVIGILATOR
• Do not send this Resource Booklet for marking; it should be retained in the centre or
recycled. Please contact OCR Copyright should you wish to reuse this document.
© OCR 2017 [T/500/7725] OCR is an exempt Charity
DC (RCL (JDA)) 138052/2 Turn over
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1 Maple Ltd manufactures a single product and uses the following standards for each unit produced:
400 kilos of material A at £3.40 per kilo
900 kilos of material B at £2.50 per kilo
60 hours of labour grade 1 at £14 per hour
50 hours of labour grade 2 at £12 per hour
Overheads £1100
The actual cost for a batch of 50 units was as follows:
Material A: 21 000 kilos costing £70 350
Material B: 44 000 kilos costing £114 400
Labour grade 1: 3100 hours costing £43 090
Labour grade 2: 2480 hours costing £30 008
Overheads: £55 800
REQUIRED
(a) The following variances from standard for the batch of 50 units:
• material price variances
• material usage variances
• labour rate variances
• labour efficiency variances. [16]
(b) A reconciliation statement for the budgeted (standard) cost and the actual cost for the batch of
50 units. [6]
(c) Discuss two possible reasons for each of the materials and labour variances. [8]
(d) Discuss two benefits of a standard costing system. [6]
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2 Beech Ltd is preparing budgets for the three months ending 30 September 2017. The following
information is available:
(i)
June July August September October
£ £ £ £ £
Sales 420 000 400 000 430 000 434 000 440 000
General expenses 15 000 15 000 16 000 15 000 16 000
Wages 42 000 39 000 42 000 42 000 42 000
(ii) All sales provide a 25% gross profit on cost. 10% of sales are for cash and the remaining
90% are on a credit basis. 50% of credit sales are paid in the month of sale and attract a
2% cash discount. The balance is paid net in the month following sale.
(iii) Purchases are made such that the stock at the end of each month exactly covers the sales
for the following month. 60% of purchases are paid in the month received and the remainder
is paid in the month after purchase. No discount received applies to purchases.
(iv) General expenses are paid in the month incurred.
(v) Two-thirds of wages are paid in the month incurred and the remaining one-third in the
following month.
(vi) Machinery costing £40 000 is to be purchased on 1 August 2017. A deposit of 20% will be
made on 1 August 2017 and the balance in two equal instalments in September 2017 and
October 2017. Machinery which originally cost £16 000 and with a written down value of
£2000, will be sold for £3000 cash in August 2017.
(vii) The bank balance at 1 July 2017 is estimated to be £20 900.
REQUIRED
(a)* The Cash Budget for each of the three months ending 31 July 2017, 31 August 2017 and
30 September 2017. [27]
(b) Discuss two behavioural aspects of budgeting to the managers of a business. [6]
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3 Sycamore Ltd manufactures three products X, Y and Z. Budgeted sales and costs for its next
financial year are as follows:
Product X Y Z
Sales (units) 18 000 17 000 20 000
Selling price per unit (£) 90 78 80
Variable costs per unit:
Direct labour (£12 per hour) 36 24 30
Direct material (£) 22 25.50 18
Variable overheads (£) 12 10.50 8
The total annual budgeted fixed costs for the business are £890 000.
Owing to a shortage of direct labour, the business has forecast that only 124 200 direct labour
hours will be available for its next financial year. It uses one grade of labour only and this is
common to all products. The business is now considering the following options.
Option 1
To utilise the forecast labour of 124 200 direct labour hours to achieve the maximum profit possible.
Option 2
To increase the hourly direct labour rate to £13 per hour. This would attract additional labour and
Sycamore Ltd would be able to meet all budgeted sales demands. The increased direct labour
rate would be payable to all labour for the full financial year. No other changes would be made.
REQUIRED
(a) A statement to show the maximum profit Sycamore Ltd could make in its next financial year under
Option 1. Show the contribution per unit for each product. [13]
(b) A statement to show the maximum profit Sycamore Ltd could make in its next financial year under
Option 2. Show the contribution per unit for each product. [7]
(c)* Evaluate both options for Sycamore Ltd. [11]
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4 Poplar Construction plc is the contractor for the building of a new school. The contract commenced
on 1 May 2015 and was estimated to last two years. Increased costs resulted in no profit being
recorded in the Contract Account for the year ended 30 April 2016. At that date the following
balances were remaining in the Contract Account and were carried forward to the second year:
£
Materials 400 000
Machinery 620 000
Direct labour accrued 149 000
Sub-contractors charges accrued 72 000
Plant hire prepaid 12 000
In addition the following costs were incurred during the second year:
£
Materials 2 700 000
Direct labour 1 680 000
Sub-contractors charges 840 000
Plant hire 164 000
Architect’s fees 135 000
Head office expenses 170 000
The contract was completed on 30 April 2017 and there were no accruals or prepayments
outstanding. The machinery had a nil residual value.
The contract allows for Poplar Construction plc to receive payment for work certified by the
architect, less a 15% retention. In accordance with the contract, Poplar Construction plc received
£5 185 000 from the customer on 30 April 2017, with the retained balance to be paid at a later
date. At 30 April 2017, the value of work not yet certified was £280 000.
REQUIRED
(a) The Contract Account for the year ended 30 April 2017. [13]
(b) Discuss why the customer has negotiated a 15% retention on the payment made for the work
certified. [4]
(c) Explain how a loss on a long term contract should be dealt with in the accounts of a construction
company, stating the concept involved. [3]
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