top stories

This examination is divided into three sections.

• Section A – 20 compulsory questions (two marks each)
• Section B and Section C – three questions in total to be answered (20 marks each).

Candidates must answer one question from Section B, one question from Section C and one further question from either Section B or Section C.

The total marks available were divided reasonably evenly between narrative and computational questions. Most candidates attempted the required number of questions. Question 3 was attempted by the fewest number of candidates. This was also the question in which the weakest answers were presented. Question 6 produced the best answers, with some candidates scoring very high marks in this question.

In general, candidates performed well. The scripts presented by candidates scoring high marks tended to be logically structured with a clear indication as to what part of each question was being attempted. Candidates who did not perform well appeared to be prepared for only a few topics. In some cases, this resulted in candidates providing answers which did not address the requirement of the question. Candidates are reminded of the need to answer the question which has actually been set, and not their own question. It is often the case that such answers are a waste of valuable time as they reduce the amount of time available for questions in which the candidate can develop a relevant answer.

In contrast to the better scripts referred to above, candidates who did not perform well tended to present poorly-structured and labelled scripts. Often, calculations were difficult to interpret. In a few cases, having obtained a result from a calculation, candidates incorporated a different figure into the final answer.

Some candidates did not record workings. Credit will often be given for the approach to a calculation. If the various stages of the calculation are not shown, this is not possible.

Section A

The multiple-choice questions were equally divided between the two subject areas, and covered a range of outcomes from the Study Guide. Overall performance in this section was sound. Most questions were correctly answered by the majority of candidates.

Section B

Question 1

This question required the preparation of a cash flow statement and interpretation of the information contained therein. It is a matter of concern that the weakest part of answers was the interpretation of the information. Many candidates did not develop their answers beyond simply restating the figures included in the cash flow statement in a narrative form. While this has some value, such value is limited.

It is important to move beyond basic comments and attempt to explain what the figures mean for managers. In addition, candidates must consider how the information should influence managers' actions. Some candidates did develop their answers in this way, but could have obtained better marks if they had avoided the temptation to make definitive observations.

The question did not include sufficient information to assess why, for example, the value of stock had increased. Although it is the case that an increase in stock will lead to an increased need for cash, there may be valid reasons for this. The key question is whether the increase was a result of a deliberate management policy, or an indication that there is a lack of management control. Without knowing the context, it is not possible to make a definitive judgement. Rather than make the standard assumption, candidates should look for other information which may provide clarification. In this case, the fact that there had also been an increase in the value of debtors might suggest that the increased stocks have led to increased sales.

Without comparative figures for sales, we cannot draw a final conclusion. If these increases are properly financed, the overall effect may be beneficial. The fact that cash has been generated by operating activities suggests that the increases are deliberate and as such, should not be a major cause for concern.

Before any final conclusion can be drawn however, more information is needed. Even though the conclusion is not definitive, an answer which is developed in this way, to include analysis and application, will obtain more marks than an answer which simply states a fact.

Question 2

This question tested the area of fixed assets – in particular revaluation and the need to provide for depreciation. Answers to part (a) (ii) were generally better than answers to the rest of the question. Most candidates demonstrated a clear understanding of the issues relating to revaluation.

This was not the case with part (ii) where a number of candidates discussed the ways in which depreciation could be calculated. In some cases, such discussions were quite extensive, and must have taken a significant proportion of the time available. This is a specific example of the point made in the general comments above.

Candidates who discussed methods of calculating depreciation did not answer the question which was set. The question concerned the need to provide for depreciation. No matter how correct the descriptions of the methods of calculation were, no marks could be awarded.

Several candidates, having discussed calculation methods in detail, annotated other answers on their script with the comment that they were short of time. It is no surprise that candidates who spend time writing answers to their own version of a question, rather than the question asked, find that they have insufficient time to complete the required number of questions. Candidates are reminded of the need to ensure that their answers are relevant to the question which is asked.

Question 3

This question was attempted by the fewest candidates. It was also the question in which the weakest answers were presented. Most candidates obtained good marks in part (a) which required a consideration of the nature, and accounting treatment of, an associate. While many candidates were able to distinguish between an associate and a subsidiary, few were clear on the accounting treatment of an associate. In some cases, having clearly stated the difference between an associate and a subsidiary, candidates described the accounting treatment of a subsidiary.

The confusion surrounding the accounting treatment had a negative effect on candidates’ performance in part (b). Those candidates who understood that ‘the equity method of accounting’ means that the value of the interest in the associate included in the consolidated balance sheet is:

• the group share of the net assets
  plus
• unamortised goodwill on acquisition

were able to provide a schedule of the relevant amounts and obtain good marks. Unfortunately, such candidates were in the minority. A number of candidates did recognise that the difference was mainly due to goodwill, but did not provide any explanation as to how this arose.

Question 4

This was the most popular question. While it was generally well answered, a significant number of candidates could have gained more marks if their answers had been better planned, and if they had read the question more carefully.

A number of answers included a discussion of aspects of just-in-time purchasing in part (a) along with the discussion of supply chain management. This meant that when answering part (b), some of the answer to part (a) was repeated, thereby wasting valuable time. In some cases, possibly because just-in-time had been discussed in part (a), the discussion was not developed in part (b).

While such candidates may feel that they have discussed just-in-time, the fact that it was included in part (a) means that it was unclear whether they were confused, or their answer was inadequately planned. In either event, marks could not be awarded.

Secondly, a number of answers discussed just-in-time manufacturing, despite the fact that the question stated just-in-time purchasing. Candidates who recognised the difference between manufacturing and purchasing (further highlighted by the fact that the question concerned a retail chain) produced much better answers, and therefore obtained higher marks.

This weakness was carried through to part (c). Candidates scored good marks when they planned their answer and read the question carefully. They discussed the contribution of information technology in the specific context of a retail company with regard to supply chain management and just-in-time purchasing. Candidates who ignored either the retail context or the topics from parts (a) and (b), did not pick up as many marks.

Question 5

This question tested candidates’ understanding of the impact of costs on a pricing decision. There were some very good answers submitted to this question. A number of candidates were awarded very high marks. The main reasons why candidates failed to pick up marks were:

• omission of development costs from the calculation of cost
• omission of the opportunity cost of material used in another product incorrectly applying the contribution per unit of the alternative product, rather than the contribution per unit of material used in the cost calculation
• applying a 25% mark up, rather than a 25% margin to calculate selling price providing only brief comments with regard to the pricing of the product, in particular:
  - no explanation of either market skimming or market penetration
  - no discussion of the possibility of a shorter recovery time for development costs
  - no justification of the suggested price.

The scenario was carefully drafted to provide opportunities to develop a discussion. In particular, there were references to the fact that the company was ahead of their competitors in product development, and the fact that the demand would exceed production capacity, provided a price ceiling was not breached. Candidates should note that the scenario in a question has been carefully drafted to provide an opportunity for discussion. Marks are always available for developing the discussion around the issues included in the scenario.

Question 6

A number of candidates produced very good answers to this question which tested budget preparation and interpretation of the result against a defined target. However, as in previous questions, too many candidates failed to gain marks because their answers were not developed. In particular, a number of candidates constructed an accurate budget, but did not use it as a basis for the analysis required in part (b).

Essentially, part (b) required a comparison of the budgeted profit from part (a) with the stated target of a 20% increase on the current profit. It was then important to exclude the payroll costs before calculating the effect on the wages of an individual driver.

Once again, answer planning would have assisted candidates to carry out this calculation. This would have enabled many candidates to maximise the number of marks gained. Those candidates who obtained high marks in part (a) tended to produce clear workings which dealt with the issues in the question in a structured and logical manner. It is worth noting that, under the marking scheme, marks were allocated to the calculations according to their complexity. Therefore the majority of the marks available were allocated to the calculation of fuel costs (four marks) and revenue (three marks). Candidates who provided workings were able to obtain up to five of the available marks for their approach, even though the result of their calculation was incorrect. Candidates who did not provide workings therefore missed an opportunity to pick up good marks, as it was not possible to discern how they had calculated their figures.

Back to top