technician pilot papers.pdf

8/10/2019 Technician Pilot Papers.pdf

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ZAMBIA INSTITUTE OF CHARTERED ACCOUNTANTS

CHARTERED ACCOUNTANTS EXAMINATIONS

TECHNICIAN LEVEL

T 1: FINANCIAL ACCOUNTING

SERIES:PILOT PAPER

TOTAL MARKS 100; TIME ALLOWED: THREE (3) HOURS

INSTRUCTIONS TO CANDIDATES

1. You have fifteen (15) minutes reading time. Use it to study the examination paper

carefully so that you understand what to do in each question. You will be told whento start writing.

2. This paper is divided into TWO sections:

Section A: Attempt all TEN multiple choice questions.

Section B: Attempt any FOUR out of FIVE questions.

3. Enter your student number and your National Registration Card number on the front

ofthe answer booklet. Your name must NOT appear anywhere on your answer

booklet.

4. Do NOT write in pencil (except for graphs and diagrams).

5. The marks shown against the requirement(s) for each question should be taken as

an indication of the expected length and depth of the answer.

6. All workings must be done in the answer booklet.

7. Present legible and tidy work.

8. Graph paper (if required) is provided at the end of the answer booklet.


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SECTION A

Attempt all the ten (10) multiple choice questions in this section

QUESTION 0NE

Each of the following sub questions has only one answer. Write the letter of the

correct answer you have chosen in your answer booklet. Marks are indicated

against each question.

1.1 Which of the following is a correct presentation of the accounting equation?

A. Assetsliabilitiesopening capital + drawings = profitB. Assets + profit + opening capitaldrawings = liabilitiesC. Assetsprofit + liabilitiesdrawings = closing capitalD. Assetsliabilitiesdrawings = opening capital + profit (2 marks)

1.2 Which of the following are five qualitative characteristics which make financialstatements reliable according to the IASBs Framework?

A. Faithful representation, neutrality, substance over form, completeness,

consistency

B. Faithful representation, prudence, consistency, understandability, substance

over form

C. Going concern, consistency, prudence, accruals basis, true and fair view.

D. Substance over form, faithful representation, neutrality, prudence,completeness. (2 marks)

1.3 Mika Fashions had a receivable balance of K1,200,000 at 31 December 2011 and anallowance for receivables of K75,000 brought forward from the year ended 31December 2010.

It was decided to write off debts totaling K114,000 and to adjust the allowance forreceivables to 5% of the receivables balance at 31 December 2011.

What charge for irrecoverable debts and allowance for receivables should appear inthe companys income statement for the year ended 31 December 2011?

A.

K114,000B. K134,700

C. K20,700

D. K93,300 (2 marks)

1.4 Which of the following may cause a situation where a trial balance totals K250,000more than the debit side.

A. Sale of goods for K250,000 being omitted from the customers accountB. Purchase of goods for K250,000 being omitted from the suppliers accountC. Payment of K250,000 for expenses being omitted from the cashbook.

D. Invoice for commission receivable of K125,000 being debited to thecommission receivable account. (2 marks)


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1.5 A VAT registered trader buys goods on credit for K700,000 gross; sales goods on

credit for K750,000 net; returns some of the goods to the supplier worth K200,000

gross and receives returns from its customers amounting to K175,000 net. State the

amount that will be payable or receivable by the trader to/from Zambia Revenue

Authority?

A. K23,448 payable

B. K23,034 receivable

C. K23,034 payable

D. K23,448 receivable (2 marks)

1.6 IAS 7 Statement of Cash flows requires that the statement opens with the calculation

of net cash from operating activities. This is arrived at by adjusting net profit before

taxation.

Which of the following lists consists only of items which could be included in such a

calculation?

A. Depreciation, increase in receivables, decrease in payables, proceeds from sale

of equipment, increase in inventories.

B. Increase in payables, proceeds from sale of equipment, depreciation, increase

in receivables, increase in inventories.

C. Increase in payables, increase in receivables, decrease in inventories, profit on

sale of plant, depreciation.

D. Depreciation, interest paid, proceeds from sale of equipment, decrease in

inventories. (2 marks)

1.7 Maambo J M Co has presented to you the following statement of financial position

extract as at 31 March 2012.

K000

Share capital (K2000) 500,000

Share premium 200,000

Retained earnings 300,000

1,000,000

Maambo J M Co has decided on a bonus issue of 1 for 4 to the existing shareholders.Which of the following correctly shows new balances on the three accounts shownabove after a bonus issue?

K000A. Share capital Cr 500,000

Share premium Dr 125,000Retained earnings Cr 300,000

B. Share capital Cr 625,000Share premium Cr 200,000

Retained earnings Dr 300,000


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C. Share capital Cr 625,000Share premium Cr 75,000Retained earnings Cr 300,000

D. Share capital Cr 500,000Share premium Cr 200,000

Retained earnings Cr 300,000(2 marks)

1.8 The primary reason for entities establishing internal audit function is to:

A. reduce the costs of the external auditors.

B. Support the work of the external auditors

C. Prepare the financial statements

D. Report to shareholders on the accuracy of the accounts. (2 marks)

1.9. A business achieves a margin of 25% on sales. Opening inventory was K162,000.

Closing inventory was K252,000 and purchases were K2,700,000. Calculate the sales

for the period.

A. K3,480,000

B. K3,262,500

C. K3,719,070

D. K3,600,000 (2 marks)

1.10 Your firms cash book at 30 April 2012 shows a favourable balance at the bank ofK22,410,000. A comparison with the bank statement received at the same date

revealed the following differences:

Dishonoured cheques not in the cash book K1,260,000

Receipts not yet credited by the bank K4,230,000

Bank charges not yet in the cash book K450,000

Unpresentedcheques K7,560,000

The correct balance on the bank statement at 30 April 2012 is

A. K13,140,000

B. K20,700,000

C. K23,220,000

D. K24,030,000 (2 marks)

Total( 20 marks)


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SECTION B

QUESTION TWO

Chisomo and Chikondi are in partnership, sharing profits 3:2 respectively and the trial

balance of the business as at 31

st

October 2011 is given below:

K000 K000

Buildings at cost 48,000

Machinery at cost 24,000

Accumulated depreciation at 1stNovember 2010:

Buildings 18,000

Machinery 9,000

Purchases and Sales 650,000 906,600

Returns outwards 4,100

Returns inwards 10,800

Carriage inwards 3,450

Rent 39,000

Bank 4,125

General expenses 5,700

Selling expenses 52,500

Bank charges 225Trade receivables and Trade payables 77,100 67,800

Wages and salaries 45,270

Insurance 2,400

Inventory at 1stNovember 2010 70,500

Current accounts at 1stNovember 2010: Chisomo 7,680

Chikondi 4,110

Allowance for receivables at 1stNovember 2010 2,100

Discounts allowed 4,020

Drawings: Chisomo 19,500

Chikondi 16,800

Capital accounts at 1stNovember 2010: Chisomo 36,000

Chikondi ________ 18,000

1,073,390 1,073,390


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The following additional information is available as at 31stOctober 2011.

(a) Inventory was valued as K57,000,000

(b) Chisomo has taken some goods for her own use during the year to the value ofK2,700,000, but this has not yet been recorded in the accounts.

(c) Interest on drawings for the year is K810,000 for Chisomo and K630,000 forChikondi.

(d) Chikondi is entitled to a salary of K25,500,000 per annum before profits are shared.

(e) Rent of K3,000,000 has been paid in advance

(f) There are outstanding wages of K1,200,000

(g) Irrecoverable debts of K1,200,000 are to be written off and the allowance forreceivables to be adjusted, based on past events to the equivalent of 5% of theremaining receivables.

(h)

Depreciation is to be provided for as follows: Buildings at 25% using the reducing balance method.

Machinery at 10% using the straight line method.

Required:

Prepare the following statements for the partnership:

(i) The income statement and appropriation account for the year ended

31stOctober 2011 (10 Marks)

(ii) The partners current accounts for the year ended 31stOctober 2011 (3 marks)

(iii) the statement of financial position as at 31stOctober 2011. (7 marks)

Total (20 marks)

QUESTION THREE

(a) You are a newly employed Accounts assistant for Jokoto and Sons Ltd, a business

that has been in existence for barely two years in the city of Kitwe. The Propriator

Jokoto Kalonda has presented you with the following opening balances and

transactions for the year ending 30 September 2011.

Opening balances as at 1 October 2010:

Rent payable account Dr K6,000,000

Electricity account Cr K3,200,000

Interest receivable account Dr K1,200,000

Allowance for receivables account Cr K19,200,000

You are told of the following additional information:


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Rent is payable quarterly in advance on the last day of November, February,May and August at the rate of K24,000,000 per annum.

Electricity is paid as follows:

5 November 2010 K4,000,000 (for the period to 31 October 2010)

10 February 2011 K5,200,000 (for the period to 31 January 2011)8 May 2011 k6,000,000 (for the period to 30 April 2011)

7 August 2011 K4,400,000 (for the period to 31 July 2011)

At 30 September, 2011 there is electricity owing of K3,600,000

Interest was received during the year as follows:

2 October 2010 K1,000,000 (for the 6 months to 30 September 2010)

3 April 2011 K2,400,000 (for the six months to 31 March 2011)

Jokoto estimates that interest of K1,200,000 is accrued at 30 September 2011

At 30 September 2011, the balance of receivables amounts to K500,000,000.

The allowance for receivables is to be amended to 5% of receivables.

Required:

Write up the ledger accounts for:

(i) Rent payable (5 marks)

(ii) Electricity (5 marks)

(iii) Interest receivable (4 marks)

(iv) Allowance for receivables (3 marks)

And bring down the balances at 30 September 2011, clearly stating the meaning ofeach, and treatment in the statement of financial position.

(b) Briefly explain the meaning of each of the two accounting concepts:

(i) Going concern (1 marks)

(ii) Substance over form (1 marks)

Total (20 marks)


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QUESTION FOUR

Maboshe, the treasurer of Chipata Tennis Club has provided you with the following details of

transactions during the year ended 31 March 2012.

1. Bank account summary

Receipts K000Members annual subscriptions 257,580Sales of old tennis equipment 86,400Receipts from Bar customers 150,147Tennis tournament fee income 35,559Donation 2,943Total receipts 532,629

PaymentsCaretakers wages 91,800Tennis tournament expenses 5,562Rent of tennis house 82,350Bar ancillary services 5,670Electricity 22,896Bar staff wages 62,370Bar purchases 115,290Telephone 9,990Purchase of Tables for playing tennis 78,300Total payments 474,228

2. Cash account summaryReceipts K,000

Bar cash sales 26,163

PaymentsTennis tournament expenses 19,548General expenses 5,616Total payments 25,164

3.Assets and liabilities balances were as follows:

1 April 2011 31 March 2012K000 K000

Cash in the till 513 to be calculated

Bank overdraft 59,184 to be calculated

Rent of tennis house prepaid 8,100 12,150

Subscriptions owing 4,050 -

Subscriptions in advance 8,910 7,290

Payables for bar purchases 20,250 17,010

Bar inventory 8,100 to be calculated

Bar receivables - 1,260

Telephone accrued 1,242 1,593Tennis tables (cost K194,400,000) 89,100 to be calculated


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4. Tennis tables are depreciated evenly over four years.

5. The bar operates on a gross profit margin of 40%.

6. The tennis equipment sold during the year had a carrying amount of K135,000,000on 31 March 2011. It is the clubs policy not to depreciate its equipment in the year

of disposal and to depreciate it fully in the year of purchase.

Required

(a) Prepare a bar income statement for the year ended 31 March 2012. (4 Marks)

(b) Prepare an income and expenditure account for the year ended 31 March 2012.(9 marks)

(c) Prepare a clubs statement of financial position as at 31 March 2012. (7 marks)

Total (20 marks)

QUESTION FIVE

You have just joined Twalumba Ltd, a private business owned by Twalumba and her sisters,

as trainee accounting technician. Twalumba Ltd is a VAT registered business and so is

entitled to claim VAT paid on inputs and charge VAT on outputs. Twalumba has presented

to you the following transactions for the month of March 2012: All transactions are subject

to VAT at 16%.

March 1 Credit purchases from: Mwamba K1,720,000; Mark K896,000 (all grossamounts)

March 5 Goods sold on credit to: Mbita K2,240,000; Pele K2,900,000; ChitaluK3,200,000; Chansa K1,380,000 (all net amounts).

March 8 Credit purchases from: Monde K1,730,000 gross; Mukwa K1,026,800 net;Tumelo K3,062,200 gross.

March 11 Sold goods to the following: Mbita K1,729,600 gross; Chitalu K1,420,960 net.

March 12 Goods returned to: Mwamba K360,000 net; Mukwa K220,000 gross.

March 17 Bought goods from: Monde K2,683,120 gross; Hamweemba K3,074,280 listprice (We received 5% trade discount and was offered 2% cash discount byHamweemba).

March 19 The following customers returned goods to us: Pele K455,000; ChitaluK520,000 (all tax exclusive).

March 20 Sold goods on credit to: Mubita K1,741,200 gross; Mukwita K588,800 net.

March 24 Goods were returned to Hamweemba K272,000 list price.

March 26 Credit sales to Panda allowing him 2.5% cash discount on list price ofK3,000,000.

March 29 Goods were returned to us by Panda K600,000 list price.

Twalumba also tells you that they maintain control accounts as part of double entry.


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Required

(a) Enter the following books of prime entry:

(i) Sales day book (5 marks)

(ii) Sales returns day book (2 marks)

(iii) Purchases day book and (4 marks)(iv) Purchases returns day book (2 marks)

(Analyzing amounts into Gross, VAT and Net and rounding off all figures 5

and above to the nearest whole number)

b) Post the Subsidiary book totals in double entry in an appropriate ledger. (7 marks)

TOTAL (20 MARKS)

QUESTION SIX

Brian & Sons and Chola enterprises are two competing businesses in the area of childrensToys. You have been asked to compare the performances of the two businesses using their

financial statements provided below.

Income statements for the year ended 31 December 2011.

Brian & Sons Chola Enterprises

K000 K000

Revenue 33,000 43,200

Cost of sales (26,400) (30,240)Gross profit 6,600 12,960

Operating expenses (3,660) (10,110)

Operating profit 2,940 2,850

Finance costs (90) (90)

Profit before tax 2,850 2,760

Corporation tax (1,200) (1,080)

Net profit for the period 1,650 1,680


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Statements of financial position as at 31 December 2011

Brian & Sons Chola EnterprisesK000 K000 K000 K000

Non current assets 22,500 43,200

Current assetsInventory 750 2,160Receivables 3,000 1,140bank 180 0

3,930 3,30026,430 46,500

Equity and liabilitiesEquity shares K1000 18,000 42,000

General reserves 6,480 2,460

24,480 44,460Non current liabilitiesLoans 450 660Current liabilitiesTrade payables 1,200 1,230Overdraft - 30Corporation tax payable 300 120

1,500 1,380Total equity and liabilities 26,430 46,500

Required

(a) Calculate the following ratios for both Brian & Sons and Chola.

(i) Net operating profit margin

(ii) Return on capital employed

(iii) Current ratio

(iv) Gearing

(v) Earnings per share

(vi)

Interest cover (6 Marks)

Note: round off all ratios to 1 decimal place.

(b) Use the ratios calculated in (a) above to comment on the performance of the two

businesses, by giving possible reason for the performance as indicated by the ratios.

(9 marks)

(c) Define adjusting event and non adjusting event after the reporting period, andexplain the accounting treatment of each. (3 marks)


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(d) Limpopo Plc. is a manufacturing business in secondary industry. After the end of thereporting period, but before financial statements were authorized for issue, thefollowing material events took place: Indicate whether each of the events is

adjusting or non adjusting.

(i) Confirmation has been received about the bankruptcy of a client whosereceivable existed at the period end.

(ii) There have been large changes in Foreign exchange rates affecting Limpoposreceivables and payables.

(iii) Limpopo has announced the discontinuance of an operation in one of theregions it operates from.

(iv) Limpopo Plc has discovered some fraud and error showing incorrectness of

financial statements. (2 marks)

Total (20 marks)

END OF QUESTION PAPER


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T1

SUGGESTED SOLUTIONS

SOLUTION ONE

1.1 A

1.2 D

1.3 D

1.4 A

1.5 C

1.6 C

1.7 C

1.8 B

1.9 A

1.10

D

SOLUTION TWO

(i)

CHISOMO AND CHIKONDI PARTNERSHIP INCOME STATEMENT AND

APPROPRIATION ACCOUNT FOR THE YEAR ENDED 31 OCTOBER 2011

K000 K000

Sales 906,600

Less returns inwards (10,800)895,800

Less cost of sales:

Opening inventory 70,500

Purchases (650,0002,700) 647,300

Returns outwards (4,100)

Carriage inwards 3,450

717,150

Less closing Inventory (57,000)

660,150

Gross profit 235,650

Less Expenses

Discounts allowed 4,020

Irrecoverable debts 1,200

Insurance 2,400

Rent (39,0003000) 36,000



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Selling expenses 52,500

Bank charges 225

Wages and salaries (45,270 + 1,200) 46,470

Allowance for receivables 1,695Depreciation: building [25 x (48,000 -18,000)] 7,500

Machinery (10% x 24,000) 2,400

TOTAL EXPENSES (160,110)

Net profit 75,540

Add interest on drawings:

Chisomo 810

Chikondi 630

76,980

Less salary- Chikondi (25,500)

51,480

Share of profit:

Chisomo 3/5 30,888

Chikondi 2/5 20,592 ______

51,480 51,480

(ii)PARTNERS CURRENT ACCOUNTS

Chisomo Chikodi Chisomo Chikodi

K000 K000 K000 K000

Drawings 22,200 16,800 Balances b/f 7,680 4,110

Interest on drawings 810 630 salary- chikondi 25,500

Balances c/d 15,558 32,772 Share of profi 30,888 20,592

38,568 50,202 38,568 50,202

Balances b/d 15,558 32,772


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(ii) CHISOMO AND CHIKONDI PARTNERSHIPS

STATEMENT OF FINANCIAL POSITION AS AT 31 OCTOBER 2011

K000 K000 K000Non Current Assets

Cost Depn Carrying

Amount

Buildings48,000 25,500 22,500

Machinery24,000 11,400 12,600

72,000 36,900 35,100

Current Assets

Inventory57,000

Receivables (77,100 -1,200 -3,795) 72,105

Bank4,125

Rent payable in advance3,000 136,230

171,330

Capital And Liabilities

Capital accounts: Chisomo36,000

Chikondi18,000

Current accounts: Chisomo15,558

Chikondi 32,772

102,330

Current Liabilities

Payables67,800

Wages and salaries owing1,200 69,000

171,330


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SOLUTION THREE

(a) (i)

Rent payable account

2010/11 K000 2010/11 K00010.1 Balance b/f 6,000 9.30 I/S 24,00011.30 bank 6,000 9.30 Balance c/d 6,0002.29 bank 6,0005.31 Bank 6,0008.31 bank 6,000 _____

30,000 30,00010.1 Balance b/d 6,000

Meaning: rent had been paid in advance by K6,000,000 at 30 September 2011 and

this would be shown as a current asset in the statement of financial position.(ii)

Electricity account

2010/11 K000 2010/11 K00011.5 Bank 4,000 10.1 Balance b/d 3,2002.10 Bank 5,200 9.30 I/S 20,0005.8 Bank 6,0008.7 Bank 4,4009.30 Balance c/d 3,600 ______

23,200 23,200

10.1 Balance b/d 3,600Meaning: electricity bill was outstanding of K3,600,000 at 30 September 2011. Thiswould be shown as a current liability in the statement of financial position at the samedate.

(iii)Interest receivable account

2010/11 K000 2010/11 K000Balance b/f 1,200 10.2 bank 1,000I/S 3,400 4.3 bank 2,400

_____ 9.30 Balance c/d 1,200

4,600 4,600Balance b/d 1,200

Meaning: interest was not received amounting to K1,200,000. It would be presented

as a current asset in the statement of financial position as at 30 September 2011.


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(iv)Allowance for receivable account

2010/11 K000 2010/11 K000Balance b/f 19,200I/S 5,800

Balance c/d 25,000 ______25,000 25,000

Balance b/d 25,000

Working 5% x K500,000,000 = K25,000.

Meaning: a new allowance as at 30 September 2011 is K25,000,000. It wouldbe used to reduce receivables balance for recognition in the statement offinancial position.

(b)(i) Going concern concept

When financial statements are prepared, it is assumed that the business willcontinue to operate in the foreseeable future and that operations will not bediscontinued by closure of business. The going concern status is implied unlessstated otherwise.

For example, stating non current assets at their carrying amounts in thestatement of financial position implies they are yet to be used up in futureoperations, otherwise they could have been stated at their disposal value.

(ii) Substance over form

It is an assumption that requires that where the legal form of a transaction differs

from its commercial view, the commercial view should be taken for the purpose of

treatment.

For example, assets acquired under hire purchase are recognized by the acquiring

entity even though it has not paid up all the installments. Legally, it does not own

such assets but from the commercial point of view, it is enjoying economic

benefits.


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SOLUTION FOUR

(a)

Chipata tennis clubsBar income statement for the year ended 31stMarch 2012

K000 K000

Sales (W5)177,570

Less cost of sales:

Opening inventory8,100

Purchases (w4)112,050

120,150

Less closing inventory(w8)(13,608)

106,542

Gross profit

71,028

LESS EXPENSES

Bar ancillary services5,670

Bar staff wages62,370

(68,040)

Net profit from trading activities2,988

(b)

Chipata Tennis Clubs

Income and expenditure account for the year ended 31stMarch 2012

Income K000 K000

Net profit from trading 2,988

Subscriptions (w2) 255,150

Donations 2,943

Tournament fee income 35,559

Total income 296,640

Expenditure

Caretakers wages 91,800

Tennis tournament expenses (5,562 + 19,548) 25,110

Rent (w6) 78,300

Electricity 22,896

Telephone (w3) 10,341

Depreciation;tennis tables(w7) 68,175

Loss on sale of old tennis equipment(w8) 48,600



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Total expenditure (350,838)

Deficit 54,198

(c)

Chipata Tennis clubsStatement of financial position as at 31stMarch 2012

K000 K000 K000Non current assets Cost depn carr.

AmountTennis tables 272,700 173,475 99,225

Current assetsBar inventory 13,608Bar receivables 1,260Cash 1,512

Rent prepaid 12,150 28,530Total assets 127,755

Accumulated fund and liabilitiesAccumulated fund (W1) 155,277Less deficit (54,198)

101,079

Current liabilitiesBar payables 17,010Bank overdraft 783

Subscriptions in advance 7,290Telephone accrued 1,593

26,676127,755

WORKINGS

1. Accumulated fund calculation

ASSETS K000 K000Cash 513Rent prepaid 8,100Subscriptions owing 4,050Bar inventory 8,100Tennis tables 89,100Tennis equipment 135,000LIABILITIESBank overdraft 59,184Bar payables 20, 250Subscription in advance 8,910Telephone accrued 1,242Accumulated fund ________ 155,277

244,863 244,863


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2. Subscription Account

K000 K000Owing b/f 4,050 Prepaid b/f 8,910I/E 255,150 Bank 257,580Prepaid c/d 7,290 _______

266,490 266,490Prepaid b/d 7,290

3.Telephone Account

K000 K000Bank 9,990 Balance b/f 1,242Owing c/d 1,593 Purchases 10,341

11,583 11,583Owing b/d 1,593

4. Bar Payables AccountK000 K000

Bank 115,290 Balance b/f 20,250Balance c/d 17,010 Purchases 112,050

132,300 132,300Balance b/d 17,010

5. Bar Receivables

K000 K000Balance b/f - Bank 150,147Sales 151,407 Balance c/d 1,260

151,407 151,407Balance b/d 1,260

Total sales = 151,407 + 26,163 = 177,570

6. Rent Account

K000 K000Prepaid b/f 8,100 I/E 78,300Bank 82,350 Balancec/d 12,150

90,450 90,450Balance b/d 12,150

Note: The candidate may alternatively use the arithmetic format to derive themissing figures, and write the arithmetic on the face of the Income statement.

7. Depreciation of tennis tables:

Existing at 1.4.2011 K194,400,000/4 years

= K48,600,000 p/a

New during year K78,300,000/4 years

= K19,575,000 p/a


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Total charge for the year = 48,600,000 + 19,575,000 = 68,175,000

Total accumulated depreciation year to 31 March 2012 = 173,475,000

(68,175,000 + 105,300,000)

8. Closing inventory

Cost of sales is calculated as: 60/100 x 177,570,000 = 106,542,000Therefore, 120,150,000x = 106,542,000X = 106,542,000120,150,000X = 13,608,000

9. Cash Receivables

K000 K000Balance b/f 513 Tournament expenses 19,548Sales (bar) 26,163 General expenses 5,616

______ Balance c/d 1,512

26,676 26,676Balance b/d 1,512

10. Bank Receivables

K000 K000Sundry receipts 532,629 Balance b/f 59,184Balance c/d 783 payments 474,228

533,412 533,412Balance b/d 783

11. Disposal of tennis equipment

Carrying amount 135,000

Less proceeds (86,400)

Loss on disposal 48,600


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SOLUTION FIVE

(a) (i) SALES DAY BOOK

date details Gross

amount

VAT

amount

Net

amount

3.5 MbitaK

2,598,400K

358,400K

2,240,000

3.5 Pele 3,364,000 464,000 2,900,000

3.5 Chitalu 3,712,000 512,000 3,200,000

3.5 Chansa 1,600,800 220,800 1,380,000

3.11 Mbita 1,729,600 238,566 1,491,034

3.11 Chitalu 1,648,314 227,354 1,491,034

3.20 Mubita 1,741,200 240,166 1,501,034

3.20 Mukwita 648,208 89,408 558,800

3.26 Panda(w3) 3,468,000 468,000 3,000,000

TOTALS 20,510,522 2,818,694 17,761,902

(ii) SALES RETURNS DAY BOOK

date details Grossamount

VATamount

Netamount

3.19Pele

K527,800

K72,800

K455,000

3.19 Chitalu 603,200 83,200 520,000

3.29 Panda(w4) 693,600 93,600 600,000

TOTAL 1,824,600 249,600 1,575,000

(iii) PURCHASES DAY BOOK

Date Details Grossamount

VATamount

Netamount

3.1 MwambaK

1,720,000K

237,241K

1,482,759

3.1 Mark 896,000 123,586 772,414

3.8 Monde 1,730,000 238,621 1,491,379

3.8 Mukwa 1,191,088 164,288 1,026,8003.8 Tumelo 3,062,200 422,372 2,639,828

3.17 Monde 2,683,120 370,086 2,313,034

3.17 Hamweemba(w1) 3,378,291 457,915 2,920,376

TOTALS 14,660,699 2,014,109 12,646,590


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(iv) PURCHASES RETURNS DAYBOOK

date details Grossamount

VATamount

NetAmount

3.12Mwamba

K417,600

K57,600

K360,000

3.12 Mukwa 220,000 30,345 189,655

3.24 Hamweemba (w2) 298,917 40,517 258,400

TOTALS 936,517 128,462 808,055

WORKINGS

1. Purchases from Hamweemba

List price 3,074,080

Less Trade Discount (@ 5% x 3,074,080) (153,704)2,920,376

Less cash discount (@ 2% x 2,920,376) (58,408)2,861,968

VAT (@ 16% x 2,861,968) 457,9153,319,883

Add back cash discount 58,408Gross amount to record 3,378,291

2. Returns to Hamweemba

List price 272,000Less Trade Discount (@ 5% x 272,000) (13,600)258,400

Less cash discount (@ 2% x 258,400) (5168)253,232

Add VAT (@ 16% x 253,232)40,517

Gross amount before adding back c.d. 293,749Add back cash discount 5,168Gross amount to record 298,917

3.

Sales to PandaList price 3,000,000Less cash discount (@ 2.5% x 3,000,000) (75,000)

2,925,000Add VAT @ 16% X 2,925,000 468,000

3,393,000Add back cash discount 75,000Gross amount 3,468,000


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Purchases Returns account

K KPRDB 808,055

Sales Returns account

K KSRDB 1,575,000

SOLUTION SIX

(a) Brian & Sons Chola(i) net operating profit margin =

operating profit/sales x 100 000,000,33

000,940,2x 100

8.9%

100000,200,43

000,850,2x

6.6%

(ii) Return on capital employed =operating profit/capital employed 100000,930,24

000,940,2x

11.8%

100000,120,45

000,850,2x

6.3%

(iii) Current ratio = currentassets/current liabilities 000,500,1

000,930,3

2.6 : 1

000,380,1

000,300,3

2.4 1

(iv) Gearing = interest bearing debtShareholders funds + interestbear.

000,450000,480,24100000,450

x

1.8%

000,660000,460,44100000,660

x

1.5%

(v) Earning s per share =earnings/no. of equity shares

1,650,000

18,000 shares

K91.67/share

1,680,000

42,000 shares

K40.00/ share

(vi) Interest cover =

payableinterest

profitoperating 000,90

000,940,2

32.7 times

000,90

000,850,2

31.7 Times


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(b) (i) Net operating profit margin for Brian & Sons signifies better performance than

that of Chola. However, the percentages are generally both lower than expected

of good profitability.

Possible reasons for Brian & Sons better performance could be due to an absolutehigher profit figure of K2,940,000 from lower sales of K33,000,000 compared toChola who had profit of K2,850,000 from sales of K43,200,000. Additionally, itcould be due to Brian & Sons strict control of operating expenses that are 3 timeslower than Cholas.Finally, Brian could have sold lower volume toys at attractiveprices while Chola higher volume sales at unattractive prices.

(ii) ROCE for Brian & Sons equally indicate better performance at almost double thatof Chola, i.e 11.8% against 6.3%. however, both percentages are much on thelower side, which could indicate problems in the industry generally wherebusinesses are not as much profitable as normally expected in the use of their

resources.

Possible reasons for Brian & sons better performance may include the fact that itcould be making an efficient use of its non current assets. Brian & Sons is hencean attractive investment to potential investors.

(iii) The two businesses current ratios are almost equal and healthy with Briansbeing slightly higher than Cholas by 0.2. This may be attributed to the fact thatBrian & Sons have a positive bank balance while Chola is servicing a bankoverdraft.

Both businesses current liabilities are covered by current assets more than twice.This means they are likely to meet short term obligations as they fall due withBrian at a most advantage.

(iv) Both businesses Gearing are very low, confirming the fact that their loan financeas a proportion of total finance is very low. This is healthy as the businesses aresaved the finance cost obligations that usually erode earnings for distribution toshareholders when large. Although Brian & sons gearing is slightly higher thanthat of Chola, its much reasonable as any gearing less than 50% is well withinacceptable levels.

(v) Brian & Sons earnings per share is twice that of Chola, indicative of better

performance.

This may mean Brian & Sons is putting investors funds to good use, therebygenerating more earnings for the number of shares than Chola. Brian and Sonsbecomes an attractive investment destination for investors as a result. Theshareholders of Brian &Sons are more likely to receive dividends than those ofChola.

(vi) Brian & Sons operating profit covers interest obligations more than Chola. This isattributed to increased profitability as shown in the other ratios calculated, asinterest obligation is same for both companies.

Note: any other reasonable points for comments may be acceptable


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(c) An adjusting event is an event occurring after the reporting period that providesfurther evidence of conditions that existed at the reporting date.

A non adjusting event is an event occurring after the reporting date that is indicativeof conditions that arose subsequent to the reporting date.

Accounting treatment

Adjusting events require adjustment of assets and liabilities or any relevant balances

at the reporting date.

Non adjusting events do not require adjustment of any balances at the reporting

date but need to be disclosed in the financial statements regarding:

The nature of the event

An estimate of the financial effect of the event. Where an estimate cannot be

made, a statement that an estimate cannot be made.

(d) (i) adjusting

(ii) non adjusting

(iii) non adjusting

(iv) adjusting


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TECHNICIAN LEVEL

T2: COST ACCOUNTING

SERIES: PILOT PAPER

TOTAL MARKS 100 TIME ALLOWED: THREE (3) HOURS


1. You have fifteen (15) minutes reading time. Use it to study the examination papercarefully so that you understand what to do in each question. You will be told whento start writing.


Section A: Attempt all TEN multiple choice questions.

Section B: Attempt any FOUR out of FIVE questions.

3. Enter your student number and your National Registration Card number on the frontof the answer booklet. Your name must NOT appear anywhere on your answerbooklet.


5. The marks shown against the requirement(s) for each question should betaken as an indication of the expected length and depth of the answer.


7. Present legible and tidy work.



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SECTION A

Attempt all multiple choice questions in this section.

Each of the following questions has only ONEcorrect answer. Write the LETTERof the

correct answer you have chosen in your answer booklet. Marks allocated are indicatedagainst each question.

1.1 The annual use of an item is 10,000 units. The cost of placing an order is K90,000

and the cost of holding one unit in stock for one year is K4,500.

What is the Economic Order Quantity?

A 632.46 units

B 532.46 units

C 400,000 units

D 63, 246 units (2 marks)

1.2 Various costs will increase by jumps when certain levels of activity are attained.

These are commonly referred to as Step functions or stepped costs.

Which of the following is usually classified as stepped cost?

A inventory of raw materials

B Business rates

C Supervisors wages

D Telephone (2 marks)

1.3 Which of the following source documents in the area of cost accounting is aimed at

exercising control over the delivery of and accurate recording of the receipt of

goods?

A Purchase Requisition

B Order to the supplier

C Goods Received Note

D Materials Requisition (2 marks)


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1.4 JB company limited operates a piecework system of remuneration. Workers ought to

work for a minimum of 40 hours per week. Mangani Banda produces the following

output for a particular week.

PRODUCT QUANTITY STANDARD TIME PER ITEM(HRS)

AGREGATEACTUAL TIME

(HRS)

Gear levers 25 2 9

Gaskets 100 1.2 14

Filters 50 2 12

Springs 5 14 6

His payment per standard hour worked is K2000. What are his earnings for theweek?

A K680,000

B K648,000

C K656,000

D K146,000 (2 marks)

1.5 Which of the following would not cause either an under or over-absorption of

overheads.

A Actual direct labour time per unit being greater than budget.

B Actual cost of direct labour being greater than budget

C Actual overheads incurred being less than budget

D Actual number of units produced being greater than budget. (2 marks)

1.6 In a machining process the normal spoilage rate is expected to be 2% of input.

Spoiled units are sold for K0.53 each. In a period 5,000 units were input at a cost of

K2 each. The total output of good units was 4,750.

How much will be written off to the profit and loss account in respect of the

abnormal spoilage?

A K225.00

B K375.00

C K304.50

D K507.50 (2 marks)


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1.7 Product Y has a standard direct material cost of K100 per unit (10kg @ K10 per kg).

During period 4, 1,000 units of Y were manufactured, using 11,700 kg of material Z

which cost K98,600.

What is the material total variance?

A 1,400 (F)

B 18,400 (F)

C 1,400 (A)

D 17,000 (A) (2 marks)

1.8 Kanjombi Ltd has a budgeted production overhead of K180,000 and a budgeted

activity of K45000 machine hours.

Calculate the under-/over-absorbed overhead if Actual overheads cost K170,000 and

45,000 machine hours were worked.

A 10 000 over-absorbed overhead

B 20 000 under-absorbed overhead

C 10 000 under-absorbed overhead

D 15 000 over-absorbed overhead. (2 marks)

1.9 Activity Based Costing (ABC) establishes separate cost pools for support activitiessuch as dispatching. Which of the following is a criticism of ABC?

A ABC helps or facilitates a good understanding of what drives overhead costs.

B ABC is concerned with all overhead cost as a result it takes management

accounting beyond its traditional factory floor boundaries.

C Some measure of apportionment may still be required at the cost pooling

stage for items like rent, rates and building depreciation

D ABC provides data which can be used to evaluate different ways of deliveringbusiness. (2 marks)


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1.10 Which of the following best describes interlocking cost accounts?

A This is a single, comprehensive accounting system with no division between

financial and cost accounts.

B This is the system that uses separate cost accounts which periodically arereconciled with the financial accounts.

C This is the system that uses the same bases for items such as stock valuation

and depreciation with no need for reconciliation between cost profit and

financial profit.

D This is the system that emphasizes functional analysis eg selling overheads,

rather than analysis by nature. (2 marks)

(Total: 20 marks)

SECTION B

Attempt any FOUR questions in this section.

QUESTION TWO

(a) For the six months ended 31stOctober, Masiwa Musiwa, an importer and distributorof one type of washing machine has the following transactions in his records. Therewas an opening balance of 100 units which had a value of K3, 900,000.

RECEIPTS

DATE QUANTITY (in units) COST PER UNIT (K)

May 100 41,000

June 200 50,000

August 400 51,875

The unit price of K51,875 for the August receipt was K6,125 per unit less than thenormal price because of the large quantity ordered.

ISSUES

DATE QUANTITY (in units) PRICE EACH (K)

July 250 64,000

September 350 70,000

October 100 74,000

Required:

Show the stores ledger records including closing stock balance and stock valuation

using:

(i) LIFO (6 marks)


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(ii) FIFO (6 marks)

(iii) AVCO (Average Cost method of pricing) (4 marks)

(b) The following information relates to component COPPER

Maximum stock 55,000 units

Usage per month: maximum 11,000 units

Minimum 90,00 units

Estimated delivery period: Maximum 5 months

Minimum 3 months

Required: Calculate the

(i) re-order level (1 mark)

(ii) re-order quantity (1 mark)

(iii) minimum level (1 mark)

(iv) average stock held (1 mark)

(TOTAL: 20 Marks)

QUESTION THREE

(a) Sombo Ltd is a manufacturing company. The company has a standard working

week of 40 hours.

Employees are paid on an hourly basis. Any overtime necessary is paid for at a

time and half. For every hour saved a bonus is paid at 40% of the basic rate.

The following information relates to the performance of two of the companysemployees (Chola Lungu and Mwape Mate) in a particular week:

EMPLOYEE CHOLA LUNGU MWAPE MATE

Standard time per unit 10 minutes 7.5 minutes

Actual units produced 378 408

Actual hours worked 45 36

Hourly rate K1,500 K1,800

No. of units scrapped 10 units 12 units

Employees were paid in full for the scrapped units. Mwape Mate was in

attendance for the full 40 hours.


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Required:

Calculate the.

(i) amount of bonus earned by CholaLungu and Mwape Mate separately.

(7 marks)

(ii) gross wages payable to Chola Lungu and Mwape Mate. (3 marks)

(iii) labour cost per good unit made. (4 marks)

(b) Magoye ltd is a company that operates interlocking financial and cost accounting

bookkeeping systems. In a particular period, profit in the financial accounts was

K11,287,000 while cost accounts showed a profit of K2,704,000.

Further examination of the accounts showed the following discrepancies:

COST ACCOUNTS

K000

Depreciation 9826

Valuations of stock: Opening stocks 27510

Closing stocks 18218

Imputed rent charge 3250

FINANCIAL ACCOUNTS

K000

Depreciation 10520

Valuations of stock: Opening stocks 25500

Closing stocks 18750

Profit on sale of asset 850

Dividends received 2635

Required:

Prepare a statement reconciling the profit figures as per the cost accounts and

financial accounts. (6 marks)

(TOTAL: 20 marks)


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QUESTION FOUR

(a) Moyenda Mulimabvuto Limited company produces a single product in two

successive processes. Below is the information for the month of January.

PROCESS A PROCESS B There was no work in process on 1st

January During the month 815 units costing

K2,370 were put into process Labor and overhead incurred

amounted to K1,668 During the month 600 units were

finished and passed to process B On 31stJanuary, 190 units remained

in process, the operations on which

were half completed, but thematerials for the whole process havebeen charged to the process.

No opening work in process on 1stJanuary

The cost of labour and overhead inthis process was K900 and materialscosting K350 were added at the endof operations

On 31 January, 400 units had beentransferred to finished stock

At that date 200 units remained inprocess, and it was estimated that

one quarter () of the operations hadbeen completed.

Required: Prepare

(i) Process A Account (8 marks)

(ii) Process B Account (8 marks)

NOTE: All process losses should be treated as normal loss.

(b) A factory has three service cost centres, MA, TR and BH, costing as below:

MA K15 000

TR K10 000

B H K30 000

The services are to be charged to each other and to the production department

using the following basis:

SERVICE CENTRE PRODUCTIVE USAGE BY OTHER CENTRESMA TR BH

MA 90% 10%TR 100%BH 80% 10% 10%

Required:

Apportion the total overhead costs of K55 000 among the centres using Elimination

Method. (4 marks)

(Total: 20 marks)


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QUESTION FIVE

Sons and Daughters Ltd is a company that manufactures and sells two products Zeddyand

Cee. The following information is available:

Selling price each: Zeddy K15

Cee K20

Labour (unit): Zeddy K2 (1 hour)

Cee K4 (2 hours)

Variable productionoverheads:

Zeddy K3

Cee K6

Material: Zeddy K4

Cee K5

Production units: Zeddy - June 700

- July 350

Cee - June 300

- July 500

Sales units: Zeddy - June 600

- July 400

Cee - June 700

- July 400

Fixed overheads: - June K4,600

- July K2,700

Required:

Prepare a profit statement for June and July showing closing stock valuations

using:

(i) Total absorption costing ( 10 marks)

(ii) Marginal costing ( 10 marks)

(Total: 20 marks)


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QUESTION SIX

Kangwa Chewe chemicals Limited produce an industrial purifying agent known as

Supchem, the budgeted weekly output/sales of which is 10,000 litres. The standard

cost per 100 litres is:

Materials 250 kg costing K2,500 per kg

Labour 4 hours at K6,250 per hour

Budgeted fixed overhead K2,500,000

The standard selling price is K7,500 per one litre container

During the week ended 20 March, the output of Supchem was 9,860 litres, all of

which was sold, the invoiced value being K73,750,000. The materials input was

24,720 kg, which cost K61,500,000. Production employees booked 380 hours toprocess and were paid K2, 450,000. Overhead amounted to K2, 625,000.

Required:

(a) Calculate the following variances,

(i) Direct material usage (2 marks)

(ii) Direct material price (2 marks)

(iii) Direct labour efficiency (2 marks)

(iv) Direct labour rate (2 marks)

(v) Overhead expenditure (2 marks)(vi) Overhead volume (2 marks)

(b) Write brief notes on the following types of standards:

(i) Basic standard (2 marks)

(ii) Current standard (2 marks)

(iii) Attainable standard (2 marks)

(iv) Ideal standard (2 marks)

(Total: 20 marks)

END OF PAPER


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T2

PILOT PAPER

MODEL SOLUTIONS

SECTION A: SOLUTIONS

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10

A C C A B C A A C B

SECTION B

SOLUTION TWO

(a) STORES LEDGER - FIFO METHOD

DATERECEIPTS ISSUES BALANCE STOCK

VALUEQTY PRICE QTY PRICE QTY PRICE

OpeningMay

June

July

August

September

October

100

200

400

K

41,000

50,000

51,875

250

350

100

K

100=39000100=4100050= 50000

150x50000200x51875

51875

100100100100100200

150

150400200

100

K39,00039,00041,00039,00041,00050,000

50,000

50,00051,87551,875

5,1875

K0003,900

8,000

1,8000

7,500

2,82501,0375

51,87.5


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STORES LEDGER - LIFO METHOD

DATERECEIPTS ISSUES BALANCE STOCK


OpeningMay

June

July

August

September

October

100

200

400

K

41,000

50,000

51,875

250

350

100

K

200 x 50,00050 x 41000

51,875

50 x 51,87550 x 41,000

100100100100100200100

50

100

50400

1005050

100

K

39,00039,00041,00039,00041,00050,00039,000

41,000

39,000

41,00051,875

39,00041,00051,875

39,000

K000

3,900

8,000

18,000

5,950

26,700

8,543.75

3,900


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STORES LEDGER - AVCO METHOD

DATE RECEIPTS ISSUES BALANCE STOCK


OpeningMay

June

July

August

September

October

100

200

400

K

41,000

50,000

51,875

250

350

100

K

45,000

50,000

50

100200

400

150

550

200

100

K39,00040,000

45,000

45,000

50,000

50,000

50,000

K0003,9008,000

18,000

6,750

27,500

10,000

5,000

(b) (i) The reorder level = Maximum Lead time Usage

= 11,000 x 5

= 55,000 Units

(ii) Reorder quantity

Maximum level = Reorder Level + Reorder QuantityMinimum lead timeusage

= 55,000 + RQ(9,000 x 3)

RQ = 55,00055,000 + 27,000

= 27,000 Units


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(iii) The minimum level = Rorder level less average lead time usage

= 55,000(10,000 x 4)

= 55,00040,000

= 15,000 units

(iv) Average stock held = Minimum stock + RQ

= 15,000 + (27,000)

= 15,000 + 13,500

= 28,500 Units

SOLUTION THREE

(i)

CHOLA LUNGU MWAPE MATE

60

10x378=

63 hours

60

7.5408x

51 hrs

Actual hours worked 45 hours 36 hrs

Time saved 18 hours 15 hrs

Overtime = Time allowedtime taken

40 hrs45 hrs = - 5 hrs 40 hrs36 hrs = 4 hrs

Bonus = (18 xK1,500) x 40% (15 x K1,800) x 40%

= K10,800 K10,800

Overtime pay = 5 x 2250 NIL

= K11,250

(ii) K K

Basic pay = K1,500 x 40 hrs = 60,000 40 x K1,800 = 72 000

Overtime (as above) 11,250 NIL

Bonus (as above) 10,800 10,800

82,050 82,800

Units produced 378 408

Units scrapped (10) (12)

368 396

(iii)

Labour cost per good unit produced 82,050 82,800

368 396= K222.96 = K209


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(2b)

MEMORANDUM RECONCILIATION ACCOUNT

K000 K000

Profit as per financialaccounts

11,287 Profit on cost accounts 2,704

Depreciation difference 694 Profit on sale of asset 850

Dividend Received 2,635

Imputed rent charge 3,250

Stock difference (opening) 2,010

_____ (closing) 532

11,981 11,981

SOLUTION FOUR

PROCESS A

units K units K

Input

Labour and overheads

815 2,370

1,668

Process B (w1)

Work in process c/d (w1)

Process loss

600

190

25

3,240

798

-

815 4,038 815 4,038

PROCESS B

units K units K

Process A

Labour and overheads

Materials added

600 3,240

900

350

Finished stock (w2)

Work in process c/d (w2)

400

200

3,310

1,180

600 4,490 600 4,490


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WORKINGS

VALUING WORK IN PROCESS

1 PROCESS A

Materials Labour and overhead TOTAL

Effective units effective units

Work in process 190 95

Transfer to process B 600 600

Total effective units 790 695

Total costs K2,370 K1,668

Cost per effective unit K3 K2.4

EVALUATIONWork in process 570 228 798

Transfer to process B 1,800 1440 3,240

K2,370 K1,668

2. PROCESS B

Materials Labour and overhead TOTAL

Effective units effective units

Work in process 200 50

Transfer to Finishedgoods

400 400

Total effective units 600 450

Total costs K3,240 K900

Cost per effective unit K5.40 K2

EVALUATION

Work in process 1,080 100 1,180

Finished Goods 2,160 800 3,310

Material costs

______ _____ _____

K3240 K900 4,490


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(3b)

BH MA TR PRODU

Indirect costs to be apportioned

Apportionment of BH costs

Apportionment of MA costs

Apportionment of TR costs

K000

30,000

(30,000)

K000

15,000

3,000

(18,000)

K000

10,000

3,000

1,800

(14,800)

K000

_

24,000

16,200

14,80055,000

SOLUTION FIVE

(a)

MARGINAL COSTING ABSORPTION COSTING

JUNE K JUNE K

Sales: Zeddy 9,000 Sales: Zeddy 9,000

Cee 14,000 Cee 14,000

23,000 23,000

Variable production cost Cost of production

Zeddy (700 x K9) 6,300 Labour (2300 hrs x 2) 4,600

Cee (800 x K15) 12,000 Materials: Zeddy (700 x K4) 2,800

18,300 Cee (800 x K5) 4,000

Less: Closing stock Variable overhead:

Zeddy (100 x K9) (900) Zeddy (700 x K3) 2,100

Cee (100 x K15) (1,500) Cee (800 x K6) 4,800

15,900 Fixed overhead 4,600

Contribution 7,100 22,900Fixed costs (4,600) less: Closing stock:

Profit 2,500 Zeddy (100 x K11) (1,100)

Cee (100 x K19) (1,900)

19,900

3,100


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MARGINAL COSTINGABSORPTION COSTING

JULY K JULY K

Sales: Zeddy 6000 Sales: Zeddy 6000

Cee 8000 Cee 800014000 14000

Variable production cost Cost of production

Opening stock Opening stock

Zeddy (100 x K9) 900 Zeddy (100 x K11) 1100

Cee (100 x K15) 1500 Cee (100 x K19) 1900

2400 3000

Add: Zeddy (350 x K9) 3150 Labour (1350 hrs x K2) 2700

Cee (500 x K15) 7500 Materials: Zeddy (350 x K4) 1400

Cee (500 x K5) 2500

Less: Closing stock Variable overhead:

Zeddy (50 x K9) (450) Zeddy (350 x K3) 1050

Cee (200 x K15) (3000) Cee (500 x K6) 3000

9600 Fixed overhead 2700

Contribution 4400

Fixed costs 2700 _____

Profit 1700 16350

less: Closing stock:

Zeddy (50 x K11) (550)

Cee (200 x K19) (3800)

12000

Profits 2000

COSTS PER UNIT

ZEDDY CEE

Variable 9 15

Fixed 2 4

(1:2 hours x K2) 11 19

Fixed overhead absorption on labour hours =K,4600 = K2 per hour

23 00 hours


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SOLUTION SIX

(a) Variance Calculation:

(i) Direct material usage:

9.860 litres should use (x 2.5 kg) 24,650,kg

But did use 24,720,kgUsage variance in kg 70 kg (A)

Standard material cost per kg K2,500

Direct material usage variance K175,000 (A)

(ii) Direct material Price: K000

24,720kg should cost (x K2,500) 61,800

But did cost 61,500

Direct material price variance 300(F)

(iii) Direct Labour efficiency:

9,860 litres should take ( x 0.04 hours) 394.4 hours

But did take 380.0 hrs

Efficiency variance in hours 14.4 hrs

X standard labour cost per hour K6,250

Direct labour efficiency variance K90,000 (F)

(iv) Directlabour rate: K000

380 hours should cost (x K6,250) 2,375

But did cost 2,450

Direct labour rate variance 75 (A)

(v) Fixed Overhead expenditure: K000

Budgeted fixed overhead K2,500

Actual fixed overhead K2,625

Fixed overhead expenditure variance 125 (A)

(vi) Fixed Overhead volume

Budget volume 10,000 lites

Actual volume 9,860

Volume variance in litres 140 litres


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standard fixed overhead cost per litre K250

Fixed overhead volume variance K35,000(A)

(b) (i) Basic Standard

A standard established for use over a long period from which a current

standard can be developed.

(ii) Current Standard

A standard established for use over a short period of time, related to current

conditions.

(iii) Attainable Standard

A standard which can be attained if a standard unit of work is carried out

efficiently, a machine properly operated or material properly used.

Allowances are made for normal shrinkage, wastage and machine

breakdowns.

(iv) Ideal Standard

This is unrealistic, in that it presumes that ideal conditions will prevail, eg.

Maximum sales at highest prices, most efficient workmanship (with no strikes

or sickness) for maximum pay, first class materials and expense items at low

cost.


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TECHNICIAN LEVEL

T3: MATHEMATICS AND STATISTICS

SERIES: PILOT PAPER

TOTAL MARKS 100 TIME ALLOWED: THREE (3) HOURS


1. You have fifteen (15) minutes reading time. Use it to study the examination papercarefully so that you understand what to do in each question. You will be told when

to start writing.


Section A: Attempt all TEN multiple choice questions.Section B: Attempt any FOUR out of FIVE questions.

3. Enter your student number and your National Registration Card number on the frontof the answer booklet. Your name must NOT appear anywhere on your answerbooklet.


5. The marks shown against the requirement(s) for each question should be taken asan indication of the expected length and depth of the answer.


7. Formulae are provided at the end of the question paper.



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SECTION A

Attempt all ten sub-questions in this section.

QUESTION ONE (MULTIPLE CHOICE)

Each of the following questions has only ONE correct answer. Write the LETTER of

each correct answer you have chosen in your answer booklet. Marks allocated areindicated against each question.

1.1 The ratio of cash to be shared between John and Peter is 5:4. Peter got ashare of US $540.The money shared is Zambian kwacha (1US$ = ZK5,250)is:

A. ZK3,543,750

B. ZK6,378,750

C. ZK5,103,000

D. ZK1,312,500. (2 marks)

1.2 Given .= 5 solution for x is:A. 0.50045

B. 2.00100

C. 0.66095

D. 0.22000 (2 marks)

1.3 The distances covered by eight (8) students from a College were as follows:

5, 7, 6,4,10, 9, 12 and 11. The standard deviation of their distances is

A. 2.9277

B. 5.4256

C. 7.6647

D. 8.5711 (2 marks)

1.4 A given frequency distribution has a mean= 155.857, median =156.429 andthe mode= 184.375. Comment on the type of skewness of the abovedistribution.

A. positively skewed

B. Negatively skewed

C. Symmetrical

D. None of the above (2 marks)


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1.5 A fair coin is spun ten (10) times. Calculate the probability of the result giving

exactly six(6) heads (hint: use binomial)

A. 25.65%

B. 45.20%

C. 20.51%

D. 50.21% (2 marks)

1.6 In a random sample of 300 employees at University of Zambia, 70% werefound to be in favour of a strike action. Find the 99% confident limits for theproportion of all employees in the university who were in favour of suchaction.

A. 83.76% to 88.34%

B. 44.75% to 65.23%

C. 13.45% to 24.81%.

D. 63.17% to 76.88%

1.7 The prices of a product are as follows in millions of Zambian Kwacha from2000 to 2005.

Year 2000 2001 2002 2003 2004 2005

Prices 5.1 4.8 4.5 4.6 4.7 5.9

What is the price index number of a product in 2005 taking 2001 as the baseyear?

A. 116

B. 86

C. 123

D. 92. (2 marks)

1.8 What compound interest rate will quadruple the value of an investment in six(6) years?

A. 58.74%

B. 25.99%

C. 69.41%

D. 70.42% (2 marks)


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1.9 A simple distribution of the weight (kg) is 40, 35, 25, 50, 30, 55, 45 and 20.

The upper quartile of the distribution is:

A. 25

B. 55

C. 35

D. 45 (2 marks)

1.10 How much should a worker invest now (to the nearest Kwacha) in order toreceive K1.5 billion in perpetuity if the annual rate of interest is 12%?

A. 6x-4

B.

9x -4C. 10x -2

D. 18x-12 (2 marks)

Total: 20 marks

SECTION B

Attempt any four questions in this section.

QUESTION TWO

(a) The weights of twenty workers of a road construction were as follows:

Mass(kgs) No. of employees

60-62 5

63-65 4

66-68 3

69-71 2

72-74 6

Required:

Calculate

(i) Mean 3 marks

(ii) Median of the weights to the nearest (2dp) in Kgs 3 marks

(b) (i) Simplify x (1 mark)(ii) Factorize x+3x+2 (2 marks)

(iii) Solve for x in log(x+5) = 1.8 (2 marks)


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(c) Solve the following simultaneous equation algebraically

2x + yz =2

3x - 4y +2z = 4

4x + 3y -5z = -8 (9 marks)

Total: 20 marks

QUESTION THREE

(a) At a business college in Lusaka, a quarter of the students are ladies. 35% of the

students are enrolled in part-time programmes. A student is selected at random.

What is the probability that the student is.

(i) male student (3marks)

(ii) male and a part-time student (3marks)

(iii) female or a part-time student? (3marks)

(d) The output at a factory and cost of production over the past five months are givenin the following table.

Month Output (000units) X Cost(K000) Y1 19 82

2 15 70

2 22 90

4 20 85

5 16 73

(i) Draw a scatter diagram. (4 marks)

(ii) Find the regression equation to determine the expected level of cost, for any

given volume of output. (5 marks)

(iii) Estimate the cost of 220,000 units (2 marks)

Total: 20 marks


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QUESTION FOUR

(a) Price index in Pick and Pay is made up of five items. The price for each item and the

average quantities purchased from manufactures and other companies each week

were as follows in 1999 and 2002

Item1999

Qty(000) units

1999Prices/unit in

ZK

2002Qty(000) units

2002Prices/unit in

ZK

A 50 3 80 4

B 30 6 40 5

C 40 5 20 8

D 105 2 150 2

E 20 7 10 10

Required:

Calculate the Paasche Price index number taking 1999 as the base year. (8 marks)

(b) Complex ltd is considering whether to make an investment costing K30,000,000

which could earn K10,000,000 per annum for five years . The company expects to

make a return of 11% per annum.

Required:

Assess whether the project is viable. (7 marks)

(c) If K800,000 is invested today and generates K1,000,000 in one years time.

Required:

Calculate the rate (5 marks)

Total: 20 marks


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QUESTION FIVE

(a) How long will it take to accumulate K7,800,000 when K6,000,000 is invested at 10%

interest compounded quarterly. (3 marks)

(b) In a quality control tests, the weights of standard packages were measured to givethe following grouped frequency table

Weights in grams Number of packages

150


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QUESTION SIX

(a) The sales distribution of four items A, B, C and D in a shop are sown in the tablebelow:

ITEM A B C D

AMOUNT 8 10 5 13

Required:

Draw a pie chart. (8marks)

(b) A firm plans to invest a sum of money at the beginning of every year of K150 millionfor five years. What is the value of the amount if the investment rate is 12.5%?

(8 marks)

(c) Mr Konda deposited K70 million in a bank offering 15% simple interest for threeyears.

Required:

Calculate the amount gained. (4,marks)

Total: 20 marks


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STATISTICAL FORMULAE

1. (i) Simple Interest I =100

PRT

(ii) Compound interest (Values and Sums)

Future Values of S, of a sum of , invested for n periods, compounded at

r% interest:

S = nr 1 OR A = P nR

)100

1(

(iii) Present Value(PV) =ni

A

)1(

100

Riwhere

(iv) Ordinary Annuity Amount

i

iPA

n 1)1( AnnuityPwhere

(v) Due Annuity Amount Pi

iPA

n

1)1( 1

(vi) The Present Value of an Annuity

Present value of an annuity of K1 per annum receivable or payable for n

years, commencing in one year, discounted at r% per annum:

PV =

nrr 1

11

1

(vii) Present Value of a perpetuity is:

i

RPv

WhereR is a perpetuity payable at the end of each interest period worth i per

interest period.

2. 1 % Confidence limits:

n

Snt

n

SZ aa 1,,

22


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3. Correlation and regression:

(i) Product moment correlation coefficient:

])(][)([ 2222 yynxxn

yxxynr

(ii) Spearmans rank correlation coefficient:

)1(

61

2

2

nn

drs

(iii) Least square regression line:

b =

22

n

n

n

xb

n

ya

OR xbya

4. (i) Z-test statistic:

n

xz

(ii) Standard error for a proportion:

n

pqp

5. (i) Arithmetic mean(grouped data):

f

f

(ii) Arithmetic mean(ungrouped data):

n

6. (i) Sample standard deviation(grouped):

SD =2

2

f

f


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(ii) Sample standard deviation(ungrouped):

SD =1

)( 2

n

(iii) Mean deviation:

n

(iv) Mean deviation(Grouped data)

f

f

7. (i) nth term of geometric series:

1 nn arT

(ii) Sum of the firstnterms of a geometric series:

1

1

r

raS

n

n OR

r

raS

n

n

1

1

Where ais the first term and ris the common ratio; 1r

(iii) nth term of an arithmetic progression.

dnaTn )1(

(iv) Sum of the first nterm of an arithmetic progression:

)(2

Lan

Sn OR dnan

122

Where ais the first term, L is the last term and dis the difference.

8. Probability distribution:

(i) Binomial

xnX

n qCxPxP )( OR pqwhereqp xnx

n

x

1

(ii) Poisson

P(x)!x

em mx

Where x = 0,1,2,3, ; and where mis Mean Value.


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(iii) Normal Distribution

Z =

9. )%]([% abBA

AaIRR

10. Quadratic formula:

a

acbbx

2

42

11. Index Numbers:

(i) Laspeyre Price Laspeyre Quantity

10000

01

QP

QP 100

00

01

PQ

PQ

(ii) Paasche Price Paasche Price

1001

10

1

QP

QP 100

10

11

PQ

PQ

(iii) Price Relative = 100 * P1/P0 Quantity Relative = 100*Q1/Q0

Price: 1000

1

w

P

Pw

Quantity: 1000

1

w

Q

Qw

12. Coefficient of skewness:

S

ModePsk

OR Sk=

DeviationdardS

Median

tan

)(3


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Standard Normal (Z) Table

Area between 0 and z

0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359

0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753

0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141

0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517

0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879

0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224

0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549

0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852

0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133

0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389

1.0 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621

1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830

1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015

1.30.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177

1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319

1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441

1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545

1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633

1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706

1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767

2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817

2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4842 0.4846 0.4850 0.4854 0.4857

2.2 0.4861 0.4864 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4887 0.4890

2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916

2.4 0.4918 0.4920 0.4922 0.4925 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936

2.5 0.4938 0.4940 0.4941 0.4943 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952

2.6 0.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964

2.7 0.4965 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974

2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981

2.9 0.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986

3.00.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990


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Chi-Square Table

Right tail areas for the Chi-squareDistribution

df\area .995 .990 .975 .950 .900 .750 .500 .250 .100 .050 .025 .010 .005

1 0.00004 0.00016 0.00098 0.00393 0.01579 0.10153 0.45494 1.32330 2.70554 3.84146 5.02389 6.63490 7.87944

2 0.01003 0.02010 0.05064 0.10259 0.21072 0.57536 1.38629 2.77259 4.60517 5.99146 7.37776 9.21034 10.59663

3 0.07172 0.11483 0.21580 0.35185 0.58437 1.21253 2.36597 4.10834 6.25139 7.81473 9.34840 11.34487 12.83816

4 0.20699 0.29711 0.48442 0.71072 1.06362 1.92256 3.35669 5.38527 7.77944 9.48773 11.14329 13.27670 14.86026

5 0.41174 0.55430 0.83121 1.14548 1.61031 2.67460 4.35146 6.62568 9.23636 11.07050 12.83250 15.08627 16.74960

6 0.67573 0.87209 1.23734 1.63538 2.20413 3.45460 5.34812 7.84080 10.64464 12.59159 14.44938 16.81189 18.54758

7 0.98926 1.23904 1.68987 2.16735 2.83311 4.25485 6.34581 9.03715 12.01704 14.06714 16.01276 18.47531 20.27774

8 1.34441 1.64650 2.17973 2.73264 3.48954 5.07064 7.34412 10.21885 13.36157 15.50731 17.53455 20.09024 21.95495

9 1.73493 2.08790 2.70039 3.32511 4.16816 5.89883 8.34283 11.38875 14.68366 16.91898 19.02277 21.66599 23.58935

10 2.15586 2.55821 3.24697 3.94030 4.86518 6.73720 9.34182 12.54886 15.98718 18.30704 20.48318 23.20925 25.18818

11 2.60322 3.05348 3.81575 4.57481 5.57778 7.58414 10.34100 13.70069 17.27501 19.67514 21.92005 24.72497 26.75685

12 3.07382 3.57057 4.40379 5.22603 6.30380 8.43842 11.34032 14.84540 18.54935 21.02607 23.33666 26.21697 28.29952

13 3.56503 4.10692 5.00875 5.89186 7.04150 9.29907 12.33976 15.98391 19.81193 22.36203 24.73560 27.68825 29.81947

14 4.07467 4.66043 5.62873 6.57063 7.78953 10.16531 13.33927 17.11693 21.06414 23.68479 26.11895 29.14124 31.31935

15 4.60092 5.22935 6.26214 7.26094 8.54676 11.03654 14.33886 18.24509 22.30713 24.99579 27.48839 30.57791 32.80132

16 5.14221 5.81221 6.90766 7.96165 9.31224 11.91222 15.33850 19.36886 23.54183 26.29623 28.84535 31.99993 34.26719

17 5.69722 6.40776 7.56419 8.67176 10.08519 12.79193 16.33818 20.48868 24.76904 27.58711 30.19101 33.40866 35.71847


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18 6.26480 7.01491 8.23075 9.39046 10.86494 13.67529 17.33790 21.60489 25.98942 28.86930 31.52638 34.80531 37.15645

19 6.84397 7.63273 8.90652 10.11701 11.65091 14.56200 18.33765 22.71781 27.20357 30.14353 32.85233 36.19087 38.58226

20 7.43384 8.26040 9.59078 10.85081 12.44261 15.45177 19.33743 23.82769 28.41198 31.41043 34.16961 37.56623 39.99685

21 8.03365 8.89720 10.28290 11.59131 13.23960 16.34438 20.33723 24.93478 29.61509 32.67057 35.47888 38.93217 41.40106

22 8.64272 9.54249 10.98232 12.33801 14.04149 17.23962 21.33704 26.03927 30.81328 33.92444 36.78071 40.28936 42.79565

23 9.26042 10.19572 11.68855 13.09051 14.84796 18.13730 22.33688 27.14134 32.00690 35.17246 38.07563 41.63840 44.18128

24 9.88623 10.85636 12.40115 13.84843 15.65868 19.03725 23.33673 28.24115 33.19624 36.41503 39.36408 42.97982 45.55851

25 10.51965 11.52398 13.11972 14.61141 16.47341 19.93934 24.33659 29.33885 34.38159 37.65248 40.64647 44.31410 46.92789

26 11.16024 12.19815 13.84390 15.37916 17.29188 20.84343 25.33646 30.43457 35.56317 38.88514 41.92317 45.64168 48.28988

27 11.80759 12.87850 14.57338 16.15140 18.11390 21.74940 26.33634 31.52841 36.74122 40.11327 43.19451 46.96294 49.64492

28 12.46134 13.56471 15.30786 16.92788 18.93924 22.65716 27.33623 32.62049 37.91592 41.33714 44.46079 48.27824 50.99338

29 13.12115 14.25645 16.04707 17.70837 19.76774 23.56659 28.33613 33.71091 39.08747 42.55697 45.72229 49.58788 52.33562

30 13.78672 14.95346 16.79077 18.49266 20.59923 24.47761 29.33603 34.79974 40.25602 43.77297 46.97924 50.89218 53.67196


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T3: SUGGESTED SOLUTIONS

SECTION A

SOLUTION ONE

1.1 4-------------------$540

9------------------ X

Therefore X =x 540 = $1,215

Using the rate 1$ = K5,250

Money shared 1,215 X 5,250 = B (ZK6,378,750)

1.2 . 5 = 5

Log =log 52x+1log2 = log 5

2x+1 =

X = ( )

= ( )= 0.5x 1.3219= 0.66095C.

1.3

Mean = = 64/8= 8

x x- (x-)25 -3 9

7 -1 1

6 -2 4

4 -4 16

10 2 4

9 1 1

12 4 16

11 3 9

64 60


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Standard Deviation = ( = = = 2.9277 (A)

1.4 (b)Negative skweness

1.5 Binomial

P(r=6) = nCr= 10C6()()= 0.2051= 20.51% .C)1.6

= 0.70 n = 300

= 0.70= ( ) = ()() = 0.02646Assume normal distributions of 99% confidence limits are

= 0.7 2.58(0.02646)= 0.7

0.06826

= 0.76826 & 0.63174

: . 99% confident limits are 63.17% and 76.83% (D)

1.7 index = (5.9/4.8 )x 100= 123 (C )

1.8 A = p(1+i)n :.

4p =p (1+i)6

4 = (1+i)6

= 1+i -1 = .i = 1.2599 -1 = 0.2599 = 25.99%( B)

1.9 20, 25, 30, 35,40, 45, 50, 55

Q3Position = (8) = 6th


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Answer D

1.10 PV = 00,500,1212.0

000,000,15K

nswer B

SECTION B

SOLUTION TWO

a)

Range x f fx cum f

60-62 61 5 305 563-65 64 4 256 9

66-68 67 3 201 12

69-71 70 2 140 14

72-74 73 6 438 20

20 1340

i) Mean = = =1340/20 = 67 (3marks)ii) Median = L +R/f = 66+(1/3)x3 L = 66, R = 10-9 , f = 3 , c=3

=66.67 = 66 + 1 = 67 (kg) (3marks)

b)

()( )x( ) = =

1 mark(ii) X2+3X +2

X2+ X +2X +2

X(X+1)+2(X+1)(x+1)(x+2) 2marks

(iii) log (x+5) = 1.8

Log to indices

X+5 =X+5 = 63.09573 : . x = 58.09573

c) 2x +y -2z = 2 1

3x -4y +2z = 4 24x +3y -5z = -8 3


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SOLUTION THREE

a) (i) P(F) =

P(M) = 1 - = (3marks)

(ii) P(M and PT) = P(M) P(PT)

= (0.35) = 0.2625 (3marks)

(iii) P(FOR PT) = P(F) + P(PT)P(FPT)= 0.25 + 0.35(0.25 x 0.35)= 0.60.0875 (3marks)

b) (i)

X 19 15 22 20 16

y 82 70 90 85 73

(2marks)

x y x2 y2 xy

19 82 361 6724 1558

15 70 225 4900 1050

22 90 484 8100 1980

20 85 400 7225 1700

16 73 256 5329 1168

92 400 1726 32278 7456

Mean of x = 92/5 =18.4 ; mean of y = 400/5 =80

0

20

40

60

80

100

0 5 10 15 20 25

Scatter Diagram

X versas Y

y

P

2

1


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b = -n. .= 7456 -5x(18.4)x(80) = 96 =2.8916 -n. 1726-5x(18.4)2 33.2

a =

-b

= 802.8916x18.4 = 80-53.20=26.8

Y = a + b x ;

y = 26.8 +2.8916x (5marks)

(iii) y = 26.8+2.8916(220)

= 662.952

Or K662952 (2 marks

SOLUTION FOUR

a)

Q 0 P0 Qn Pn pnqn qopn

50 3 80 4 320 240

30 6 40 5 200 240

40 5 20 8 160 100

105 2 150 2 300 300

20 7 10 10 100 70

1080 950

Paasche price index = 113.63100x950

1080100x

nqoP

nqnP


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b)

year cash flow

discount

factor(11%) present value

0 (30,000,000.00) 1.000 (30,000,000.00)

1 10,000,000.00 0.901 9,009,009.01

2 10,000,000.00 0.812 8,116,224.33

3 10,000,000.00 0.731 7,311,913.81

4 10,000,000.00 0.659 6,587,309.74

5 10,000,000.00 0.593 5,934,513.28

NPV 6,958,970.18

NPV is positive , therefore the project is viable (7marks)

c) PV cost = PV of benefits

800,000 =r1

000,000,1

1+r = 1000000/800000 =1.25

.r = 1.25-1 = .25 = 25% (5marks)


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SOLUTION FIVE

a)A = p(1 +i)n A= 7,800,000; P=6,000,000;.i = 0.10/4 =0.025

7,800,000= 6,000,000(1.025)n

7800000/6000000=1.025n

1.3 = 1.025n

Taking logs

Log 1.3 = log 1.025n

Log1.3 = nlog1.025

N = log1.3/log1.025 = 0.113943/0.010724 = 10.625 quarters app.=2years.

(3marks)

b)

x f fx x2 cumf fx2

155 5 775.00 24,025.00 5 120,125.00

165 10 1,650.00 27,225.00 15 272,250.00

175 30 5,250.00 30,625.00 45 918,750.00

185 70 12,950.00 34,225.00 115 2,395,750.00

195 40 7,800.00 38,025.00 155 1,521,000.00

155 28,425.00 5,227,875.00

(i) Mean = = 28425/155 =183.39(3marks)(ii) Standard deviation =square root (2/ - (/)2

= square root (5,227,875/155(183.39)2)

== 9.869 (4marks)

(iii) Median = L + (R/f)*C ; middle number (155+1)/2 = 78

Modal class = 180


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c)

SALES(Y) TOTALS AVERAGES CENTERED(T)

1 50

2 52 218 54.50

3 56 224 56.00 55.254 60 224 56.00 56.00

1 56 226 56.50 56.25

2 52 226 56.50 56.50

3 58

4 60

5 marks

SOLUTIONS SIX

(a)

A

o

= 8/36 x 360

o

= 80

o

(1 mark)Bo = 100o (1 mark)

Co50 (1 mark)Do= 130 (1 mark)

(b) A = P 1501)1( 1

i

i n

= 150 150125.0

1)125.1( 6

150 150125.0

10273.2

150 (8.2184)150

1232.76150

K1082.76

100

80

50

130B

A

C

D


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SECTION A- Answer any two questions

QUESTION ONE

(a) In Zambia, since the government liberalized the economy in the 1990s, markets

have been left alone because it is believed that price and quantity will always moveto equilibrium.

(i) State four benefits of economic liberalization. (4 marks)

(ii) Discuss the four disadvantages of economic liberalization. (4 marks)

(b) State five arguments in favor of nationalization. (5 marks)

(c) Explain five arguments that are used in support of privatization. (8 marks)

(d) Using a diagram discuss the consequences of imposition of a minimum wage.(4 marks)

Total Marks 25QUESTION TWO

(a) State clearly two general conditions for profit maximization. (4 marks)

(b) The following data relate to costs and the demand for its product.

OUTPUT Price(K000) Total Cost (K000)

- 101 21 252 20 36

3 19 444 18 515 17 596 16 697 15 818 14 959 13 11110 12 129

Calculate at each level of output

(i) Total revenue. (4 marks)

(ii) Marginal revenue. (4 marks)

(iii) Average cost. (4 marks)

(iv) Marginal cost. (4 marks)

(v) Identify the profit maximization of level of output and indicate the profit.

(5 marks)

Total Marks 25


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QUESTION THREE

(a) What are the main characteristics of a competitive industry? (6 marks)

(b) Explain three reasons why economists in Zambia should prefer prefect competition.

(6 marks)

(c) Explain why consumers may not always suffer if a competitive industry becamemonopolized. (5 marks)

(d) What is meant by price discrimination? (2 marks)

(e) Explain the main conditions that must exist for price discrimination to be successful.(6 marks)

Total Marks 25SECTION B- Answer any two questions

QUESTION FOUR

(a)

What is meant by economic growth? (3 marks)(b) Explain the benefit to a country for achieving an increase in economic growth.

(4 marks)

(c) What are the problems to a country which is achieving higher rates of economic

growth? (4 marks)

(d) What are the main reasons for calculating national income statistics in Zambia?

(8 marks)

(e) Distinguish between an inflationary gap and a deflationary gap? (6 marks)

Total Marks 25QUESTION FIVE

(a) Throughout history , money has taken many forms

(i) Explain the main functions of money. (8 marks)

(ii) Describe the five main characteristics of money which make it useful.

(5 marks)

(b) Explain the main factors that determine the demand for money according to theKeynes liquidity preference theory. (6 marks)

(c) What are the main functions of the Lusaka Stock Exchange? (4 marks)

(d) Explain what is meant by the Central Bank being Lender of last resort.(2 marks)

Total Marks 25


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QUESTION SIX

(a) What is meant by a multinational company? (4 marks)

(b) Discuss four reasons which have led to the growth of multinational companies inZambia. (8 marks)

(c) What are the advantages of multinational companies to the host country? (5 marks)

(d) Outline five arguments against the operation of multinational companies. (5 marks)

(e) What is meant by globalization of capital markets? (3 marks)

Total Marks 25

QUESTION SEVEN

(a) Distinguish between balance of payments and balance of trade. (5 marks)

(b) Explain the composition of the balance of payments of the Zambian economy.(8 marks)

(c) List four advantages and four disadvantages of floating exchange rates. (8 marks)

(d) Outline the reasons why a country might want to control the value of its currency.(4 marks)

Total Marks 25

END OF QUESTION PAPER


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SOLUTIONS T4

SUGGESTED SOLUTIONS

PILOT PAPER 2012

SECTION A

1(a) (i) The Benefits of economic liberalization are;

- Enables countries to gain access to global markets for their products and so

increase home employment and incomes.

- Forces firms to become more efficient and to compete with overseas products

in home and foreign markets.

- Encourages inward investment from foreign investors to revitalize home

industries.

- Improves choice and quality to home consumers.

(ii) The disadvantages of economic liberalization are the following;

- Developing countries can be exploited due to weakness in their industrial

base and need for investment.

- Deterioration of pay and conditions of service for workers.

- Environmental degradation if there are poor environmental protection laws.

- Increased dependence on other countries for markets and investment.

(b) Arguments in favor of nationalization;

- Natural monopoly such as public utilities e.gzesco.

- Sufficient capital available for investment because of government support.

- Provision of uneconomical services.

- Strategic control over key industries.

- Protects emplo

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