[Afrina]

Hi.

Congratz on passing FMA.

Since u’ve alrdy cleared FMA, m sure U’ll hv no prb clearing MA2, as itz jst the basics of wat u’v read in FMA.

Best U read BPP as ur main text book & practice from KAPLAN & BPP Exam kit & various past exam papers from online resources.

Make sure U hv clear concept on ALL topics of MA2, esp. on Capital investment appraisals, budgeting, Job-batch costing & process costing, Spreadsheets, Absorption & Marginal costing & Accounting for Inventory.

Best of luck 4 ur exm!

[Afrina]

Hello again,

Important topics in MA2:

Spreadsheets, Budgets & Capital Investment Appraisals r commonly found in this paper, these r the most important chapters where questions usually hit in exams. However, if ur thinking of taking this paper soon, i do recommend that you complete the full syllabus, as you may never know from where questions come from.

U can use both text books, but I’d go with BPP as question patterns are relevant with BPP revision kits.

Best of luck with MA2!

[Afrina]

it depends on the person studying the subject; whichever paper’s concept you can grasp quickly will be the one u find it during ur exam.

But from my perspective, MA2. Best of luck!

[Afrina]

Hi,

I have 2 other questions regarding to this chapter.

1. Michel has bought the following results. 10080 hrs actually worked and paid costing $ 8770.
If the rate variance is $ 706 (A), the efficiency variance $ 256 (F), and 5000 units were produced, what is the standard production time per unit?

A. 1.95 hrs
B. 1.96 hrs
C. 2.07 hrs
D. 2.08 hrs

The correct answer to this question was D. But I don’t know why i keep getting answer C. Can someone pls help me out with this problem??

2. A company operates a standard marginal costing system. Last month actual fixed OH Expenditure was 2% below budget and fixed OH expenditure variance was $ 1250. What was the actual fixed overhead expenditure for last month?

I would really appreciate it if someone can explain the calculation that was used to answer this question pls.

Thx in advance.

[Afrina]

Thanks for your reply sir.

Unfortunately sir, my server doesn’t support the free lectures of open tuition. So i always have to rely on the lecture notes and forums.

[Afrina]

I get it now.

thx 4 d help of highlighting the key technique!

🙂

[Afrina]

Which topics mainly came as hard questions on the exam, can someone be kind enough to highlight it pls.

[Afrina]

Hi again!

I have another problem with two June exam papers 2012 & 2013.

June 2012:

Q: An investor has the choice between 2 investments. Investment Exe offers interest of 4% per year compound semi-annually for a period of three years. Investment Wye offers one interest payment of 20% at the end of its four-year life.

What is the annual effective interest rate offered by the two investments?

Investment Exe Ivestment Wye
A. 4% 4.66%
B. 4% 5%
C. 4.04% 4.66%
D. 4.04% 5%

Correct answer given was C. How should the calculation for “semi-annually for period of 3 years” be?

June 2013:

Q: A project has an initial outflow of $12000 followed by 6 equal annual cash inflows, commencing in 1 year’s time. The payback period is exactly 4 years. The cost of capital is 12% per year.

What is the project’s NPV (to the nearest $) ?

A. $333
B. -$2899
C.-$3778
D.-$5926

Correct answer given was A with no clear explanation of solving this question. How do i solve this question??

Please help, as this topic is quite complicated for me to catch.

Thx.

[Afrina]

Dear Mr. Moffat,

Hope your well.

I need your help with the following question.

The following information relates to a 2 year project.

Initial investment $ 1m
Cash inflow: yr 1: $ 750000, yr 2: $ 500000
Cost of capital: yr 1: 10%, yr 2: 15%

What is the NPV of the project (to the nearest $500)?

A. ($ 12000)
B. ($ 55000)
C. $ 77000
D. $ 116500.

Given that the correct answer is C.

However, when I did this math, i came up with a result of $ 59750. And when i checked the answer, it stated that for yr 1, 750000/1.10 & yr 2 500000 / (1.10 x 1.15).
I’m confused with the denominators of both years. Kindly can you give me an alternative way to calculate this type of math & also explain to me why they used the cost of capital Discount factors in this way.

Humble Regards Sir.

[Afrina]

thank you sir.

[Afrina]

Hi Devansu,

Thanks so much for your kind help, I’ve thoroughly understood your calculation.

I have another question though regarding Marginal Costing methods.

Let me give you an e.g.:

The OAR for a certain product T is $4 per machine hr. Each unit of T requires 3 machine hrs. Inventories of product T last period were:

Opening inventory 2400 units; Closing inventory 2700 units.

Compared with marginal costing profit for the period, what will the absorption costing profit for product T be?

The answer is $3600 higher. I got the calculation correct. But here’s my prb.
We know that when CI (Closing Inventory) > OI (opening inventory), MCP (Marginal Costinng Profit) > ACP (Absorption Costing Profit & vice versa.

Over here, the question already stated that CI is higher than OI. So how can ACP be higher than MCP in this case? Pls help.

[Afrina]

Good Day Mr. Moffat,

Hope your well.

I have 3 questions regarding to Marginal Costing methods.

1. I’d like to know if there is any kind of formula for finding closing inventory, esp. when both production costs & sales cost is given.

2. A company operates a standard marginal costing system. Last month its actual fixed overhead expenditure was 10% above budget resulting in a fixed overhead expenditure variance of $ 36000.

What was the actual expenditure on fixed OH last month?

A. $324,000
B. $360,000
C. $396,000
D. $400,000

From this question, do we calculate by charging 110% on $ 36000? If not kindly show me how.

3. A company has the following budgeted costs & revenues:

Sales Price $50/ unit
Variable production cost $18/ unit
Fixed production cost $10/ unit

In the most recent period, 2000 units were produced & 1000 units were sold. Actual sales price, variable production cost per unit & total fixed production costs were all budgeted. Fixed production costs were over-absorbed by $ 4000. There was no opening inventory for the period.

What would be the reduction in profit for the period if the company has used marginal costing rather than absorption costing?

A. 4000
B. 6000
C. 10000
D. 14000.

From this question I have two problems. 1st, I want to know which unit ( 2000 or 1000) I should be using in order to calculate the budgeted fixed overhead.
2nd, by using this information, how do i calculate the Actual OH incurred, in order to bring about the correct difference of the two costing methods. If there’s an alternative way, please do show the calculation.

Thanks in advance.

[Afrina]

Thank you so much for your help!

[Afrina]

@ lloyd

Yeah i did calculate to get the answer, i just came across a similar type of scenario where i had to subtract the beginning & ending year staff figure, and I thought this question may be related to that question.

Anyway, thx.

[Afrina]

Please help with this question as well.

A company operates a standard marginal costing system. Last month its actual fixed overhead expenditure was 10% above budget resulting in a fixed overhead expenditure variance of $ 36000.

What was the actual expenditure on fixed overheads last month?

A. $ 324,000
B. $ 360,000
C. $ 396,000
D. $ 400,000

Correct answer is C. Pls Help me with the calculation.

[Afrina]

Thanks to all. 😀

[Afrina]

@ Joyanne,

Hi.

Discount received is usually a Cr entry & Discount allowed Dr, but it was recorded as Discount allowed Cr instead of Discount allowed Dr.

So to vanish discount allowed from the above error, we have to:

Dr Suspense a/c $ 100 ( total amount of the 2 entries)
Cr Discount Received $ 50 ( the correct entry )
Cr Discount Allowed $ 50 ( cancel out Discount Allowed ).

hope this helps. 🙂

[Afrina]

U can use what u already have. If u have a clear conception of what you revised, U’ll b able to answer the questions without any hesitation. Best of luck 4 ur exam.

[Afrina]

Hi sir,

Can you pls explain to y this is the correct answer, my exam kit’s print isn’t so clear.

In preparing its financial statements for the current year, a company’s closing inventory was understated by $ 300,000.

What will be the effect of this error if it remains uncorrected?

A. The current year’s profit will be overstated & next year’s profit will be understated.
B. The current year’s profit will be understated but there will be no effect on next year’s profit.
C. The current year’s profit will be understated & next year’s profit will be overstated.
D. The current year’s profit will be overstated but there will be no effect on next year’s profit.

I’m extremely confused about this question, and would like to know if we were to correct it, what would the profit of current year & next year’s be.

Thx in advance for your help.

[Afrina]

oh! Ok thx a lot, now i get it. 🙂 🙂 🙂

[Afrina]

Thx Mr. Moffat & rkwasim.

[Afrina]

Persaud,

Revaluation reserve:

valuation equity account that is adjusted to a higher level, caused by an upward appraisal of capital assets and a resultant increase in the carrying value of such assets.

[Afrina]

Hi!

Ans:

The company purchased $ 170,000 4 years ago, having the total years of useful life of 20 years. So remaining useful life before revaluation is 16 yrs.

New CV = $170,000 x 16/20 yrs = $ 136,000

So, ur Revaluation surplus = $ 210,000 – 136,000 = $ 74,000

Alternative way u can do this:

Purchase 4 years ago $170,000

Useful life of 20 years, depreciation = 170,000/20 = $ 8500

Accumulated Dep’n for 4 yrs = $ 8500 x 4 = $ 34,000.

NBV / CV = $ 170,000 – 34,000 = $ 136,000

Therefore, revaluation surplus = $ 210,000 – 136,000 = $ 74,000

Hope this helps.

[Afrina]

Thx a lot!

[Afrina]

Thank you very much Sir.

[Author]

Posts