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It depends a little on the requirements but:
(a) If you are asked to give advice eg choose between alternative strategies, try a structure like:
1 Summarise the evidence from the exhibits. However, do not simply copy data from question to answer (no marks for copying!), move it forward eg by working our % sales increases, or changes in % market share, or the size of competitors. Always move things forward
2 Draw Inferences from this data eg that the strength and size of competition makes it unlikely that the company would be able to compete on costs. This is where models can sometimes help.
3 Come to a conclusion/recommendation.
This might all be dressed up as a report.
(b) If you are asked to brief the board eg by producing PowerPoint slides, go from summarising the situation, perhaps briefly describing an approach/model, then reach a conclusion if required.
Don’t worry too much at the start about finding a model that fits. Concentrate on a common-sense, logical approach and use models only if they help you to make sense of the situation and suggest possible responses to the problem.
Ignoring the transfer price for the moment, if there are capacity limitations, eg material, the way to maximise contribution is to work out for each product:
Contribution/unit of restricted resource (here material)
Then make the products (up to their maximum sales volume) in the order of this index, highest first. This gives you the best way to eke out your precious material so that it always earns the highest possible contribution per unit used. So if Product A earns $2 per kg used and the Product B $3 per kg used use the material for B first then turn to A.
In the example in the notes, labour is the restricted resource and, as the answer shows, it is better for the Division A to first dedicate labour to making Product X ($4/hr) than Product Y (only $3 per hour). Ignoring Division B, Division A would make only product X. If 10 hours of labour were removed from making X, then the loss in contribution would be $4 x 10 = $40.
To make a unit of Y, A’s own variable costs are $70. But A will also perceive an opportunity cost of $40 because it can’t then make a unit of X.
To persuade A to sell to B it will therefore have to have revenue which covers both its own variable costs and the opportunity costs. So, the required transfer cost is $70 +$40 = $110.
HTH
Buy a Revision Kit/Question Bank from BPP (20% discount if you buy through this site). Study a chapter in our notes, doing the questions in each chapter. Then try appropriate questions in the revision kit.
Practise, practise, practise questions!
PVS is considering establishing its services in B4P outlets. PVS owns its brand and expertise but would allow B4P to offer those. So PVS is the franchisor.
Similarly when McDonalds let’s someone set up a McDonald’s outlet, McDonalds is the franchisor and the other party is the franchisee.
NO! You need to practise lots of questions. This exam is relatively light on new technical material but often requires you to ‘think on your feet’ and use common sense when attempting questions.
This exam has relatively little new technical content (nb learn about Economic Value Added), but it is vital that you practise lots of questions.
So read notes, try many questions and listen to lectures where you need more instruction.
Stert with FA1 and MA1, then move on to FA2 and MA2 etc. I would recommend this route for you if you found BT and MA currently too demanding..
See here:
Have a look atourfree notes to see how you get on. Before attempting an exam it is important for you to practise lots of question, so you should buy a question bank/revision kit. You get a 20% discount if you buy through this site.
Yes. Lots of levels, boss upon boss and great formality. Role cultures are likely.
A short wide structure means fewer levels and better vertical communication and improved cooperation because of less hang-ups about status. So, facilitates a task culture.
I thing it should be:
10+(20-10)*13875/(13875+14350)
However, in the SBL exam you are much more likely to be given IRRs already calculated. You need to be able to interpret them and understand them rather than calculate them.
I suspect the quote should read;
“Configurations are not just structures, nor even just power systems. They are cultures.”
Obviously configurations do influence structures and power, but he meant that the configurations will certainly influence the culture. So for example
A tall narrow configurations will tend to correlate with a task culture.
A wide, flat configuration will be more likely to encourage cooperation and so a task culture.
There have been no syllabus changes recently to E1. Sorry, we should have changed the date on the notes.
Note that it is very important to have lots of question practice so it is essential that you also work through a revision kit/question bank provided by BPP or Kaplan. You can get a 20% discount on BPP books ordered through this site.
Glad you’ve heard good things about us!
We don’t have access to the pre-seen material, so these answers are more general than you would like.
Volunteers. Depends on how reliant the charity is on its volunteers. They could be key players if vital. Otherwise they could be ‘keep informed’. I think level of interest must be high – otherwise they wouldn’t volunteer.
Principal/agent. I think that the trustees are likely to be the principals as they run the show. Donor might be agents – or they might not fit into this simple model. Remember, models simplify real life and you don’t have to squeeze everything to fit into a model.
Not sure who ‘members of the charity’ are. Volunteers, donors, employees. Again look at the information given and decide on that basis. You are very unlikely to be specifically told to use Mendelow’s Matrix. Use it as far as it ‘s useful.
In a centralised organisation, heat office takes decisions and tells branches/departments/subsidiaries what to do. This at least means all the sub0units should be acting in coordination, but also means that HO might be making decisions where it has little information or expertise. There’s also likely to be delays in the communication process.
Once decentralisation is introduced, the sub-units can become un-coordinated. For example, the sales department wants to sell 10,000 units but the production department has decided to make only 8,000 units. Certainly, lateral communication is needed.
However, the sub-units should ultimately be acting in the best interests of the organisation overall. Eg head office might have noticed that cash-flow is tight so will require all sub-units not to incur capital expenditure. Therefore, downward communication is needed for both coordination and to ensure everyone is aimed at the strategic objectives of the organisation.
I think the difference stems from the word ‘instrument’.
An instrument can be traded and its value can vary. A bank deposit is not an instrument, but is part of the money market.
There are two things going on here – process costing, and accounting for joint and by-products.
Process costing: the cost per unit is calculated as though everything goes to plan. If input is 100kg at $10/kg and 20% is the normal loss with the lost material selling for $2/kg, then the cost per unit is:
(100 x 10 – 20 x 2)/80 = $12
If there are only 79 units made (an abnormal loss of 1 unit) the cost of that abnormal loss like taking a good unit down from the shelf and scrapping it for $2, so the cost is £12 – $2 – 10.
Joint cost/by products. This is where there is a common process to start with then the initial product (precursor) splits into, say, two in a subsequent process. You need to know how to split the initial, joint costs and feed them into the two resulting products.
So, continuing my example, if 80kg were made as expected at $12 each the total cost of 12 x 80 = 960 has to be split ie apportioned between the two resulting products. You were told in your question do to the split according to the output volumes of the two final products.
I agree with you.
‘Flexing’ is always performed by relation to volume: volume produced for cost variances or volume sold for sales revenue variances.
So if budgeted sales is 1000 units at a budgeted sp of $10 per unit, budgeted revenue is $10,000.
If actual sales are 1100 units at $11 per unit, actual revenue is $12,100 and the total revenue variance is $2,100 F.
The sales price variances is 1100 x (11 – 10) = 1,100F
The sales volume revenue variance is (1100 – 1000) x 10 = 1,000FNote 1000 + 1100 = 2100, the total revenue variance.
To me the phrase “What is the total sales revenue variance comparing actual revenue against the flexed budget” must mean the price variance. In the example, above the actual revenue is 12,100 and the flexed budget revenue is 1,100 x 10 = 11,000 so the difference is the price variance 1,100 F
Generally, sales tax is not recoverable on cars so the sales tax is part of the cost of the asset.
Sales tax is recoverable on vans, so is not part of the cost of the asset?
The 70/30 business/private spilt is irrelevant.
The question should have specified the sales tax rate to be used.
The profit sharing ratio always applies to residual profits ie after salaries and interest on capital. However, salaries, interest on capital and the PSR are all components if the profit sharing agreement. Generally, if there is interest and/or salaries the profit share is likely yo refer to residual profits.
When receipt of the invoice was recorded the entry would have been, Dr Purchases, Cr Accounts payable. If the goods were returned immediately the next entry would be Dr Accounts payable Cr Returns outwards.
However, a cheque was issued before the goods were returned, so Dr Accounts Payable Cr Bank. When the cheque is cancelled and the goods returned, the entry should be Dr Bank, Cr Returns outward.
I think the model answer is incorrect. I think it’s OK to Dr Accounts payable before the credit note is received. That would stop the amount being inadvertently paid.
