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Didn’t think this exam was that hard, just the questions that I’m strongest at like ABC, Target Costing, Throughput, Limiting Factor, Quantitative Analysis didn’t come up
1) Relevant costing
This was quite straightforward, just had to identify which costs would be incurred as a direct consequence of undertaking the project and which costs can be classed as sunk costs and ignored. I added the opportunity cost of not being able to sell the old swipe system as a result of undertaking the contract, not sure if right or not.
In part b, i made a not of the fact that the $500 penalty for late completion of project X can be avoided by completing project X first and then starting the Push Co project as they had no work lined up for a weeks time
2) Transfer pricing
a was relatively simple, prepare profit and loss statements for both divisions and then combine to give a company profit and loss. think I made a mistake of including divisional profit and losses in the company profit statement, probs couple marks lost
for part b, i took the optimised transfer price to be $65. this is because A has autonomy to buy the same part externally for $65 so if B charges anything more than $65, then A would simply choose to buy externally.
part c, I think I worked out that at a transfer price of $65, A would see an £800,000 increase in net profit while B would see either a smaller increase or even a loss. I said that even reducing the transfer price to $65 would benefit the company overall, B would be unwilling to accept because it would give them poorer profit figures. Didn’t provide a reasonable recommendation though so probs couple marks lost.
3) This was tricky, never seen a question on budgeting quite like this so just improvised and wrote down as much as i could.
For part a, think the objectives I wrote down were set targets, control, performance evaluation and forecasting. Gave a little explanation on each
For part b, i took participative style of budgeting as a ‘bottom-up’ approach so briefly explained what it was and the benefits
4) Lifecycle cost
a was fairly straightforward, calculate total costs and then divide by numbe of units.
b, i made a little mistake on the calculation of the time taken for the 100th unit, small mistake, hope they don’t punish me too much.
c, Just wrote jibberish, I said that by using lifecycle costing, you are able to estimate the costs of the product throughout the whole life cycle thus, able to prevent overspending during r + d and under pricing during product launch. Also said something about cost gaps and ways to reduce although thats probs completely irrelevant, only 4 marks tho.
5) Variance analysis, pretty easy, only one which i might have made a mistake on is the set up efficiency variance.
2nd part of this question is easy too
Overall, the exam could have been a lot better if my stronger questions came up, but I’m not that pissed off, I gave every question my best shot and I don’t think i’ve made any significant mistakes (apart from the budgeting question, but that will depend on how strict the marker is), I’m fairly confident I got the 50% but fingers crossed just in case.