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Instructions to students:
No candidate will be permitted to leave within the first hour or the last half hour of this
exam.
Both entry and exit to the examination hall shall be at the absolute discretion of the
invigilator.
Students should answer ONE compulsory question from Section A (weighting 50%)
and TWO questions from Section B (weighting 25% x 2).
Materials allowed:
Calculators: You may use Business School approved models only: Casio FX-
83GT/Casio-83GT+, Casio FX-85GT/Casio FX-85GT+, Sharp EL531WH, Aurora AX-
582BL.
CONTINUED OVERLEAF/
SECTION A
You must use ONE WHITE answer sheet per question. To provide an answer
that exceeds the space on the answer sheet, please raise your hand to request
a YELLOW answer sheet.
QUESTION 1
Paul Carter runs a patisserie and is considering launch of Portuguese Egg Tarts
(PET) in Glasgow next year. In order to facilitate the budgeting process for the next
year, the following information has been collected:
- Annual production will be 300 batches of PET. All the tarts will be sold on the
day they are baked, and the selling price is £500 per batch.
- A type of flour specialised for PET will be bought at £3 per kilogram next year.
- 8 kilograms of flour will be used to bake a batch of PET for the first 40
batches. The quantity of flour used per batch will fall by 1% of the original
level for each 40 batches thereafter as the learning curve effect improves the
efficiency with which the flour is used up to 200th batches.
- Delivery of the flour will be made every 4 months when the stored flour, which
will be used at an even rate throughout the year, is used up.
- Flour storage cost for 4 months is £0.5 per kilogram.
- Direct labour hour is subject to a learning curve of 97% (b: -0.02915).
- The labour cost of the first batch is £50 (at £10 per hour)
- Variable overhead rate is based on the quantity of flour used, which is at £1
per kilogram.
REQUIRED:-
1.1 Prepare a budget for the next year showing contribution earned from PET, and
advise Paul whether the PET project is acceptable based on the assumption that the
spare capacity can be utilised for PET production and sales. Show all relevant
workings.
(40%)
1.2 Another supplier approached Paul Carter and offered to deliver the identical flour
everyday on just-in-time basis in return for the price of £3.2 per kilogram. Advise
Paul whether this offer is acceptable.
(10%)
(TOTAL 50%)
CONTINUED OVERLEAF/
SECTION B
You must now answer TWO out of three questions from this section. As
before, please use a new WHITE answer sheet. To provide an answer that
exceeds the space on the answer sheet, please raise your hand to request a
YELLOW answer sheet.
Pricing is an essential decision for any business. The following approaches to pricing
have been used by business:
Marginal cost-plus
Target costing
Penetration pricing
Differential pricing
Price-skimming
Explain each of these methods, illustrating your answer with an example of a product
or service which one might reasonably expect to be priced according to each of the
above methods. You should also state why pricing methods using differential calculus
are theoretically sound, but rarely used in practice.
(25%)
The Balanced Scorecard has been one of the most well-received innovations in
management accounting in recent years. Explain the advantages of the balanced
scorecard and describe each of its four perspectives. Identify THREE measures which
could be applied to each of the three non-financial perspectives of a mass-market
travel company which owns its own airline and hotels
(25%)
(TOTAL 50%)
CONTINUED OVERLEAF/
Before your exam answers are collected:
Please ensure that you have written the course code (on the front of this exam
paper), your student ID, date of birth and the number of the question that you
have attempted on each answer sheet.
Put your exam answers in the order of the question number, ensuring that
yellow answer sheets follow the appropriate white answer sheet.
Do not place any other exam materials, including the exam paper, beside the
A3 answer sheets.
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