@IVE(Tuen Mun)

A-Level Principles of Accounts

• Paper 2• 2008 examination review and teaching exp

eriences sharing• By Mr Tony Lim--Lecturer• Department of Business Services and Man

agement• Institute of Vocational Education (Tuen Mu

n)• 22/11/2008

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(A) Paper 2 syllabus review

• Costing -principles and methods

(eg overheads absorption)• Planning and control

(eg Standard Costing, Budgeting)

• Decision making

(eg Marginal Costing, NPV )• Financial accounting theory

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(B) Past Paper Analysis-Costing principles and methods

Y2004 Y 2005 Y 2006 Y 2007 Y 2008

1 Absorption of overheads and absorption rate A-Q1(9%) B-Q4(17%) A-Q1(3%)calculation of unit production costsProducts unit cost A-Q1(3%)ABC method A-Q1(4%) A-Q1(10%)

2 Valuation of stocks A-Q1(11%) B-Q4(4%)3 Cost behaviours analysis B-Q4(6%) A-Q2(11%)4 Process Costing A-Q1(6%) B-Q4(20%) A-Q2(11%) B-Q4(8%) A-Q2(14%)

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(B) Past Paper Analysis-Planning and control

Y2004 Y 2005 Y 2006 Y 2007 Y 2008

1 Standard costingVariance analysis A-Q2(20%) A-Q2(15%) A-Q1(16%) B-Q4(11%)

2 Budgeting Flexible budgeting B--Q5(9%) B-Q4(5%)

Budget income statement A-Q2(7%)Cash budget A-Q1(24%) A-Q2(19%) A-Q1(24%)

Functional budget A-Q1(6%)

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(B) Past Paper AnalysisDecision Making

Y2004 Y 2005 Y 2006 Y 2007 Y 2008

1 Investment Appraisal(Long term decision )NPV calculation & explanations B-Q4(14%) B-Q5(10%) A-Q2(10%) B-Q5(20%)

NPV Buy or Lease B-Q5(10%)

2 Marginal Costing System(Short term decision): B-Q5(3%) B-Q4(3%)--contribution/profits maximisation A-Q1(30%) A-Q2(9%)Minimum pricing B-Q4(12%)Breakeven Analysis/ Target Profits/CVPA-Q2(6%) B-Q5 (20%) B-Q5(11%) A-Q2(16%)

Acceptance of order under spare capacity A-Q1(8%) ,and full capacity A-Q2(8%)Make or buy decision B-Q5(17%)

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(B) Past Paper Analysis

• --Financial accounting theory, and applications. (20%)

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(C) Examiners’ commentSharing of Examiners' Comment

Answering techniques:1. To have clear presentation of workings/ steps helped candidates to gain marks.2. To practise writing effectively, mastering the correct terminology, and giving precise answer.3. No marks awarded to a decision without supporting calculations.4. A few did not label the variances properly5. To read questions carefully in order to answer correctly.6. The topics included in syllabus are analytical tools to assist a manager to make better decisions.7. Students must analyse questions from the management's perspective.

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(D) Students’ comment

• 1) Difficult to understand the questions, and to apply theory in answering;

• 2) Difficult to apply data in the calculation questions;

• 3) Complicated areas:– Standard costing, budgeting, NPV

applications, overheads absorption.

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(E) Teaching experiences sharing (1)

• Examiners are based on the concept of management perspective to set their questions

• Students are difficult to understand the questions because they lack business experience and applications.

• Eg 1 direct Vs indirect costs• Eg 2 absorption of overheads based on ac

tual unit of basis

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(E) Teaching experiences sharing (2)

• Some simple cases studying are recommended to draw students’ observations of the costing behaviour

• This can help students to understand:

-- variable and fixed costs

-- applications of high/ low method to separate any semi-variable costs

-- calculation of flexible budgeting.

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(E) Teaching experiences sharing (3)

• Some process costing questions were based:• Calculation of loss in process

• Calculation of equivalent units(Year 2008-Q2a)

Yr 2005 ……" A normal production loss within 7% of the completed units is expected"………

Yr 2006 ……" Process 1: A normal spoilage of 4% occurred at the end of the process"………

……" Process 2: A normal spoilage of 1000 units occurred immediately after adding

in raw material B"………and "work-in-progress

Yr 2007 ……" One-sixth of the completed units (identified at the satge of completion)"………

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(E) Teaching experiences sharing (4a)

• Planning and control techniques are essential in management accounting

• Eg---Budgetary control is designed to

control cost centres;

---Preparation of budget PNL accounts and balance sheets are different from cash budgets(eg non-cash expenses are ignored. )

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(E) Teaching experiences sharing (4b)

Eg 2 Standard costing and variance analysis are important in cost units controlling

Yr 2004 ……"Prepare a statement in columnar form showing the standard cost per unit"……

Yr 2005 ……"Prepare a variance analysis on the 2004 performance of Product X"……

Yr 2007 ……"Explain whether it is fair for the General Manager to hold the production

manager accountable for" ……

Yr 2008 ……"Using marginal costing approach, prepare for …a three-column trading account

comparing flexible budget and the actual performance……"

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(E) Teaching experiences sharing (5a)

• Decision Making—long-term. To calculate PV by discounting the future time value of money. PV = 1/ (1 +r )ª

Yr 2007 ……."Supporting with NPV calculations, advise …whether it is worthy to spend $1.2M to acquire plant."

Yr 2008 …….."Based on NPV calculations, advise which proposal ….should adopt."

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(E) Teaching experiences sharing (5b)

• Decision Making—short-term. Only relevant costs will be considered.

Yr 2005 ……"Advise which alternative should be adopted, supporting with calculations

on the respective total contributions under the two alternatives"……

Yr 2007 ……"Comment whether it is advisable for Porsha Company to set up the sales

team by transferring staff from the production department"….

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(F) Sources of examination questions

• Past years A-level questions;

• Professional bodies past questions:

---AAT; CIMA; ACCA

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