UG1 BUSINESS & MANAGEMENT EXAMINATION

UG1: Introduction to Financial and Management

Accounting

March 2021

Assignment

Time permitted 2 hours

Instructions

All answers should be input into a separate document

To be completed using a word document file

Answer ALL three questions.

Question 1 32 marks

Question 2 36 marks

Question 3 12 marks

80 marks
 BELLERBYS COLLEGE UG1 EXAMINATION

Question 1

a) Using the trial balance extract for Core-Metals Ltd. prepare

(i) A profit and loss appropriation account for the year ended 31 December 2020 (11 marks)

(ii) An extract of current assets and current liabilities from the statement of financial position
(9 marks)

(iii) An extract of Capital and reserves from the statement of financial position. (4 marks)

Core-Metals Ltd. Trial Balance extract as at 31 December 2020

Dr £ Cr £
Accruals 5,400
Prepayments 7,100
Trade receivables 35,500
Trade payables 42,400
Admin expenses 60,300
Bank 5,400
loan 2028 150,000
General reserve 50,125
Interest paid 12,000
Interim dividends 8,400
Opening inventory 12,400
Ordinary shares at £1.00 200,000
8% Preference shares 80,000
Retained profit 12,400
Revaluation reserve 30,200
Share Premium 40,000

Additional information
1. Profit before interest and taxation for the year ending 31 December 2020 is £95,000
2. Corporation tax is to be estimated at £22,000
3. Loan interest is charged at a rate of 10% per annum
4. Inventory as at 31 December 2020 is £15,400
5. There is to be a transfer of £12,000 to the general reserve
6. Ordinary shares have been issued at £1.20 the amount received totalled £120,000 and
this was paid into the bank account.
7. Ordinary dividends are proposed at 5p per ordinary share at the year-end balance
8. Preference dividends are yet to be paid

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b) The director of the company is proposing to complete the following two actions; pay
20,000 of the Loan balance using the share premium. Transfer £10,000 from the
revaluation reserve to the general reserve. You are to make recommendations on these
proposals of the director.
(8 marks)

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Question 2

a) Using the information below calculate for both years the following ratios for KLE Plc.
Rounding is to two decimal places (16 marks)

(i) Gross profit margin

(ii) Net profit margin
(iii) Return on capital employed
(iv) Inventory turnover
(v) Current ratio
(vi) Earnings per share
(vii) Dividend cover
(viii) Gearing ratio

KLE Plc 2019 2020

£ £
Sales 320,000 440,000
Gross profit 120,000 110,000
Net profit before tax 75,000 55,000
Opening inventory 21,500 23,500
Closing inventory 18,200 26,400
Current assets 34,000 38,000
Current liabilities 42,000 35,000
Non-current assets 460,000 650,000
Non-current liabilities 140,000 155,000
Share capital and reserves 312,000 498,000
Ordinary shares at £1.00 250,000 380,000
10% Preference shares at £1.10 52,000 52,000
Market price ordinary shares £2.50 £2.65
Corporation Tax 15,000 14,000
Ordinary dividend £5,000 £8,000

b) Comment on the results of ratios (i, ii, iii) between 2019 and 2020 (6 marks)

c) Comment on the results of the current ratio, inventory turnover and the earnings per
share for both years
(6 marks)

d) Comment on the results of the gearing ratio of both 2019 and 2020 and explain whether
it’s better for a company to have high gearing or low gearing.
(6 marks)

e) Comment on the results of the dividend cover

(2 marks)

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Question 3)

a) Outline the steps taken to find an overhead absorption rate and evaluate the usefulness of
using an overhead absorption rate to assign indirect costs to products manufactured.

(8 marks)

b) Provide advantages and limitations of using standard costing

(4 marks)

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END OF ASSIGNMENT
Success of any organization depends on these three points.

Strategy

Clever integration of a great operations related strategy.

Process

Process to deliver products and services

Analytics

Analytics to support the decision needed to manage the firm.

Overall COO (Chief Operating Officer) is responsible to determine the company’s competitive
strategy along-with CEO and President. He determines the location, facilities, vendors to use and
implementation of the hiring policy. There basic principles that guide the design of transformation
process/ operations.

How different types of processes are organized

How to determine the capacity of a process

How long it should take to make a unit

How the quality of a process is monitored

How information is used to make decisions.

Process activities further involve the following:

Planning

Sourcing

Making

Making

Delivering

Return

Traditional Supply Chain: That used to be Dell’s in 1905, where took 1-30 days from supplier to
SLC Huba and it further took 2-5 days in the production units. Further, it takes 1-7 days to reach
the specific customers.

Centroid method is used for locating single facility that considers existing facilities the distance
between them and the volumes of goods to be shipped between them. Assumes inbound and
outbound transportation costs are equal. It doesn’t include special shipping costs for less

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 BELLERBYS COLLEGE UG1 EXAMINATION

Levelled schedule material into final assembly at a constant rate. Do it right the first time and if
something goes wrong, stops the process automatically. Workers are personally responsible for the
quality of their product. Workers become their own inspectors. Workers are empowered to do their
own maintenance. Levelled production reduces the labour cost with better customer service. With
all of this, it improves the quality of the production

. Do it right the first time and if something goes wrong, stops the process automatically. Workers
are personally responsible for the quality of their product. Workers become their own inspectors.
Workers are empowered to do their own maintenance.

On the other conventional production system produce many forms of waste and ultimately which
do not meet the current strategic needs of any organization whose goal is lean production, quality
and cost.

e.g:

Conventional Schedule:

Model A:

Sun -300

Mon-300

Tue-300

Wed-100

Thu-100

Total- 1000

Model-B

Sun -0

Mon-0

Tue-0

Wed-200

Thu-300

Total- 500

Levelled Schedule:

Model A:

Sun -200

Mon-200

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 BELLERBYS COLLEGE UG1 EXAMINATION

Tue-200

Wed-200

Thu-200

Total- 1000

Model-B

Sun -100

Mon-100

Tue-100

Wed-100

Thu-100

Total- 500

Total Demand= 1500 Units

Model A- 1000

Model B- 500

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