PART 1

FRIDAY 5 DECEMBER 2003

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A

ALL 25 questions are compulsory and MUST be

answered

Section B

ALL FIVE questions are compulsory and MUST be

answered

Formulae Sheet, Present Value and Annuity Tables are on

pages 13, 14 and 15

Paper 1.2

Financial

Information for

Management

Section A – ALL 25 questions are compulsory and MUST be attempted

Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice

question.

Each question within this section is worth 2 marks.

1

A cost is described as staying the same over a certain activity range and then increasing but remaining stable over a

revised activity range in the short term.

What type of cost is this?

A

B

C

D

2

A

A

A

A

fixed cost

variable cost

semi-variable cost

stepped fixed cost

The following quarterly adjustments have been calculated using the multiplicative model for time series analysis:

Quarter 1

0·95

Quarter 2

1·25

Quarter 3

0·70

What would be the adjustment for quarter 4 to two decimal places?

A

B

C

D

3

0·83

0·91

1·10

1·20

A company which uses marginal costing has a profit of £37,500 for a period. Opening stock was 100 units and

closing stock was 350 units.

The fixed production overhead absorption rate is £4 per unit.

What is the profit under absorption costing?

A

B

C

D

4

£35,700

£36,500

£38,500

£39,300

The following could relate to contract costing:

(i)

Work is for a period of long duration.

(ii) Progress payments are amounts paid for the contract throughout the course of the contract.

(iii) Architects’ certificates are provided to establish the amount of work certified.

Which of the above are correct?

A

B

C

D

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

2

5

A company values stocks using the weighted average value after each purchase. The following receipts and issues

have been made with regards to materials for the last month:

Date

Receipts

Issues

Units

£/unit

Valuation

Brought forward

100

£5

£500

4th

150

£5·50

£825

16th

Units

100

20th

100

£6

£600

21st

75

What is the value of the closing stock using this weighted average method?

A

B

C

D

6

£1,012·50

£976·50

£962·50

£925·00

Sydney wishes to make an investment on a monthly basis starting next month for five years. The payments into the

fund would be made on the first day of each month.

The interest rate will be 0·5% per month. Sydney needs a terminal value of £7,000.

What should be the monthly payments into the fund to the nearest £?

A

B

C

D

7

£75

£86

£100

£117

A company has the following budget for the next month:

Finished Product

Sales

Production units

7,000 units

7,200 units

Materials

Usage per unit

Opening stock

Closing stock

3 kg

400 kg

500 kg

What is the material purchases budget for the month?

A

B

C

D

20,900

21,100

21,500

21,700

kg

kg

kg

kg

3

[P.T.O.

8

The

(i)

(ii)

(iii)

following could relate to optical mark readers:

Specialist pens are always required for use.

Data entry is quick.

Computers carry out most of the work.

Which of the above would be considered to be advantages of using optical mark readers?

A

B

C

D

9

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

Which of the following would be best described as a short term tactical plan?

A

B

C

D

Reviewing cost variances and investigate as appropriate

Comparing actual market share to budget

Lowering the selling price by 15%

Monitoring actual sales to budget

10 A company incurs the following costs at various activity levels:

Total cost

£

250,000

312,500

400,000

Activity level

Units

5,000

7,500

10,000

Using the high-low method what is the variable cost per unit?

A

B

C

D

£25

£30

£35

£40

11 An investment gives the following results:

Net present value

£000

383

(246)

Discount rate

10%

15%

What is the estimated internal rate of return to the nearest whole percentage?

A

B

C

D

12%

13%

14%

17%

4

12 A company uses process costing to establish the cost per unit of its output.

The following information was available for the last month:

Input units

Output units

Opening stock

Closing stock

10,000

9,850

300 units, 100% complete for materials and 70%

complete for conversion costs

450 units, 100% complete for materials and 30%

complete for conversion costs

The company uses the weighted average method of valuing stock.

What were the equivalent units for conversion costs?

A

B

C

D

9,505

9,715

9,775

9,985

units

units

units

units

13 Which of the following is correct with regard to expected values?

A

B

C

D

Expected values provide a weighted average of anticipated outcomes

The expected value will always equal one of the possible outcomes

Expected values will show whether the decision maker is risk averse, risk seeking or risk neutral

The expected value will never equal one of the possible outcomes

5

[P.T.O.

14 The following graph has been established for a given set of constraints:

300

y

200

B

C

100

A

D

OF

0

100

200

x

300

The objective function (OF) for the company has also been plotted on the graph and the feasible region is bounded

by the area ABCD.

At which point on the graph will profits be maximised?

A

B

C

D

15 The following information has been obtained for sales of two products for a three year period:

Price

2000 (base year)

2001

2002

Product A

100

125

130

What is the Paasche quantity index for 2002?

A

B

C

D

Quantity

Product B

150

140

135

0·86

0·89

1·19

1·20

6

Product A

3

2

2

Product B

4

3

4

16 A company has just secured a new contract which requires 500 hours of labour.

There are 400 hours of spare labour capacity. The remaining hours could be worked as overtime at time and a half

or labour could be diverted from the production of product X. Product X currently earns a contribution of £4 in two

labour hours and direct labour is currently paid at a rate of £12 per normal hour.

What is the relevant cost of labour for the contract?

A

B

C

D

17 The

(i)

(ii)

(iii)

£200

£1,200

£1,400

£1,800

following statements relate to performance evaluation methods:

Residual income is not a relative measure.

The return on investment figure is a relative measure.

Residual income cannot be calculated for an individual project.

Which of the above are correct?

A

B

C

D

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

18 A company uses variance analysis to control costs and revenues.

Information concerning sales is as follows:

Budgeted selling price

Budgeted sales units

Budgeted profit per unit

£15 per unit

10,000 units

£5 per unit

Actual sales revenue

Actual units sold

£151,500

9,800 units

What is the sales volume profit variance?

A

B

C

D

£500 favourable

£1,000 favourable

£1,000 adverse

£3,000 adverse

19 A company has the following budgeted information for the coming month:

Budgeted sales revenue

Budgeted contribution

Budgeted profit

£500,000

£200,000

£ 50,000

What is the budgeted break-even sales revenue?

A

B

C

D

£125,000

£350,000

£375,000

£450,000

7

[P.T.O.

20 An investment has the following cash inflows and cash outflows:

Time

Cash flow per annum

£000

0

(20,000)

1-4

13,000

5-8

17,000

10

(10,000)

What is the net present value of the investment at a discount rate of 8%?

A

B

C

D

(£2,416)

£7,046

£6,981

£2,351

21 Which of the following is correct?

A

B

C

D

When considering limiting factors the products should always be ranked according to contribution per unit sold

If there is only one scarce resource linear programming should be used

In linear programming the point furthest from the origin will always be the point of profit maximisation

The slope of the objective function depends on the contributions of the products

22 A company has over absorbed fixed production overheads for the period by £6,000. The fixed production overhead

absorption rate was £8 per unit and is based on the normal level of activity of 5,000 units. Actual production was

4,500 units.

What was the actual fixed production overheads incurred for the period?

A

B

C

D

£30,000

£36,000

£40,000

£42,000

23 A company uses process costing to value its output. The following was recorded for the period:

Input materials

Conversion costs

Normal loss

Actual loss

2,000 units at £4·50 per unit

£13,340

5% of input valued at £3 per unit

150 units

There were no opening or closing stocks.

What was the valuation of one unit of output to one decimal place?

A

B

C

D

£11·8

£11·6

£11·2

£11·0

8

24 Which of the following are correct with regard to regression analysis?

(i)

In regression analysis the n stands for the number of pairs of data.

(ii)

∑ x2 is not the same calculation as (∑ x)2

(iii)

∑ xy is calculated by multiplying the total value of x and the total value of y

A

(i) and (ii) only

B

(i) and (iii) only

C

(ii) and (iii) only

D

(i), (ii) and (iii)

25 The following information relates to labour costs for the past month:

Budget

Labour rate

Production time

Time per unit

Production units

£10 per hour

15,000 hours

3 hours

5,000 units

Actual

Wages paid

Production

Total hours worked

£176,000

5,500 units

14,000 hours

There was no idle time.

What were the labour rate and efficiency variances?

A

B

C

D

Rate variance

£26,000 adverse

£26,000 adverse

£36,000 adverse

£36,000 adverse

Efficiency variance

£25,000 favourable

£10,000 favourable

1£2,500 favourable

£25,000 favourable

(50 marks)

9

[P.T.O.

Section B – ALL FIVE questions are compulsory and MUST be attempted

1

A business operates with two production centres and three service centres. Costs have been allocated and apportioned

to these centres as follows:

Production Centres

Service Centres

1

2

A

B

C

£2,000

£3,500

£300

£500

£700

Information regarding how the service centres work for each other and for the production centres is given as:

Work done for:

Production Centres

Service Centres

1

2

A

B

C

By A

45%

45%

–

10%

–

By B

50%

20%

20%

–

10%

By C

60%

40%

–

–

–

Information concerning production requirements in the two production centres is as follows:

Units produced

Machine hours

Labour hours

Centre 1

1,500 units

3,000 hours

2,000 hours

Centre 2

2,000 units

4,500 hours

6,000 hours

Required:

(a) Using the reciprocal method calculate the total overheads in production centres 1 and 2 after

reapportionment of the service centre costs.

(7 marks)

(b) Using the most appropriate basis establish the overhead absorption rate for production centre 1. Briefly

explain the reason for your chosen absorption basis.

(3 marks)

(10 marks)

10

2

Break-even charts and profit-volume charts are commonly associated with cost-volume-profit analysis (break-even

analysis).

Required:

(a) (i)

Sketch a break-even chart and indicate where the break-even point would be for a single product firm.

Clearly label the axes and indicate the following lines:

– total revenue;

– variable cost;

– fixed costs; and

– total cost.

(ii) How would contribution be established from your chart in (a)(i)?

(b) (i)

(6 marks)

Sketch a profit-volume chart and indicate where the break-even point would be for a single product firm.

Clearly label the axes and indicate the profit line and fixed costs.

(ii) How would contribution be established from your chart in (b)(i)?

(4 marks)

[Note: no specific numbers are required.]

(10 marks)

3

A company has obtained the following information regarding costs and revenue for the past financial year:

Original budget:

Sales

Production

10,000 units

12,000 units

Standard cost per unit:

Direct materials

Direct labour

Fixed production overheads

Selling price

Actual results:

Sales

Revenue

Production

Material cost

Labour cost

Fixed production overheads

£

5

9

8

–––

22

–––

30

9,750 units

£325,000

11,000 units

£65,000

£100,000

£95,000

There were no opening stocks.

Required:

(a) Produce a flexed budget statement showing the flexed budget and actual results. Calculate the variances

between the actual and flexed figures for the following:

– sales;

– materials;

– labour; and

– fixed production overhead.

(7 marks)

(b) Explain briefly how the sales and materials variances calculated in (a) may have arisen.

(3 marks)

(10 marks)

11

[P.T.O.

4

A business currently orders 1,000 units of product X at a time. It has decided that it may be better to use the Economic

Order Quantity method to establish an optimal reorder quantity.

Information regarding stocks is given below:

Purchase price

£15/unit

Fixed cost per order

£200

Holding cost

8% of the purchase price per annum

Annual demand

12,000 units

Current annual total stock costs are £183,000, being the total of the purchasing, ordering and holding costs of

product X.

Required:

(a) Calculate the Economic Order Quantity.

(2 marks)

(b) Using your answer to (a) above calculate the revised annual total stock costs for product X and so establish

the difference compared to the current ordering policy.

(4 marks)

(c) List ways in which discounts might affect this Economic Order Quantity calculation and subsequent stock

costs.

(4 marks)

(10 marks)

5

A company manufactures a single product, product Y. It has documented levels of demand at certain selling prices

for this product as follows:

Demand

Selling price per

unit

Cost per unit

Units

£

£

1,100

48

24

1,200

46

21

1,300

45

20

1,400

42

19

Required:

Using a tabular approach calculate the marginal revenues and marginal costs for product Y at the different levels

of demand, and so determine the selling price at which the company profits are maximised.

(10 marks)

12

Formulae Sheet

Laspeyres’ price index =

Paasche price index =

Laspeyres’ quantity index =

Paasche quantity index =

13

[P.T.O.

Present Value Table

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14

Annuity Table

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End of Question Paper

15

FRIDAY 5 DECEMBER 2003

QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

Section A

ALL 25 questions are compulsory and MUST be

answered

Section B

ALL FIVE questions are compulsory and MUST be

answered

Formulae Sheet, Present Value and Annuity Tables are on

pages 13, 14 and 15

Paper 1.2

Financial

Information for

Management

Section A – ALL 25 questions are compulsory and MUST be attempted

Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice

question.

Each question within this section is worth 2 marks.

1

A cost is described as staying the same over a certain activity range and then increasing but remaining stable over a

revised activity range in the short term.

What type of cost is this?

A

B

C

D

2

A

A

A

A

fixed cost

variable cost

semi-variable cost

stepped fixed cost

The following quarterly adjustments have been calculated using the multiplicative model for time series analysis:

Quarter 1

0·95

Quarter 2

1·25

Quarter 3

0·70

What would be the adjustment for quarter 4 to two decimal places?

A

B

C

D

3

0·83

0·91

1·10

1·20

A company which uses marginal costing has a profit of £37,500 for a period. Opening stock was 100 units and

closing stock was 350 units.

The fixed production overhead absorption rate is £4 per unit.

What is the profit under absorption costing?

A

B

C

D

4

£35,700

£36,500

£38,500

£39,300

The following could relate to contract costing:

(i)

Work is for a period of long duration.

(ii) Progress payments are amounts paid for the contract throughout the course of the contract.

(iii) Architects’ certificates are provided to establish the amount of work certified.

Which of the above are correct?

A

B

C

D

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

2

5

A company values stocks using the weighted average value after each purchase. The following receipts and issues

have been made with regards to materials for the last month:

Date

Receipts

Issues

Units

£/unit

Valuation

Brought forward

100

£5

£500

4th

150

£5·50

£825

16th

Units

100

20th

100

£6

£600

21st

75

What is the value of the closing stock using this weighted average method?

A

B

C

D

6

£1,012·50

£976·50

£962·50

£925·00

Sydney wishes to make an investment on a monthly basis starting next month for five years. The payments into the

fund would be made on the first day of each month.

The interest rate will be 0·5% per month. Sydney needs a terminal value of £7,000.

What should be the monthly payments into the fund to the nearest £?

A

B

C

D

7

£75

£86

£100

£117

A company has the following budget for the next month:

Finished Product

Sales

Production units

7,000 units

7,200 units

Materials

Usage per unit

Opening stock

Closing stock

3 kg

400 kg

500 kg

What is the material purchases budget for the month?

A

B

C

D

20,900

21,100

21,500

21,700

kg

kg

kg

kg

3

[P.T.O.

8

The

(i)

(ii)

(iii)

following could relate to optical mark readers:

Specialist pens are always required for use.

Data entry is quick.

Computers carry out most of the work.

Which of the above would be considered to be advantages of using optical mark readers?

A

B

C

D

9

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

Which of the following would be best described as a short term tactical plan?

A

B

C

D

Reviewing cost variances and investigate as appropriate

Comparing actual market share to budget

Lowering the selling price by 15%

Monitoring actual sales to budget

10 A company incurs the following costs at various activity levels:

Total cost

£

250,000

312,500

400,000

Activity level

Units

5,000

7,500

10,000

Using the high-low method what is the variable cost per unit?

A

B

C

D

£25

£30

£35

£40

11 An investment gives the following results:

Net present value

£000

383

(246)

Discount rate

10%

15%

What is the estimated internal rate of return to the nearest whole percentage?

A

B

C

D

12%

13%

14%

17%

4

12 A company uses process costing to establish the cost per unit of its output.

The following information was available for the last month:

Input units

Output units

Opening stock

Closing stock

10,000

9,850

300 units, 100% complete for materials and 70%

complete for conversion costs

450 units, 100% complete for materials and 30%

complete for conversion costs

The company uses the weighted average method of valuing stock.

What were the equivalent units for conversion costs?

A

B

C

D

9,505

9,715

9,775

9,985

units

units

units

units

13 Which of the following is correct with regard to expected values?

A

B

C

D

Expected values provide a weighted average of anticipated outcomes

The expected value will always equal one of the possible outcomes

Expected values will show whether the decision maker is risk averse, risk seeking or risk neutral

The expected value will never equal one of the possible outcomes

5

[P.T.O.

14 The following graph has been established for a given set of constraints:

300

y

200

B

C

100

A

D

OF

0

100

200

x

300

The objective function (OF) for the company has also been plotted on the graph and the feasible region is bounded

by the area ABCD.

At which point on the graph will profits be maximised?

A

B

C

D

15 The following information has been obtained for sales of two products for a three year period:

Price

2000 (base year)

2001

2002

Product A

100

125

130

What is the Paasche quantity index for 2002?

A

B

C

D

Quantity

Product B

150

140

135

0·86

0·89

1·19

1·20

6

Product A

3

2

2

Product B

4

3

4

16 A company has just secured a new contract which requires 500 hours of labour.

There are 400 hours of spare labour capacity. The remaining hours could be worked as overtime at time and a half

or labour could be diverted from the production of product X. Product X currently earns a contribution of £4 in two

labour hours and direct labour is currently paid at a rate of £12 per normal hour.

What is the relevant cost of labour for the contract?

A

B

C

D

17 The

(i)

(ii)

(iii)

£200

£1,200

£1,400

£1,800

following statements relate to performance evaluation methods:

Residual income is not a relative measure.

The return on investment figure is a relative measure.

Residual income cannot be calculated for an individual project.

Which of the above are correct?

A

B

C

D

(i) and (ii) only

(i) and (iii) only

(ii) and (iii) only

(i), (ii) and (iii)

18 A company uses variance analysis to control costs and revenues.

Information concerning sales is as follows:

Budgeted selling price

Budgeted sales units

Budgeted profit per unit

£15 per unit

10,000 units

£5 per unit

Actual sales revenue

Actual units sold

£151,500

9,800 units

What is the sales volume profit variance?

A

B

C

D

£500 favourable

£1,000 favourable

£1,000 adverse

£3,000 adverse

19 A company has the following budgeted information for the coming month:

Budgeted sales revenue

Budgeted contribution

Budgeted profit

£500,000

£200,000

£ 50,000

What is the budgeted break-even sales revenue?

A

B

C

D

£125,000

£350,000

£375,000

£450,000

7

[P.T.O.

20 An investment has the following cash inflows and cash outflows:

Time

Cash flow per annum

£000

0

(20,000)

1-4

13,000

5-8

17,000

10

(10,000)

What is the net present value of the investment at a discount rate of 8%?

A

B

C

D

(£2,416)

£7,046

£6,981

£2,351

21 Which of the following is correct?

A

B

C

D

When considering limiting factors the products should always be ranked according to contribution per unit sold

If there is only one scarce resource linear programming should be used

In linear programming the point furthest from the origin will always be the point of profit maximisation

The slope of the objective function depends on the contributions of the products

22 A company has over absorbed fixed production overheads for the period by £6,000. The fixed production overhead

absorption rate was £8 per unit and is based on the normal level of activity of 5,000 units. Actual production was

4,500 units.

What was the actual fixed production overheads incurred for the period?

A

B

C

D

£30,000

£36,000

£40,000

£42,000

23 A company uses process costing to value its output. The following was recorded for the period:

Input materials

Conversion costs

Normal loss

Actual loss

2,000 units at £4·50 per unit

£13,340

5% of input valued at £3 per unit

150 units

There were no opening or closing stocks.

What was the valuation of one unit of output to one decimal place?

A

B

C

D

£11·8

£11·6

£11·2

£11·0

8

24 Which of the following are correct with regard to regression analysis?

(i)

In regression analysis the n stands for the number of pairs of data.

(ii)

∑ x2 is not the same calculation as (∑ x)2

(iii)

∑ xy is calculated by multiplying the total value of x and the total value of y

A

(i) and (ii) only

B

(i) and (iii) only

C

(ii) and (iii) only

D

(i), (ii) and (iii)

25 The following information relates to labour costs for the past month:

Budget

Labour rate

Production time

Time per unit

Production units

£10 per hour

15,000 hours

3 hours

5,000 units

Actual

Wages paid

Production

Total hours worked

£176,000

5,500 units

14,000 hours

There was no idle time.

What were the labour rate and efficiency variances?

A

B

C

D

Rate variance

£26,000 adverse

£26,000 adverse

£36,000 adverse

£36,000 adverse

Efficiency variance

£25,000 favourable

£10,000 favourable

1£2,500 favourable

£25,000 favourable

(50 marks)

9

[P.T.O.

Section B – ALL FIVE questions are compulsory and MUST be attempted

1

A business operates with two production centres and three service centres. Costs have been allocated and apportioned

to these centres as follows:

Production Centres

Service Centres

1

2

A

B

C

£2,000

£3,500

£300

£500

£700

Information regarding how the service centres work for each other and for the production centres is given as:

Work done for:

Production Centres

Service Centres

1

2

A

B

C

By A

45%

45%

–

10%

–

By B

50%

20%

20%

–

10%

By C

60%

40%

–

–

–

Information concerning production requirements in the two production centres is as follows:

Units produced

Machine hours

Labour hours

Centre 1

1,500 units

3,000 hours

2,000 hours

Centre 2

2,000 units

4,500 hours

6,000 hours

Required:

(a) Using the reciprocal method calculate the total overheads in production centres 1 and 2 after

reapportionment of the service centre costs.

(7 marks)

(b) Using the most appropriate basis establish the overhead absorption rate for production centre 1. Briefly

explain the reason for your chosen absorption basis.

(3 marks)

(10 marks)

10

2

Break-even charts and profit-volume charts are commonly associated with cost-volume-profit analysis (break-even

analysis).

Required:

(a) (i)

Sketch a break-even chart and indicate where the break-even point would be for a single product firm.

Clearly label the axes and indicate the following lines:

– total revenue;

– variable cost;

– fixed costs; and

– total cost.

(ii) How would contribution be established from your chart in (a)(i)?

(b) (i)

(6 marks)

Sketch a profit-volume chart and indicate where the break-even point would be for a single product firm.

Clearly label the axes and indicate the profit line and fixed costs.

(ii) How would contribution be established from your chart in (b)(i)?

(4 marks)

[Note: no specific numbers are required.]

(10 marks)

3

A company has obtained the following information regarding costs and revenue for the past financial year:

Original budget:

Sales

Production

10,000 units

12,000 units

Standard cost per unit:

Direct materials

Direct labour

Fixed production overheads

Selling price

Actual results:

Sales

Revenue

Production

Material cost

Labour cost

Fixed production overheads

£

5

9

8

–––

22

–––

30

9,750 units

£325,000

11,000 units

£65,000

£100,000

£95,000

There were no opening stocks.

Required:

(a) Produce a flexed budget statement showing the flexed budget and actual results. Calculate the variances

between the actual and flexed figures for the following:

– sales;

– materials;

– labour; and

– fixed production overhead.

(7 marks)

(b) Explain briefly how the sales and materials variances calculated in (a) may have arisen.

(3 marks)

(10 marks)

11

[P.T.O.

4

A business currently orders 1,000 units of product X at a time. It has decided that it may be better to use the Economic

Order Quantity method to establish an optimal reorder quantity.

Information regarding stocks is given below:

Purchase price

£15/unit

Fixed cost per order

£200

Holding cost

8% of the purchase price per annum

Annual demand

12,000 units

Current annual total stock costs are £183,000, being the total of the purchasing, ordering and holding costs of

product X.

Required:

(a) Calculate the Economic Order Quantity.

(2 marks)

(b) Using your answer to (a) above calculate the revised annual total stock costs for product X and so establish

the difference compared to the current ordering policy.

(4 marks)

(c) List ways in which discounts might affect this Economic Order Quantity calculation and subsequent stock

costs.

(4 marks)

(10 marks)

5

A company manufactures a single product, product Y. It has documented levels of demand at certain selling prices

for this product as follows:

Demand

Selling price per

unit

Cost per unit

Units

£

£

1,100

48

24

1,200

46

21

1,300

45

20

1,400

42

19

Required:

Using a tabular approach calculate the marginal revenues and marginal costs for product Y at the different levels

of demand, and so determine the selling price at which the company profits are maximised.

(10 marks)

12

Formulae Sheet

Laspeyres’ price index =

Paasche price index =

Laspeyres’ quantity index =

Paasche quantity index =

13

[P.T.O.

Present Value Table

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Annuity Table

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End of Question Paper

15

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