General Comments G^ 2a<?Di
This was the seventh examination under the current syllabus.The twohour paper,as usual,contained 50 multiple choice questions – 40 carried twomarks each and the other 10 carried one mark each.This mix continues to beexactly in line with the pilot paper.The overall general performance ofcandidates improved at this sitting compared with recent sittings.Theperformance on an individual question basis also improved – on this occasion,ononly a very few questions was the correct answer not selected by at least 40% ofthe candidates.
The following questions taken from the December 2010 examination areones where the performance of candidates was weak – in each case less than 40%of the candidates selected the correct answer.Each of these questions carried 2marks and each related to a mainstream topic in the StudyGuide.
Sample Questions for Discussion ,7{}}l
Example 1 bR*/d-v^
A company which operates a process costing system hadwork-in-progress at the start of last month of 400 units (valued at $3,000)which were 40% complete in respect of all costs.Last month 1,500 units werecompleted and transferred to the finished goods warehouse.The cost perequivalent unit for output produced last month was $20.The company uses the FIFOmethod of cost allocation. mI[$c"!BD
What is the total cost of the 1,500 units transferred to the finishedgoods warehouse last month? H |K}m,g
A $26,800 FlP
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B $28,200 oF(<}0Z
C $29,800 OlV'#D
D $30,000
The correct answer was C.This question tested Section D6(g) and (h)in the Study Guide.If 1,500 units were completed in the month then 1,100 units[1,500−400] must have been started and finished in the month.These are valued at$22,000 [1,100×20].The 400 units from opening work-in-progress (WIP) werealready 40% complete so last month would have had 60% of work done to completethem.The total value of the 400 units is therefore calculated as: $3,000 +$[400×0.6×20] = $7,800.The total value of the month’s output was $[22,000 +7,800] = $29,800.
Each of the three wrong answers was selected by at least 17% of thecandidates.Candidates selecting answer A had simply failed to add in the $3,000opening WIP value.Answer B could have been obtained by valuing the 400 units asfollows: $3,000 + $[400×0.4×20] = $6,200.This had taken the percentage tocomplete the WIP as 40% instead of 60%.Answer D was simply 1,500 units valued at$20 per unit and made no adjustment for WIP.
Example 2 t ;~H6
A company uses standard marginal costing.Last month the budgetedcontribution was $20,000 and the only variances that occurred were asfollows:
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$ .-( s`2
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Sales price
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3,000 Adverse 9 j
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Sales volume contribution
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5,000 Favourable ny,a5zEnF
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Fixed overhead expenditure
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1,000 Adverse
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What was the actual contribution last month? f/VrenZ_
A $18,000 5 1\N+
B $19,000 | 4XR [eX
C $21,000 <g^!xX<r?
D $22,000
The correct answer was D.This question tested Section E5(b) of theStudy Guide – the reconciliation of budgeted and actual contribution undermarginal costing.The fixed overhead expenditure variance is not relevant to areconciliation of budgeted and actual contributions.Fixed costs are deductedafterwards from contribution to arrive at profit.Therefore the correctcalculation of actual contribution was:[20,000 − 3,000 + 5,000] =$22,000.
Answer A was obtained by adding the adverse sales price variance andsubtracting the favourable sales volume contribution variance to the budgetedprofit.Answer B could have been obtained in two [wrong] ways.First,by simplydeducting the adverse fixed overhead expenditure variance from the budgetedcontribution.Second,by netting the three variances listed in the question andthen deducting this net figure from the budgeted contribution – there were twoerrors made in this case.The most popular wrong answer was C [chosen by a thirdof the candidates] which added the net of all three variances listed to thebudgeted contribution.
Example 3 Q;
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Are the following statements,which refer to different types ofbudgets,true or false? M -B -
Statement 1 WRWcB
An annual budget that can be broken down into monthly budgets,whichdiffer depending on the number of working days in each month,is called aflexible budget. o@d+<6Um
Statement 2 {m&8Viq1
An annual budget set before the start of a year based on estimatedsales and production volumes is called a fixed budget. yM8<)6=
Statement 1 Statement 2 ~D9VjXfL)
A True True t#
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B False False R4R SXV
C True False oiS>:de%tc
D False True
The correct answer was D.This question tested section E3(a) in theStudy Guide – the explanation of fixed,flexible and flexed budgets.A flexiblebudget is one which recognizes different cost behaviour patterns and is designedto change to reflect different volumes of activity.Therefore statement 1 isfalse.Statement 2 describes a fixed budget and is thereforetrue.
All three incorrect answers were selected by significant numbers ofcandidates – even the least popular choice [Answer C – the exact opposite to thecorrect answer] was chosen by nearly 16% of the candidates.This seems toindicate that this part of the Study Guide is generally not wellunderstood.
Future candidates are advised to: 6.! 3g(w
•Study the whole syllabus.The examination will always cover allsections of the Study Guide. xTJ-v/t3<
•Use the pilot paper questions for practice.The pilot paper is also avery good guide to the styles of questions that will continue to be set and tothe coverage of the topics in the Study Guide.It is also gives a good indicationof the approximate split between calculation and non-calculation questions thatwill continue in examinations up to and including the June 2011sitting. Nd"Rt
•Practise as many multiple choice questions as possible in preparingfor the examination. 5G-}'-R
•Read questions carefully in the examination N` DLIv8i;
•Read previous F2 Examiner’s Reports – they are all still veryrelevant and helpful.Each contains three multiple choice questionsset.
