Pearson LCCI

Certificate in Advanced
Business Calculations
Level 3

Thursday 11 June 2015

Time: 3 hours

Paper Reference

ASE3003

You will need:

An answer book

Instructions

Do not open this examination paper until you are told to do so by the supervisor.
Use
black/blue ink or ball-point pen
pencil can only be used for graphs, charts, diagrams, etc.
Ensure your answers are written clearly.

Begin your answer to each question on a new page.

Write on both sides of the page.

All answers must be correctly numbered but need not be in numerical order.

If you need more space, use the additional sheets provided. Write your name,

candidate number and question number on each sheet and attach them to the
inside of your answer book. State, on the front of your answer book, the number
of additional sheets attached.
Answer all questions.
Workings must be shown.

Information

for this paper is 100.

TTheheretotalaremark
eight questions in this question paper.
for each question are shown in brackets
Theusemarks
this as a guide as to how much time to spend on each question.
use mathematical and statistical tables.
Y Youou may
may use a calculator provided the calculator gives no printout, has no
word display facilities, is silent and cordless. The provision of batteries and their
condition is your responsibility.

Advice

each question carefully before you start to answer it.

RCead
heck your answers carefully if you have time at the end.

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2015 Pearson Education Ltd.

1/1/1/1/1

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Answer ALL questions.

1 Martin uses the products method to check the interest on his savings account. He
calculates that he is receiving interest at the rate of 0.0096% per day.

Calculate the:

(a) annual rate of simple interest paid to Martin

(b) interest earned on a balance of 25,000

(i) for 3 days

(ii) for 3 years.

(2)

(2)
(2)

From 1 January 2000 to 1 January 2015, the value of Martins house increased from
200,000 to 380,000.

(c) Calculate the rate of increase per annum based on simple interest.

Martin believes that the increase is approximately 4.4% per annum based on
compound interest.

(d) Provide a calculation to show if Martin is correct.

(e) State whether the true rate of compound interest per annum is exactly 4.4%,
more than 4.4%, or less than 4.4%.

(3)

(3)

(1)

(Total for Question 1 = 13 marks)

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2 Maisie bought two blocks of Government Stock, Stock A and Stock B, at different
rates and values. She tabulated her results as follows:

Stock A

Stock B

Rate of interest (on nominal value of stock) pa

4%

4%

$100/100 of stock bought at

$87

$65,250

102,600

3 years

4 years

Total interest earned for the whole period

Total percentage yield on amount invested

25%

Amount invested
Nominal value of stock purchased
Stock held for

(a) Calculate the total percentage yield on the amount invested for Stock A.

(b) Calculate the cost of 100 worth of Stock B.

An investor bought 7,500 5% Preference Shares (nominal value 5) at 820 pence

each, and paid brokers commission of 1.1% of the nominal value of the shares.

(c) Calculate the total cost of the shares including the commission.

(4)
(4)

(4)

(Total for Question 2 = 12 marks)

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BLANK PAGE

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3 An industrial product may be manufactured using two alternative methods of

production.

Using Method X, fixed costs per period are 840,000 and variable costs are 395 per
unit of product.

Using Method Y, fixed costs per period are 1,020,000 and variable costs are 350 per
unit of product.

(a) Calculate the level of output for which the total costs are the same for the two
methods.

(b) State, with a reason, when Method X should be used rather than Method Y.

Method Y is chosen for production, and the manufacturer sets a selling price of 470
per unit.

(c) Calculate the:

(i) number of units to achieve break even

(ii) profit or loss on production and sales of 7,000 units per period.

(3)
(2)

(3)
(4)

(Total for Question 3 = 12 marks)

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4 The following balance sheet refers to the first year of trading.

Balance Sheet at 31 December Year 1

Fixed Assets
Premises

Figure missing

Equipment

19,000

Furniture

12,100

Transport

33,350
189,450

Current Assets
Stock

30,100

Debtors

6,160

Bank

1,740

Cash

270

38,270

Amounts due within 12 months

trade creditors

8,600

Net Current Assets

29,670
219,120

Amount due after 12 months

mortgage on premises

(86,320)
132,800

Financed by
capital
Add net profit
Less drawings

130,000
Figure missing
(9,400)

132,800

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(a) Using the balance sheet, calculate the:

(i)
current ratio

(ii) acid test ratio

(iii) borrowing (gearing) ratio

(iv) value of premises

(2)
(2)
(2)
(2)

(v)
net profit.

(2)

For the second year of trading, the average stock was 26,250.

(b) Calculate the stock held at the end of the second year of trading.

(3)

(Total for Question 4 = 13 marks)

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5 A business owner has a choice of two investment projects, Project A and Project B.
The estimated costs and returns are as follows:
Project A

Project B

230,000

150,000

Year 1 cash inflow

40,000

25,000

Year 2 cash inflow

60,000

50,000

Year 3 cash inflow

60,000

60,000

Year 4 cash inflow

60,000

Figure missing

Year 5 cash inflow

60,000

Figure missing

Initial cost (investment)

(a) Calculate the payback period for Project A. Give your answer in years and months.

The payback period for Project B is 3 years 3 months.

(b) Advise the business owner which project is the better investment. You must give
a reason.

(4)

(1)

(c) Calculate the net present value of Project A, using a discount rate of 8% and the
following table.
Discount factor
Year 1

0.926

Year 2

0.857

Year 3

0.794

Year 4

0.735

Year 5

0.681
(4)

The net present value of Project B, using the same discount rate, is 7,740 (positive).

(d) Calculate the revised net present value of Project B if the year 1 cash inflow is
increased from 25,000 to 35,000.

(3)

(Total for Question 5 = 12 marks)

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6 (a) In the bankruptcy of Trader T, the total assets available for creditors were
104,368. The total liabilities were 171,580 of which 22,220 was owed to
secured creditors.
Calculate:

(i) how much is owed to unsecured creditors

(ii) the assets available for unsecured creditors

(iii) the rate in the pound paid to unsecured creditors.

(2)
(2)
(2)

(b) In the bankruptcy of Trader U, the total liabilities were 194,850. After paying
secured creditors, the assets available for unsecured creditors were 69,930 which
provided a rate of 60p in the pound for payment to unsecured creditors.

Calculate:

(i) how much is owed to unsecured creditors

(ii) how much is owed to secured creditors

(iii) the total assets available for creditors.

(2)
(2)
(2)
(Total for Question 6 = 12 marks)

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7 Derek and Clive find the following depreciation table for an item with a life of 4 years,
with most figures missing.
Year

Depreciation
for each year

Cumulative
depreciation

Book value
at year end

Initial cost

37,500

2
3

13,500

Scrap value

Derek completes the table based on the equal instalment method.

(a) Complete Dereks table for years 0 to 4.

Derek and Clive then calculate the depreciation rate based on the reducing balance
method.

Derek gives a figure of 36%, and Clive gives a figure of 40%.

(b) Provide a calculation to show which of them is correct using the figures provided
in the table above.

(3)

(4)

(c) Using the reducing balance method and the correct figure for the rate of
depreciation, calculate the:

(i)
scrap value
(ii)
initial cost

(iii) depreciation in year 1.

(2)
(2)
(2)
(Total for Question 7 = 13 marks)

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8 A company sells Product P with the following prices and numbers of units sold:
Year

2010

2011

2012

2013

2014

Sales (units)

225,000

250,000

215,000

240,000

300,000

Price per unit

50

45

48

49.50

42

Calculate the:

(a)
index of sales (units) for Product P for each of the years 2012, 2013 and 2014, with
year 2011 as the base year
(b)
index of sales (units) for Product P for year 2010, with year 2011 as the base year

(c) price relative for year 2013, with year 2011 as the base year

(d)
index of sales value (pounds sterling) for Product P for year 2014, with year 2011
as the base year

(e) percentage increase in sales value (pounds sterling) for Product P from year 2010
to year 2013.

(4)
(2)
(2)

(3)

(2)

(Total for Question 8 = 13 marks)

TOTAL FOR PAPER = 100 MARKS

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