Series: NOV 2015

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  • 15 Marks

CSME – Nov 2015 – L2 – Q7 – Corporate Strategy Formulation

Analyzes reasons for slow growth in DAB phone sales, uses the S-shaped growth curve to evaluate market stages, and suggests sales improvement strategies.

Ade John is a graduate of XYZ University. For his final project work in the Department of
Electronics and Electrical Engineering, he designed a cell-phone that is rugged, cheap,
handy and not sophisticated.
During his national service year, he kept toying with the idea of manufacturing the cellphone. To ascertain that there is a market for the phone, he carried out a series of market surveys among rural farmers, artisans, market women, etc. Each time, he was convinced that a market actually exists for his design. He also made contact with some manufacturers of cell-phone components. He entered
into an agreement with CKT Japan to import cell-phone accessories to enable him
assemble them in Nigeria. DAB phone is the first of its kind in the Nigerian market and
production and assembly commenced in a small room in his uncle‟s house at Ikare.
The first batch of phones manufactured by DAB Company was supplied to cell-phone
vendors in cities on „sale or return‟ basis. To encourage distributors to accept the
phones, a 15% margin was allowed. In addition, independent sales persons (hawkers)
were given between 10 -12% margin to sell the product. In spite of the low price of DAB
phones, demand was disappointing at the end of the first year. Nevertheless, Ade John is
still optimistic about the commercial viability of the phone if only he could develop an
effective strategy to market the DAB phones

Required:
a. Identify and explain TWO reasons for the slow growth of sales of DAB phones. (4 Marks)
b. With the aid of an S-shaped growth curve, evaluate market development of DAB phones. (6 Marks)
c. Recommend the strategies that Ade John can use to improve sales. (5 Marks)

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  • 15 Marks

CSME – Nov 2015 – L2 – Q6 – Corporate Governance

Evaluates how specific corporate governance issues impact the effectiveness of a company's governance.

Explain briefly how the following key issues in corporate governance establish how well or badly a company is governed:

a. The role and responsibilities of the board of directors
b. The composition and balance of the board of directors
c. Financial reporting, narrative reporting, and auditing
d. Directors’ remuneration
e. Risk management and internal control

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  • 15 Marks

CSME – Nov 2015 – L2 – Q5 – Corporate Governance

Outlines key responsibilities and duties of the board in corporate governance, relevant for improving corporate structure and performance.

The owner of ABC Company learned from a conference and a professional magazine that weak corporate governance accounted for recent corporate failures in Nigeria. Many board members were found lacking a clear understanding of board responsibilities and duties.

Required:
The Managing Director will soon address the board and has requested a paper detailing the board’s responsibilities and duties.

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  • 20 Marks

CSME – Nov 2015 – L2 – Q4 – Risk Management and Corporate Strategy

Analyzes strengths and weaknesses of Toyin Trust Insurance Plc pre- and post-2000 ownership changes, and suggests strategies for sustaining the company.

Toyin Trust Insurance Company is one of the duly registered insurance companies in Nigeria. Ten years after it started operations in 1990, the company had become a household name in the market. Its strengths included timely payment of claims and introduction of quality products that captured changing customers’ needs.

At inception, the company was 100% foreign-owned, with five of the seven directors being experienced expatriate insurance practitioners. However, by 2000, over 90% of the equity had been transferred to Nigerian investors. In 2009, following reorganization, many experienced senior managers resigned, and inexperienced staff took over key positions, leading to a decline in service quality and a 40% drop in premium collection.

Required:

a. Analyze the strengths of Toyin Trust Insurance Plc before 2000. (5 Marks)
b. Analyze the strengths and weaknesses of Toyin Trust Insurance Plc after 2000. (5 Marks)
c. Suggest essential strategies to sustain Toyin Trust Insurance Plc. (10 Marks)

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  • 20 Marks

CSME – Nov 2015 – L2 – Q3 – Ethics in Business

Describes the nature of business and professional ethics, Kohlberg’s theory of moral development, and criticisms of the theory.

Kalu, a competent consultant and accountant, works in Bosun and Company Limited. The company realized that almost all of its newly employed entry-level staff are deficient in business and professional ethics. Consequently, the Human Resources Manager recommended to the CEO that a training program on business and professional ethics should be organized. Kalu is nominated as a resource person to speak at the training program.

Required:
a. How should Kalu explain the nature and importance of business ethics and professional ethics? (6 Marks)
b. Advise Kalu on how he should analyze Kohlberg’s theory of moral development in an attempt to explain to the trainee participants how people generally develop a sense of morality both in personal and professional life. (10 Marks)
c. Discuss any TWO of the criticisms of Kohlberg’s theory. (4 Marks)

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  • 20 Marks

CSME – Nov 2015 – L2 – Q2 – Risk Management and Corporate Strategy

Develops a risk management program for theft, diversion, and safety issues; includes risk reduction and financing techniques.

Dolly Homes Plc is a real estate firm based in Abuja. The firm builds residential apartments and office blocks in five states of the federation. The objective of Dolly Homes Plc is to deliver high-quality, aesthetically designed, and professionally built homes/offices to its customers at competitive prices. It employs several skilled and casual workers, construction supervisors, construction engineers, architects, and quantity surveyors.

The company maintains a store at each of its building sites, each manned by a storekeeper and an assistant. Building materials are purchased centrally and delivered to sites per material schedules prepared by the quantity surveyor.

Patronage from middle and high-income brackets has been impressive; however, recently, the company has been receiving complaints about poor quality. The most alarming complaint involved a legal threat for injuries sustained when a kitchen cabinet collapsed in a client’s home.

Management’s investigation revealed theft of materials, diversion, and re-work waste due to poor finishing. There were also job site accidents, leading to employee injuries, lost hours, and increased medical claims.

Management decided to establish a risk management program to address theft, diversion, and health/safety issues.

Required:
a. As an Accountant, develop a risk management program to address Dolly Homes Plc’s problems. (8 Marks)
b. Advise management on techniques to reduce the frequency of risk exposures in the future. (6 Marks)
c. Suggest risk financing techniques to protect the company’s staff from injuries and accidents. (6 Marks)

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  • 5 Marks

CSME – Nov 2015 – L2 – Q1c – Corporate Governance

Discusses the difference between rules-based and principles-based professional ethics in accountancy.

What is the main difference between a rules-based and a principles-based code of professional ethics for accountants?

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  • 15 Marks

CSME – Nov 2015 – L2 – Q1b – Risk Management and Corporate Strategy

Discusses various methods for managing and controlling risks in an organization, illustrating different risk management techniques.

There are different methods of managing and controlling risks. Explain and illustrate any THREE of the following approaches to risk management:
i. Risk Diversification
ii. Risk Transfer
iii. Risk Sharing
iv. Risk Hedging (15 Marks)

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  • 10 Marks

CSME – Nov 2015 – L2 – Q1a – Risk Management and Corporate Strategy

Explains credit risk management concepts, including exposure, losses, residual risk, and appetite.

The finance director of Basket Company is preparing a proposal to present to the board of directors. He believes that the company is much too cautious in its policy of giving credit to customers. At the moment all customers are given 30 days’ credit. He believes that by increasing its exposure to credit risk, and increasing credit terms to 60 days, the company will achieve an increase in annual sales of up to 20%. He also thinks that some improvements in debt collection procedures will reduce the level of bad debts, although some bad debts cannot be avoided. He thinks that the value of sales where there is a default will fall each year from 2% of sales to 1.8% of sales. He proposes that in order to increase annual sales and profits, the company should be willing to increase its risk appetite and accept the risk of higher bad debts.

Required:

  1. Using this example of managing credit risk, explain and illustrate the meaning of:
    i. Exposure to risk
    ii. Risk of losses
    iii. Residual risk
    iv. Risk appetite

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  • 15 Marks

PSAF – Nov 2015 – L2 – Q7 – Public Sector Reforms

Distinguish between basic infrastructure and development projects with examples and identify funding sources and characteristics.

In order to achieve some development objectives, nations place emphasis on priority programmes like the provision of basic infrastructure and development projects, all of which require appropriate funding.

Required:

a. By means of specific relevant examples, distinguish between “basic infrastructure” and “development projects”. (3 Marks)

b. Discuss TWO development objectives which the priority programmes you refer to in (a) above are planned to achieve. (4 Marks)

c. Identify TWO sources of funding for these priority projects stating TWO distinct characteristics of each source identified and TWO factors that facilitate the commercial viability of the projects. (8 Marks)

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  • 20 Marks

MI – Nov 2015 – L1 – SB – Q5 – Information Systems

Defines an information system and explains the functions of different types of support systems.

a. Define an Information System. (2 Marks)

b. Explain FOUR functions of an Executive Support System. (8 Marks)

c. Explain briefly the following:
i. Transaction Processing System (TPS). (5 Marks)
ii. Decision Support System (DSS). (5 Marks)

(Total 20 Marks)

 

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  • 6 Marks

MI – Nov 2015 – L1 – SB – Q4b – Information Systems

Summary: Describes three main methods used to monitor performance in IT-based organizations.

State and describe briefly THREE main methods of monitoring performance in
an IT based organisation. (6 Marks)

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  • 14 Marks

MI – Nov 2015 – L1 – SB – Q4a – Information Systems

Identifies values added by an Accounting Information System and its various uses.

a. “A well-designed Accounting Information System normally adds VALUES to an organization.”
Required:
i. Enumerate FOUR of these values. (4 Marks)

ii. State FIVE uses of Accounting Information System and explain each briefly. (10 Marks)

(Total 14 Marks)

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  • 20 Marks

MI – Nov 2015 – L1 – SB – Q3 – Accounting for Cost Elements

Determines inventory balance using FIFO and weighted average pricing methods.

A company located in Ijora area of Lagos extracted the following figures from its materials analysis sheet:

Date Transaction Quantity Unit price (N)
1st January Balance b/f 10,000 50
25th January Receipt 7,000 55
6th February Issue 14,000 –
3rd March Receipt 5,000 60
27th March Receipt 4,500 62
4th June Issue 7,500 –
24th June Issue 2,500 –
30th June Receipt 6,500 65

You are required to record the above transactions in the inventory ledger and determine the value of the inventory balance at the end of June 2015 using:
a. First-in-First-out pricing method. (10 Marks)
b. Weighted average pricing method. (10 Marks)

(Total 20 Marks)

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  • 20 Marks

MI – Nov 2015 – L1 – SB – Q2 – Budgeting

Compiles functional budgets for sales, production, and material purchases for six months.

ABC Limited is engaged in the production of AiBiCi product and the following data were extracted from the Budget Committee’s Report:

i. Sales is expected to be 20,000 units each in months 1 and 2, this will increase by 10% each in months 3 and 4, and 5% each in months 5 and 6.

ii. Unit selling price is currently estimated at N250, and due to increased awareness, the price will move up to N300 in the fourth month.

iii. To produce one unit of AiBiCi, the following materials are required:

  • 2kgs of A @ N20/kg
  • 5kgs of B @ N5/kg
  • 2kgs of C @ N10/kg

iv. The company keeps 10% of estimated sales as closing inventory for the month. Assume no opening inventory for month 1.

You are required to compile, in tabular form, the following functional budgets for the next 6 months:

a. Sales in quantity and value. (6 Marks)

b. Production in quantity. (6 Marks)

c. Material purchase in quantity and the total cost. (8 Marks)

(Total 20 Marks)

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  • 20 Marks

MI – Nov 2015 – L1 – SB – Q1 – Costing Techniques

Involves calculating the life cycle target cost and addressing cost reduction actions for a new product.

XYZ Limited has just designed a new consumer product – XEE, which is expected to have a ten-year life cycle. Based on its market research, XYZ Limited’s Management has determined that the new product should be packaged in a 5kg-polymer sack with a selling price of N150 in the first four years, N120 in the next four years, and N90 per unit during the last two years.

Sales in units are expected as follows:

Year Units
1 400,000
2 500,000
3 600,000
4 800,000
5 1,000,000
6 1,200,000
7 900,000
8 600,000
9 500,000
10 300,000

Variable selling costs are expected to be N10 per package throughout the product’s life. Annual fixed selling and administrative costs are estimated to be N1,200,000. XYZ Limited’s management desires a 25% profit margin on the selling price.

Required:
a. Compute the life cycle target cost of manufacturing the product (round up to the nearest kobo). (14 Marks)

b. If XYZ Limited anticipated that the new product will cost N90.50 per unit to manufacture in the first year, what are the maximum manufacturing costs in the following nine years? (3 Marks)

c. Suppose that the outcome of the market research indicates that expected manufacturing cost per unit over the product life cycle is N89.90, what actions would the company take to reduce this cost? (3 Marks)

(Total 20 Marks)

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q20 – Information Systems

Identifies an incorrect statement regarding directional alignment between IT strategy and business strategy.

Which of the following is NOT true of Directional Alignment between IT Strategy and Business Strategy?
A. The alignment must consider all of the organisation’s business functions
B. It must consider the related importance of data on assets throughout the enterprise
C. Alignment causes an organisation to incur costs that may not be necessary to the business needs
D. An organisation can transform technology into business service functions by aligning existing architecture and project portfolios with business needs
E. The cost of not having a directional alignment can be stated through direct costs to the technology environment

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q19 – Information Systems

Identifies a career path that is not typically suitable for a Chartered Accountant in a computer-based industry.

The possible career paths for a Chartered Accountant in a computer-based industry include the following EXCEPT:
A. System Analyst
B. Computer Manufacturer
C. Computer Programmer
D. Web Designer
E. Database Administrator

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q18 – Decision-Making Techniques

Identifies a factor that does not contribute to improving decision-making through information.

Which of the following is NOT a means by which information can improve decision making?
A. Increasing information overload
B. Reducing uncertainty
C. Providing feedback about the effectiveness of prior decisions
D. Identifying situations requiring management action
E. Improving the timing of information

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q17 – Information Systems

Identifies an item that is not considered a component of an Accounting Information System.

Which of the following is NOT a component of an Accounting Information System (AIS)?
A. Humanware
B. Software
C. Information Technology Infrastructure
D. Office structure
E. Internal control and security measures

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