2020年贵州ACCA考试准考证打印时间考前两周

3 Clyde Williams is facing a dilemma. He has successfully built up a small family-owned company, Concrete Solutions

Ltd, manufacturing a range of concrete based products used in making roads, pavements and walkways. The

production technology is very low tech and uses simple wooden moulds into which the concrete is poured. As a

consequence he is able to use low skilled and low cost labour, which would find it difficult to find alternative

employment in a region with high unemployment levels. The company has employed many of its workforce since its

creation in 1996. The company’s products are heavy, bulky and costly to transport. This means its market is limited

to a 30-mile area around the small rural town where the manufacturing facility is located. Its customers are a mix of

private sector building firms and public sector local councils responsible for maintaining roads and pavements. By its

nature much of the demand is seasonal and very price sensitive.

A large international civil engineering company has recently approached Clyde with an opportunity to become a

supplier of concrete blocks used in a sophisticated system for preventing coast and riverbank erosion. The process

involves interlocking blocks being placed on a durable textile base. Recent trends in global warming and pressure in

many countries to build in areas liable to flooding have created a growing international market for the patented erosion

prevention system. Clyde has the opportunity to become the sole UK supplier of the blocks and to be one of a small

number of suppliers able to export the blocks to Europe. To do it he will need to invest a significant amount in CAM

(computer aided manufacturing) technology with a linked investment in the workforce skills needed to operate the

new technology. The net result will be a small increase in the size of the labour force but redundancy for a significant

number of its existing workers either unwilling or unable to adapt to the demands of the new technology. Successful

entry into this new market will reduce his reliance on the seasonal low margin concrete products he currently produces

and significantly improve profitability.

One further complication exists. Concrete Solutions is located in a quiet residential area of its home town. Clyde is

under constant pressure from the local residents and their council representatives to reduce the amount of noise and

dust created in the production process. Any move into making the new blocks will increase the pollution problems

the residents face. There is a possibility of moving the whole manufacturing process to a site on a new industrial estate

being built by the council in a rival town. However closure of the existing site would lead to a loss of jobs in the current

location. Clyde has asked for your help in resolving his dilemma.

Required:

(a) Using models where appropriate, advise Clyde on whether he should choose to take advantage of the

opportunity offered by the international company. (12 marks)

3 The Chemical Services Group plc (CSG), which operates a divisionalised structure, provides services to industrial and

domestic customers in Swingland, a country whose economic climate is subject to significant variations. There have

been a number of recent changes at board level within CSG and therefore the managing director called a meeting of

the board of directors at which each of four recently appointed directors put forward their view as to what their primary

focus should be. These were as follows:

The research and development director stated that ‘my primary focus is upon ensuring that we continue to develop

the products and services that satisfy the requirements of our existing and potential customers’.

The finance director stated that ‘my primary focus is upon keeping our investors satisfied’.

The human resources director stated that ‘my primary focus is upon ensuring that we take all the steps necessary to

establish and maintain our reputation as a responsible employer’.

The corporate affairs director stated that ‘my primary focus is upon the need to ensure that we are recognised as a

socially responsible organisation’.

Required:

(a) Discuss the criteria that should be considered in deciding upon suitable performance measures in respect of

the primary focus of each of the FOUR directors of CSG providing THREE appropriate quantitative measures

for each primary focus.

Note: your answer may include financial or non-financial quantitative measures. (12 marks)

3 You are the manager responsible for the audit of Keffler Co, a private limited company engaged in the manufacture of

plastic products. The draft financial statements for the year ended 31 March 2006 show revenue of $47·4 million

(2005 – $43·9 million), profit before taxation of $2 million (2005 – $2·4 million) and total assets of $33·8 million

(2005 – $25·7 million).

The following issues arising during the final audit have been noted on a schedule of points for your attention:

(a) In April 2005, Keffler bought the right to use a landfill site for a period of 15 years for $1·1 million. Keffler

expects that the amount of waste that it will need to dump will increase annually and that the site will be

completely filled after just ten years. Keffler has charged the following amounts to the income statement for the

year to 31 March 2006:

– $20,000 licence amortisation calculated on a sum-of-digits basis to increase the charge over the useful life

of the site; and

– $100,000 annual provision for restoring the land in 15 years’ time. (9 marks)

Required:

For each of the above issues:

(i) comment on the matters that you should consider; and

(ii) state the audit evidence that you should expect to find,

in undertaking your review of the audit working papers and financial statements of Keffler Co for the year ended

31 March 2006.

NOTE: The mark allocation is shown against each of the three issues.