SECTION A
This multiple choice section is worth 30 marks (3
marks per question). Choose ONE answer only from each question.

1. The master budget will comprise:

a. All the production, selling and cost budgets for
the organisation

b. The cash budget, the budgeted profit and loss
account, and the budgeted balance sheet

c.The budgeted profit and loss account, and the
budgeted balance sheet

d. The cash budget.

2. Which of the following will not appear in a cash
budget?

a. Wages

b. Sales revenue

c. Depreciation of machinery

d. Machinery bought on hire purchase.

3. A company has sales of 2,600 units. There are 1,400
units of opening stock while the closing stock is planned to be 1,800 units.
What production level is needed to satisfy sales?

a. 2,437 units

b. 2,600 units

c. 3,000 units

d. 2,200 units.

4. An example of a semi-variable cost would be:

a. The salaries of supervisors in a department

b. The costs of material to be used in production

c. Electricity costs

d. The costs of insuring assets.

5. A business makes 2,000 units of a particular
product. It spent £24,000 on material and it paid its operatives £40,000. Other
costs of running the factory were £50,000. The sales force was also paid
£18,000 and the head office costs were £100,000. In order to break even the
selling price per unit will have to be:

a. £32

b. £84

c. £66

d. £116

6. A new machine costs £120,000 to purchase and will
generate the following cash flows:
Year 1 – £15,000
Year 2 – £25,000
Year 3 – £40,000
Year 4 – £40,000
Year 5 – £35,000
Year 6 – £30,000
Using a discount rate of 20%, which of the following
answers correctly describes how long the discounted payback period would be?

a. Four years

b. Five years

c. Six years

d. The investment does not pay back.

7. Which of the following best describes a fixed cost?

a.Remains constant irrespective of the level of
activity

b. Represents a fixed proportion of total costs

c. Increases proportionately with output

d. Has a direct relationship with output.

8. Which one of the following is true for a sole
trader in the building industry?

a. Fixed assets are bought with the intention of
resale

b. Fixed assets tend to change constantly in amount
and composition

c. The term fixed asset cannot be applied to items
which can be moved

d. Fixed assets are normally used in the business on a
long-term basis.

9. A piece of machinery held by a construction company
for continued use in the business would usually be stated in the balance sheet
at:

a. Its current replacement cost

b. Its net book value (historical cost minus
depreciation)

c. A realistic second-hand or scrap value

d. Its current value to the business.

10. Which one of the following items is relatively
unimportant in decision making?

a. Opportunity costs

b. Relevant costs

c. Accruals and prepayments

d. Net cash flow.

900 words

SECTION B
This section is compulsory and is worth 30 marks.
Scenario:
The Board of Directors of PNJ Ltd, a subsidiary of SEG
Ltd have been worried for some time about their manufacturing equipment in
their production units and they have decided that these need to be replaced.
Estimates have been arranged with companies and the following has been received
concerning the equipment in Unit 13 of the Caxham Industrial Estate:

Firm: Murray Perry Wade Jones
Year (£000) (£000) (£000) (£000)
0 (100) (150) (175) (200)
1 25 50 5070
2 22 40 50 60
3 20 40 4060
4 15 20 40 30
5 16 10 40 20

At the end of the project, the equipment will be sold
and replaced with the following being received (£000s):
Murray 20
Perry 5
Wade 15
Jones 10

11. In report format, explain to the Board of PNJ
which project they should be endorsing. Your report should show full
calculations of relevant data and should include the net present value (NPV)
and the payback period for the above projects. In your advice, include any risk
issues that you think are relevant.
The company can borrow at 7% per annum.
(30 marks) 900 words

SECTION C
This section is compulsory and each is equally
weighted for assessment purposes.

12. The largest business organisations in most parts
of the world are public limited companies.

a. Explain the advantages of such organisations.
(12 marks) 350
words

b. If such advantages exist, discuss why there are so
many very small firms in the built environment sector of industry.
(8 marks) 300 words

13. Define the term ‘work study’ and explain the value
of this activity to a manager engaged in the built environment sector of
industry.
(20 marks)

14. Describe four business risks that confront limited
companies in the built environment sector and explain how these companies can
mitigate the problems associated with such risks.
(20 marks) 600
words

15a.Organisations require fixed assets to achieve
their objectives. Explain the four alternative ways in which such assets may be
acquired and the financing arrangements that may be entered into to secure
them.
(12 marks) 350
words

b. Describe the differences between short- and
long-term financing required by firms in the construction and property sector.
(8 marks) 300
words