Win Bo Myint Accountancy Training Centre
LCCI – Level 3 (Advanced Business Calculation)
Mock Exam – 2 (Sep 2023)
Time Allowed (3 Hours)
Name ……………………………
Question – 1
(Total for Question 1 – 23 marks)
Question 2
(Total for Question 2 – 27 marks)
Question – 3
The annual demand for an item of inventory is 2,500 units. The cost of placing an order is $80 and the cost of
holding an item in stock for one year is $15.
(a) Calculate the economic order quantity, to the nearest unit. (3)
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A manufacturing company uses 25,000 components at an even rate during a year. Each order placed with the
supplier of the components is for 2,000 components, which is the economic order quantity.
The company holds a buffer inventory of 500 components. The annual cost of holding one component in inventory
is $2.
(b) What is the total annual cost of holding inventory of the component? (3)
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A company uses an item of inventory as follows.
Purchase price $25 per unit
Annual demand 1,800 units
Ordering cost $32
Annual holding cost $4.50 per unit
EOQ 160 units
(c) What is the minimum total cost assuming a discount of 2% applies to the purchase price and to holding costs
on orders of 300 and over? (6)
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(Total for Question 3 = 12 marks)
Question – 4
LD Co provides two cleaning services for staff uniforms to hotels and similar businesses. One of the services is a
laundry service and the other is a dry cleaning service. Both of the services use the same resources, but in different
quantities. Details of the expected resource requirements, revenues and costs of each service are shown below.
laundry Dry cleaning
$per service $per service
Selling price 5.60 13.20
Cleaning materials ($10.00 per litre) 2.00 3.00
Direct labour ($6.00 per hour) 1.20 2.00
Variable machine cost ($3.00 per hour) 0.50 1.50
Fixed costs 1.15 2.25
Profit 0.75 4.45
Total annual fixed costs are $32,825.
The maximum resources expected to be available in December 20X3 are
Cleaning materials 5,000 litres
Direct labour hours 6,000 hours
Machine hours 5,000 hours
The maximum demand for laundry is expected to be 14,000 services and for dry cleaning 9,975 services.
Required
Assuming that a graphical linear programming solution is to be used to maximize profit:
(i) State the constraints and objective function. (5 marks)
(ii) Determine the maximum profit that can be made. (8 marks)
(Total for Question 4 = 13 marks)
Question – 5
The value of a factory building in the United Kingdom has increased at the constant rate of 4.5% per annum for a
period of four years, with the rate based on compound interest. At the end of the four years, in January 2018, the
value was £560,000 (British pounds).
(a) Giving your answer correct to the nearest hundred British pounds (£), calculate the value of the factory
building:
(i) at the start of the four years, in January 2014 (3)
(ii) one year later, in January 2015. (2)
After January 2018, the building is expected to continue to increase in value over the next three years, at a different
constant rate, reaching a value of £620,882
(b) Calculate the annual rate of interest in this three-year period, based on compound interest. (3)
The Royal Bank of Walsall successfully tenders £963,391 for a £1,000,000 Treasury bill that runs for six months
and is to be redeemed at par.
(c) Calculate the:
(i) rate of simple interest per annum earned on the Treasury bill (3)
(ii) value of the Treasury bill after two months. (2)
Ramrung Ltd is going to produce a new mobile phone, which will be manufactured in South Korea. Ramrung Ltd
needs to choose between two production methods, A and B.
The table shows some costs for both production methods in South Korean won (₩).
Production method Fixed cost per period (₩) Variable cost per unit (₩)
A 2,500,000,000 120,000
B 8,40,000,000
(a) Calculate the cost of producing 23,500 mobile phones in a single period using production method A.
When the production level is 41,500 mobile phones, both methods will have the same total production costs in a
single period.
(b) Calculate the variable cost of each mobile phone using production method B.
The company chooses production method A and decides to sell the new mobile phone for ₩200,000 per unit in
South Korea.
(c) Calculate the break-even point, in number of mobile phones sold.
Ramrung Ltd sells mobile phones in South Korea, United States of America (USA) and the European Union (EU).
(d) The table shows some information about the sales of mobile phones.
Region Selling price Units sold Exchange rate (₩ to Total sales value
(local currency) 1 x local currency) (₩)
South Korea 200,000 198000 1 (i) ..................
USA 350 (ii) .................. 1150 45,080,000,000
EU (iii) ............... 67,500 1330 35,910,000,000
Working
Ramrung Ltd has transportation costs of ₩13,300 for each unit shipped to the EU and ₩19,775 for each unit
shipped to the USA.
The variable cost per unit for production in all three regions is still ₩120,000
(g) Calculate the contribution per unit sold in the EU and in the USA.
(Total for Question 5 = 25 marks)
