Diploma-Level-1 2017 DEC PDF

DIPLOMA IN ACCOUNTING PROGRAMME EXAMINATIONS
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LEVEL ONE
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DA 1: FINANCIAL ACCOUNTING
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MONDAY 11 DECEMBER 2017
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TOTAL MARKS – 100; TIME ALLOWED: THREE (3) HOURS

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INSTRUCTIONS TO CANDIDATES
1. You have fifteen (15) minutes reading time. Use it to study the examination paper
carefully so that you understand what to do in each question. You will be told when
to start writing.
2. This paper is divided into TWO sections:

Section A: One (1) Compulsory question.
Section B: Five (5) Optional Questions. Attempt any Four (4) questions.
3. Enter your student number and your National Registration Card number on the front
of the answer booklet. Your name must NOT appear anywhere on your answer
booklet.
4. Do NOT write in pencil (except for graphs and diagrams).
5. Cell Phones are NOT allowed in the Examination Room.
6. The marks shown against the requirement(s) for each question should be taken as
an indication of the expected length and depth of the answer.
7. All workings must be done in the answer booklet.
8. Present legible and tidy work.
9. Graph paper (if required) is provided at the end of the answer booklet.
SECTION A – (Compulsory)
Attempt all ten (10) multiple choice questions
QUESTION ONE
Each of the following questions has only one correct answer. Write the letter of the correct
answer you have chosen in your answer booklet. Marks allocated are indicated against each
question.
1.1 Musa, a sole trader had opening inventory of K30,400 on 1 January 2015. His Cost of
Goods Sold figure on 31 December, 2015 was K92,000. Closing inventory as at 31
December, 2015 was K26,000. There were some purchase returns during the year
amounting to K10,400.
What were the purchases for the year?
A. K98,000
B. K87,600
C. K118,000
D. K77,200 (2 marks)
1.2 Mansa Limited is in the process of preparing its cash flow statement for the year
ended 30 September, 2016. The following balances were extracted from the
statement of financial position as at 30 September:
2016 2015
K K
Bank 12,000 20,000
Non-current liabilities
8% Debentures 30,000 25,000
Capital and Reserves
Share Capital 50,000 40,000
Share Premium 15,000 10,000
Retained earnings 23,000 17,000
What will be the increase or decrease in cash and cash equivalents at the end of 30
September, 2016?
A. Increase of K20,000
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B. Decrease of K20,000
C. Increase of K8,000
D. Decrease of K8,000 (2 marks)
1.3 Mwami is carrying out a reconciliation of her payables ledger. She needs to make
correcting entries due to the following errors:
1. A payment to Mwila Lombe has been posted to the account of Lombe Mwila
2. An invoice for K546 has been entered in the purchase day book as K456
Which of the corrections will result in an entry in the general ledger?
A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2 (2 marks)
1.4 Government produces financial reports regarding the sources and application of
public funds. Which of the following is NOT a user of public sector financial
reports?
A. Central government
B. Company shareholders
C. International funding organizations
D. Taxpayers (2 marks)
1.5 Which of the following errors would be found by extracting a trial balance?
A. A transaction has been completely missed in the accounts

B. The double entries have been made the wrong way round
C. Different figures have been entered for the debit and credit entries
D. An expense item has been posted to a non-current asset account. (2 marks)
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1.6 Which of the following are TRUE of partnerships?
1. The partners’ individual exposure to debt is limited.

2. Financial statements for the partnership by law must be produced and made
public.
3. A partnership is not a separate legal entity from the partners themselves.
A. 1 and 2 only
B. 2 only
C. 3 only
D. 1 and 3 only (2 marks)
1.7 Which accounting concept should be considered if the owner of a business takes
goods from inventory for his own personal use?
A. The substance over from concept.

B. The accruals concept.
C. The going concern concept
D. The business entity concept. (2 marks)
1.8 B and B Company purchased a machine with an estimated useful life of 10 years for
K456,000 on 30 June 2013. The machine has a residual value of K96,000.
What are the ledger entries to record depreciation charge for the machine in the
year ended 30 June 2016?
A. Dr Depreciation charge K36,000

Cr Acculated depreciation K36,000
B. Dr Depreciation charge K36.000

Dr Non-current assets K72,000
Cr Acculated depreciation K108,000
C. Dr Acculated depreciation K36,000

Cr depreciation charge K36,000
D. Dr Acculated depreciation K108,000

Cr Non-current assets K108,000
(2 marks)
1.9 The bank statement on 31 October 2016 showed an overdraft of K5,600. On

reconciling the bank statement, it was discovered that a cheque drawn by your
company for K560 had not been presented for payment and that a cheque for K910
from a customer had been dishonoured on 30 October 2016, but this had not yet
been notified to you by the bank.
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What is the correct bank balance to be shown in the statement of financial position
at 31 October 2016?
A. K7,070 overdrawn
B. K6,160 overdrawn
C. K5,250 overdrawn
D. K5,040 overdrawn (2 marks)
1.10 Rudo had an opening accrual of K10,660 for telephone expenses. During the year
she paid invoices totaling K59,480. Her closing accrual was K9,760.
What is the correct charge for the telephone expenses in Rudo’s income statements?
A. K39,060
B. K58,580
C. K60,380
D. K79,900 (2 marks)
[Total: 20 Marks]
5
SECTION B
There are five (5) questions in this section. Attempt any four (4) questions
QUESTION TWO
Mapalo, a limited liability company has the following trial balance as at 30 June 2016
Dr Cr
Inventory at 1 July 2015 17,600
Administrative expenses 17,648
Distribution costs 5,200
Cash at bank 800
Non-current assets at cost:
Buildings 80,000
Plant & equipment 11,200
Motor vehicles 2,560
Retained earnings 12,880
Suspense 1,500
Accumulated Depreciation:
Buildings 32,000
Plant and Equipment 3,840
Motor vehicles 960
Trade receivables 7,008
Purchases 33,600
Dividend paid 1,600
VAT payable 11,120
Trade payables 8,900
Sales revenue 94,016
K1 ordinary shares 8,000
Share premium ______ __4,000
177,216 177,216
The following additional information is relevant:
(i) Depreciation is to be provided as follows:
(1) Building at 5% straight line, charged to Administrative expenses.
(2) Plant and equipment at 20% on the reducing balance basis, charged to cost
of sales.
(3) Motor vehicles at 25% on the reducing balance basis, charged to distribution
costs.
(ii) Salaries amounting to K3,900 were outstanding at the year end.
(iii) No final divided is being proposed.
(iv) A customer has gone into liquidation owing K608. This debt is not expected to be
recovered and an adjustment should be made. An allowance for receivables of 5%
is to be set up.
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(v) 1 million new ordinary shares were issued at K1.50 on 1 June 2016. The proceeds
are left in a suspense account.
(vi) Closing inventory is K12,800.
(vii) The directors propose to create a general reserve by transferring K20,000 from
profits.
(viii) The tax charge provided for the year is K6,000.
Required:
(a) Prepare Mapalo Limited statement of profit or loss for the year to 30 June
2016.
(5½ marks)
(b) Prepare Mapalo Limited Statement of changes in equity for the year to 30
June 2016.
(4½ marks)
(c) Prepare Mapalo Limited Statement of financial position as at 30th June, 2016
(10 marks)
Note: the above statements must be prepared in accordance with the

requirements of IFRS.
QUESTION THREE
(a) Kaboshe is the proprietor of a shop selling chairs and tables. For accounting
purposes he wishes the business to be divided into two departments:
Department A : Chairs
Department B : Tables
The following balances have been extracted from his nominal ledger at 31 December
2016:
Dr Cr
K K
Sales: Department A 375,000
Sales :department B 250,000
Inventory :Department A, 1 Jan 2015 6,250
Inventory :Department B, 1 Jan 2015 5,000
Purchases: Department A 255,000
Purchases :Department B 190,100
Wages of sales assistants :Department A 36,000
Wages of sales assistants :Department B 34,000
Vanishing costs 1,500
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General office salaries 66,000
Fire insurance – buildings 1,800
Lighting and heating 3,100
Repairs to premises 875
Internal telephone 150
Cleaning 900
Accountancy charges 7,450
Sundry expenses 2,550
Inventory at 31 December 2016 was valued at:
Department A : 7,050
Department B : 4,560
The proportion of the total floor area occupied by each

department was:
Department A 2/5
Department B : 3/5
The apportionment should be made by using the methods as shown:
Area:-
Fire Insurance
Lighting and heating
Repairs
Telephone
Cleaning
Turnover:-
General office salaries
Accountancy
General office expense:
Vanishing
Required:
(a) Prepare Kaboshe’s departmental statement of profit or loss for the year ending 31
December 2016, apportioning the costs to show the net profit or loss of each
department. (14 marks)
(b) Using the results obtained in part (a), recommend the decisions that Kaboshe should
take for the two departments. (4 marks)
(c) Define the following terms, in relation to accounting for public sector organizations:
(i) Below the line
(ii) Virement (2 marks)
[Total: 20 Marks]
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QUESTION FOUR
You have been provided with the following information from the financial records of Malole
general dealers.
Balances on 1 Jan 2016 K

Accounts receivable ledger – Dr 325,234
Cr 1,715
Accounts payable ledger – Dr 10,304
Cr 178,255
Total for the month to 31 Jan 2016 K

Purchases 535,318
Sales 882,168
Purchase returns 15,078
Accounts receivable settled by contra accounts with accounts payable 3,185
Bad debt written off 8,771
Discounts and allowances to customers 5,222
Cash received from customers 843,248
Cash discount received 13,594
Cash paid to creditors 493,332
Cash paid to customers 364
Required:
(a) Prepare accounts receivable ledger control account. (4½ marks)

(b) Prepare accounts payable ledger control account. (4½ marks)
(c) The following errors have been discovered:
(i) An invoice for K6,540 has been entered in the purchases day book as K4,560.
(ii) A prompt payment discount of K700 from a creditor has been completely
omitted from the accounting records.
(iii) A credit note from a supplier for K600 had been entered as if it was an
invoice.
Required:
State the numerical effect on the Payable ledger control account balance of
correcting each of these items. (3 marks)
(d) Explain the four (4) main purposes of control accounts (4 marks)
(e) Explain the fundamental qualitative characteristics of the IASB framework for
financial reporting. (4 marks)
[Total: 20 Marks]
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QUESTION FIVE
The following is a summary of the receipts and payments of the Enelesi Rotary Club during
the year ended 31 July 2016:
Enelesi Rotary Club
Receipts and payments Account for the year ended 31 July 2016
K K
Cash and balances b/d 25,200 Secretarial expenses 19,560
Sales of competition tickets 52,440 Rent 168,240
Members subscriptions 238,440 Visiting speaker’s expenses 153,000
Donations 21,240 Donations to charities 4,200
Refund of rent 60,000 Prizes for competitions 32,400
Balance c/d __1,560 Stationery & printing _21,480
398,880 398,880
The following additional information also available:
As at 31 July 2015 2016

K K
Equipment (original cost K170,400) 117,000 93,600
Subscriptions in arrears 7,800 10,200
Subscriptions in advance 1,200 4,440
Owing to Suppliers of competition prizes 6,960 8,160
Inventory of completion prizes 4,560 5,520
Required:
(a) Calculate the value of the accumulated funds of the Enelesi Rotary Club as at 1
August 2015. (3 marks)
(b) Reconstruct the following accounts for the year ended 31 July 2016:
(i) The subscriptions account. (2½ marks)
(ii) The competition prizes expense account. (2½ marks)
(c) Prepare the income and expenditure account for the Enelesi Rotary Club for the year
ending 31 July 2016 and statement of financial position as at that date.
(12 marks)
[Total: 20 marks]
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QUESTION SIX
The trial balance of Chanda Kabaso as at 31 December 2016 showed a difference and was
posted to the suspense accounts. Draft final accounts for the year ended 31 December
2016 were prepared showing a net profit of K472,400. The following errors were
discovered:
1. Sales of K4,500 to C. Tembo had been debited to Tembo and Sons Manufacturing
limited.
2. Payment of K2,750 for telephone charges had been entered on the debit of the
telephone account as K3,750.
3. The sales journal had been undercast by K20,000.
4. Repairs to a machine amounting to K3,900 had been charged to machinery account.
5. A cheque for K15,000 being rent received from Beene limited, had only been entered in
the cash book.
6. Purchases from P Banda, amounting to K7,650 had been received on 31 December 2016
and included in the closing inventory at that date, but the invoice had not been entered
in the purchases journal.
Required:
(a) (i) Prepare the journal entries, without narratives to correct the above errors.
(12 marks)
(ii) Show the effect of each of the above adjustments on the net profit in the
draft financial statement and show the corrected profit at 31 December 2016.
(6 marks)
(b) Distinguish between capital and revenue expenditure.

(2 marks)
[Total: 20 Marks]
END OF PAPER
11
DA 1: FINANCIAL ACCOUNTING SOLUTIONS
SOLUTION ONE
1. A
2. D
3. B
4. B
5. C
6. C
7. D
8. A
9. B
10. B
SOLUTION TWO
(a) Mapalo limited Statement of profit or loss for the year ended 30 June 2016
K
Revenue 94,016
Cost of sales (w2) (39,872)
Gross profit 54,144
Administrative expenses (w3) (26,476)
Distributive costs (K5,200 + K400 (w1) (5,600)
Profit before tax 22,068
Tax charge (6,000)
Profit before tax 16,068
(b) Statement of charges in equity for the year ended 30 June 2016
Share Share General Retained Total
Capital Premium reserves Earnings
K K K K K
Balance at 1 July 2015 8,000 4,000 - 12,880 24,880

Total comprehensive income for - - 16,068 16,068
the year
Dividend paid - - (1,600) (1,600)
Transfer to general reserve 20,000 (20,000) -
Share issue 1,000 500 _____- 1,500
Balance at 30 June 2016 9,000 4,500 20,000 7,348 40,848
(c) Statement of financial position as at 30 June 2017

K K
Non-current Assets
Property, plant and equipment (w4) 51,088
Current Assets:
12
Inventory 12,800
Trade receivables (K7,008 – K608 – K320) 6,080
Cash at bank 800
19,680
Totals Assets 70,768
K K
Equity and Liabilities:
Equity:
Share capital 9,000
Share premium 4,500
General reserves 20,000
Retained earnings (w6) 7,348
Current liabilities:
VAT payable 11,120
Trade payables 8,900
Income tax payable 6,000
Accruals 3,900
29,920
70,768
Workings:
1. Depreciation: K
Buildings (K80,000 x 5%) 4,000
Plant (K11,200 – K3,840) x 20% 1,472
Motor vehicles (K2,560 – K960) x 25% 400
2. Cost of sales: K
Opening inventory 17,600
Purchases 33,600
Depreciation (w1) 1,472
Closing inventory (12,800)
__39,872
3. Administrative expenses: K
Per trial balance 17,648
Depreciation (w1) 4,000
Outstanding salaries 3,900
Irrecoverable debt 608
Receivables allowance (K7,008 – K608) x 5% __320
26,476
4. Property, plant and equipment:

Cost Acc. dep Dep. Chg. Carrying
K K K Amt.
K
Buildings 80,000 32,000 4,000 44,000
Plant 11,200 3,840 1,472 5,888
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Motor vehicles 2,560 __960 __400 _1,200
93,760 36,800 5,872 51,088
5. Retained earnings: K
Balance brought forward per T/B 12,880
Profit for period 16,068
Dividend paid 1,600
Transfer to general reserves (20,000)
7,348
SOLUTION THREE
Kaboshe’s
Departmental income statement for the year ending 31 December 2016:
A B
K K K K
Sales 375,000 250,000
Less: Cost of goods sold:
Inventory 1 Jan 2015 6,250 5,000
Add purchases 255,000 190,100
261,250 195,100
Less inventory 31 December 2015 (7,050) (4,560)
254,200 190,540
Gross profit 120,800 59,460
Less expenses
Wages 36,000 34,000
Vanishing costs 900 600
General office salaries 39,600 26,400
Fire insurance 720 1,080
Lighting and heating 1,240 1,860
Repairs to premises 350 525
Internal telephone 60 90
Cleaning 360 540
Accountancy charges 4,470 2,980
Sundry expenses 1,530 85,830 1,020 68, 495
Net profit (loss) 34,970 (9,035)
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Workings
Details Basis of Total Dept. A Dept. B

Allocation
Vanishing cost Turnover 1,500 900 600
Fire Insurance Floor area 1,800 720 1,080
Lighting Floor Area 3,100 1,240 1,860
Repairs Floor Area 875 350 525
Telephone Floor Area 150 60 90
Cleaning Floor Area 900 360 540
Vanishing Turnover 1,500 900 600
General office Sal Turnover 66,000 39,600 26,400
Accountancy Turnover 7,450 4,470 2,980
charges
Sundry expenses Turnover 2,550 1,530 1,020
(b)
Management may decide to improve the performance of department B by carrying out
specific marketing campaigns to boost its sales or by reducing its operating expenses that
are higher as % of sales at 27% against 22% for department A. Additionally, cost of sales
to sales ratio is 76% for department B against 67% for department A.
The company’s management needs to consider the methods that are being used to
apportion the expenses as B’s losses may have nothing to do with controllable costs but
uncontrollable.
(C)
i. Below the line: exceptional and extraordinary items which are not included in the
calculation of above the line profit or loss.
ii. Virement: the transfer of funds from one budget head to another.
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SOLUTION FOUR
(a) Account Receivable Ledger Control

K K
Balance b/d 325,234 Balance b/d 1,715
Sales 882,168 Contra 3,185
cash 364 Bad debt 8,771
Discount 5,222
Cash 843,248
________ Balance c/d 345,625
1,207,766 1,207,766
Balance 345,625
(b) Account Payables Ledger Control

K K
Balance b/d 10,304 Balance b/d 178,255
Returns 15,078 Purchases 535,318
Contra 3,185
Discount received 13,594
Cash 493,332
Balance b/d 178,080
713,573 ______
713,573
Balance b/d 178,080
(c) (i) Increase of K1,980

(ii) Decrease of K700
(iii) Decrease of K1,200
d.)
 Control account provide a check on the accuracy of entries made in the personal
accounts in the receivables and payables ledger
 Assist in locating errors in the personal accounts
 Provides an internal check where there is separation of bookkeeping duties
 Provides a total of the receivables and payable balance to be used in the financial
statement
e.)
 Relevance: Information should be capable of influencing economic decisions.
 Faithful representation: information should be reliable. Information represents
what it purports to represent, if it is neutral, complete and free from material errors.
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SOLUTION FIVE
(a)
Accumulated fund at 1st August, 2015

K K
Equipment 117,000
Inventory of prizes 4,560
Arrears of subscriptions 7,800
Cash and bank 25,200
154,560
Less: Subscription in advance 1,200
Prizes suppliers 6,960 8,160
146,400
(b) (i) Subscriptions Account

K K
In arrears b/d 7,800 In advance b/d 1,200
In advance c/d 4,440 Subscriptions received 238,440
Income & expenditure(Bal 237,600 In arrears c/d 10,200
fig)
249,840 249,840
(ii) Competitions Prizes account

K K
Inventory b/d 4,560 Accounts payable b/d 6,960
Cash 32,400 Inventory c/d 5,520
Accounts payable c/d 8,160 Cost of prizes given 32,640
45,120 45,120
(c) Rotary Club

K K
Income
Subscription 237,600
Ticket sales 52,440
Less cost of prizes 32,640 19,800
Donations received 21,240
278,640
Less Expenditure:
Rent (K168,240 – K60,000) 108,240
Visiting speaker’s expense 153,000
Secretarial expenses 19,560
Stationery and printing 21,480
Donations to charities 4,200
Depreciation 23,400 329,880
Excess of expenditure over income 51,240
17
Statement of Financial Position as at 31 July 2016
K K
Non-current Assets:
Equipment at cost 170,400
Less: Depreciation (76,800)
93,600
Current Assets:
Inventory of prizes 5,520
Arrears of subscriptions 10,200
15,720
109,320
Current Liabilities:
Account payables for prizes 8,160
Advance subscriptions 4,440
Bank overdraft 1,560 (14,160)
95,160
Accumulated Fund:
Balance 1 Aug 2015 146,400
Less excess of expenditure over income 51,200
95,160
SOLUTION SIX
K K
(i) C Tembo 4,500
Tembo and Son Manufacturing Limited 4,500
Suspense 2,000
Telephone 1,000
Suspense 20,000
Sales Account 20,000
Machine repairs 3,900

Machinery 3,900
Suspense 15,000
Rent received * 15,000
*Assumed not invoiced to Beene limited
Purchase account 7,650

P Banda 7,650
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(ii) Corrected Profit for the year ending 31 December 2016
K K
Profit 472,400
Add: Telephone expense overstated 1,000
Sales understated 20,000
Rent received omitted 15,000
36,000
508,400
Less: Machinery repairs understated 3,900
Purchases omitted 7,650
11,550
Corrected profit figure 496,850
(b) Capital expenditure is when a business spends money to buy or add value to a non-
current asset while revenue expenditure is a total of expenses for the day to day
running of the business.
 It is necessary to distinguish between the two so that they are treated correctly.
 If they are treated wrongly the figures in the statement of financial position and
income statement will be incorrect resulting in wrong net profit and non-current
assets.
END OF SOLUTIONS
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___________________
LEVEL ONE
___________________
DA 2: QUANTITATIVE ANALYSIS
___________________
WEDNESDAY 13 DECEMBER 2017
___________________
__________________
to start writing.

Section B: Five (5) Optional Questions. Attempt any Four (4) questions.
booklet.
20
QUESTION ONE
question.
1.1 With reference to events A and B, how would you best describe mutually exclusive
outcomes?
A. A and B are dependent events.
B. A and B are independent events.
C. The occurrence of event A excludes event B from occurring.
D. Events A and B happen at the same time. (2 marks)
1.2 When the coefficient of determination is 0.65, which of the following is correct?
A. y = 0.65x
B. y = a + 0.65x
C. 65 per cent of the variation in y can be explained by the corresponding

variation in x.
D. 65 per cent of the correlation in x can be explained by the corresponding

variation in y. (2 marks)
1.3 A company must choose between two projects - Project A or Project B. The profits
generated from each project are as follows.
Project A Project B
Probability Profit (K) Probability Profit/(loss)(K)
0.45 4,000 0.64 8,000
0.55 2,000 0.36 (1,000)
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Which project should be chosen and its expected value of profit?
(a) A 2,900
(b) A 3,000
(c) B 5,480
(d) B 4,760 (2 marks)
1.4 What is the variance of the following five numbers: 4, 6, 8, 12, and 15?
(a) 8.9
(b) 9.0
(c) 16
(d) 80 (2 marks)
1.5 The discount rate at which the net present value is zero is called:
A. NPV
B. Discount factor
C. Internal rate of return
D. Point of Equilibrium (2 marks)
1.6. The average rate of arrival of customers at a busy check-out counter is three
customers per minute. The probability that at any given minute, there will be less
than two arrivals (to 2 decimal places) is:
A. 0.04
B. 0.14
C. 0.42
D. 0.20 (2 marks)
22
1.7 A class frequency distribution for a random sample of measurements is shown below.
Class limits frequency

1-5 4
6-10 8
11-15 5
16-20 3
The sample mean of the values in the table above is:
A. 9.75
B. 20
C. 195
D. 5 (2 marks)
1.8 The regression equation is given as 𝑦 = 𝑎0 + 𝑎1 𝑥 where 𝑥 and 𝑦 are independent and
dependent variables respectively. On the scatter diagram, the independent variable is
typically presented on:
A. The vertical axis

B. The horizontal axis
C. The regression line itself
D. The independent variable is actually not included on scatter diagram (2 marks)
1.9 Suppose the average number of car accidents on the highway in one day is 4. What
is the probability of no car accident in one day?
A. 0.18320
B. 0.98168
C. 0.01832
D. 0.07320 (2 marks)
1.10 Of a large number of mass –produced articles, one fifth (1/5) is defective. Find the
probability that a random sample of 50 will obtain exactly 6 defective articles.
A. 0.5537
B. 0.0442
C. 0.6537
D. 0.05537 (2 marks)
[Total: 20 Marks]
23
SECTION B
There are FIVE (5) questions in this section. Attempt any FOUR (4) questions
QUESTION TWO
(a) Two projects P and Q have the following net cash flows;
Year 0 1 2 3 4 5
Project
P -420,000 -5,000 122,000 130,000 148,000 150,000
Project
Q -95,000 -10,000 -120,000 200,000 110,000 -50,000
(i) Using the net present value criterion, determine which project is the most
profitable if a discount rate of 6% and 8% is used. (8 marks)
(ii) Estimate the Internal Rate of Return of each project. Which project would
now be considered more profitable? (7 marks)
(b) (i) Define a yield curve. (2 marks)
(ii) Give any three (3) applications of a yield curve (3 marks)
QUESTION THREE
(a) It is estimated that 55% of freshmen that are entering a programme are certain to
graduate from their college in four years’ time. From a random sample of six
freshmen;
(i) What is the probability that exactly three will graduate? (3 marks)
(ii) What is the probability that more than four will graduate? (3 marks)
(iii) What is the average number that would graduate from a group of six
freshmen? (2 marks)
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(b) You are the manager of a chain of hospitality companies which hire cars to clients for
various business purposes. Your boss is interested in the monthly distances covered
by the cars.
The table below shows a sample of distances covered by hired cars in a month and
the following distances (mileage in kilometers) were recorded
102 98 72 82
71 92 94 101
77 60 88 94
67 84 92 82
89 75 79 76
Calculate:
(i) The average distance covered by the cars. (2 marks)
(ii) The median distance (2 marks)

(iii) The first quartile (2 marks)
(iv) The third quartile (2 marks)

(v) The standard deviation (4 marks)
QUESTION FOUR
(a) The Bursar of a Nursery school would like to invest some surplus cash. She decided
to visit three banks (Zanaco, Stanbic and Finance) and was offered the following
Conditions:
(i) Zanaco would pay interest at a nominal rate of 10.5%, compounded bi-
annually, correct to 2 decimal places.
(ii) Stanbic would pay interest at a nominal interest rate of 12%,

compounded monthly, correct to 2 decimal places.
(iii) Finance bank would pay interest at a nominal interest of 12%,

compounded quarterly, correct to 2 decimal places.
Required:
In which Bank must the bursar invest her surplus cash? (12 marks)
25
(b) Mr. Bwalya borrows K5 000 from the bank. He agrees to repay the loan in six equal
monthly payments at 5% interest per month on the unpaid balance. Construct the
amortization schedule showing how much of each monthly payment is used for
interest and how much is used to reduce the unpaid balance.
(8 marks)
[Total: 20 Marks]
QUESTION FIVE
A manufacturer can produce two kinds of Biscuits: Plain and Cream, using the same
equipment in a similar three-stage process involving mixing, cooking and packaging. Boxes
of Plain sell at a profit of K1.00 and boxes of Cream at a profit of K1.25. For each production
run, the processing times (minutes) per box and the availability of the equipment is as
follows:
Processing times (minutes) Equipment
Plain Cream availability
Mixing 2 4 24 hours
Cooking 10 8 60 hours
Packaging 3 1 15 hours
The manufacturer wishes to maximise profit.
Required:
(a) State the objective function and constraint functions. (8 marks)
(b) Graph the constraints and shade the feasible region. (6 marks)
(c) Recommend a suitable production mix for the manufacturer which will maximise
profit and profit amount. (6 marks)
[Total: 20 Marks]
26
QUESTION SIX
(a) Define simulation (1 mark)
(b) Mrs. Chisenga owns a bakery in Kasama. She keeps stock of a popular brand of
cake. Daily demand based on past experience is given below:
Daily Demand Probability
0 0.01
15 0.15
25 0.20
35 0.50
45 0.12
50 0.02
Consider the following sequence of random numbers:

48, 78, 09,51,56, 77,15,14, 68 and 09
(i) Using the sequence, simulate the demand for the next ten (10) days.
(9 marks)
(ii) Find the stock situation if Mrs. Chisenga decides to make 35 cakes every day.
(4 marks)
(iii) Estimate the daily average demand for the cakes on the basis of the
simulated data. (3 marks)
(c) Blossom’s Flowers purchases roses for sale for a grand graduation ceremony of XYZ
University. The roses are purchased for K10 a dozen and sold for K20 a dozen. Any
roses not sold on graduation ceremony day can be sold for K5 per dozen. The owner
will purchase 1 of 3 amounts of roses on graduation ceremony day: 100, 200 or 400
dozen roses. Given 0.2, 0.4 and 0.4 are probabilities for the sale of 100, 200 or 400
dozen roses, respectively, what is the EMV for buying 200 dozen roses?
(3 marks)
[Total: 20 Marks]
END OF PAPER
27
DA 2: QUANTITATIVE ANALYSIS SOLUTIONS
SECTION A
SOLUTION ONE
1.1 C
1.2 C
1.3 D A = (0.45x4,000) + (0.55x2,000) , Proj. B = (0.64x8,000)+(0.36x-1,000)
= 1,800 +1,100 =5,120-360
= 2,900 = 4,760 (D is better)
1.4 C The arithmetic mean of the five numbers is: 4+6+8+12+15=45/5= 9 = x̅
x x - x̅ (x - x̅ )2
4 -5 25
6 -3 9
8 -1 1
12 3 9 Variance = ∑ (x - x̅ )2
15 6 36 n
80
80 = 5
=16
1.5 C
𝑒 −𝜇 𝜇𝑥 𝑒 −3 30 𝑒 −3 31 𝑒 −3 32
1.6 C 𝑃(𝑥) = 𝑥!
= 0!
+ 1!
+ 2!
= 0.42
1.7 A (3 ∗ 4 + 8 ∗ 8 + 13 ∗ 5 + 18 ∗ 3)/20 = 9.75
1.8 B
1.9 C We assume a Poisson distribution
 4
28
e   x
  X  x 
x!
e4 40
  X  0   0.01832
0!
1.10 D
1
n  50, p   0.2, q  1  0.2  0.8
5
n
  X  x     p x 1  p 
n x
 x
 50 
  X  6      0.2   0.8 
50  6
 0.05537
6
6 
SECTION B
SOLUTION TWO
a. At 6%
Project 𝑋
𝑁𝑃𝑉𝑋 = −5000(1.06)−1 + 122000(1.06)−2 + 148000(1.06)−4 + 130000(1.06)−3 +
150000(1.06)−5 -420000
= −4716.98 + 108579.57 + 109150.51 + 112088 − 420000 =82331.69
Project Y
𝑁𝑃𝑉𝑌 = −10000(1.06)−1 − 120000(1.06)−2 + 200000(1.06)−3 + 110000(1.06)−4
− 50000(1.06)−5 − 95000
= −9433.96 − 106799.57 + 167923.86 + 87130.30 − 37362.91 − 95000 = 6457.72
AT 8%
Project X
𝑁𝑃𝑉𝑋 = −5000(1.08)−1 + 122000(1.08)−2 + 148000(1.08)−4 + 130000(1.08)−3 +
150000(1.08)−5 -420000
= −4629.63 + 104595.34 + 103198.19 + 108784.42 + 102087.48 − 420000 =
−5964.2
29
Project Y
𝑁𝑃𝑉𝑌 = −10000(1.08)−1 − 120000(1.08)−2 + 200000(1.08)−3 + 110000(1.08)−4 −
50000(1.08)−5 − 95000 = 1549.35
Therefore, at 6%, project X is better than project Y
At 8% project Y is better than project X
(6×−5964.2)−(8×82331.69)
𝐼𝑅𝑅𝑋 = −5964−82331.69
= 7.86
(6×−1549.35)−(8×6457.72)
𝐼𝑅𝑅𝑦 = −1549.35−6457.72
= 7.6
According to the IRR project X is more profitable
b. Yield curve is the relationship between the level of interest rate (or cost of
borrowing) and the time to maturity of the debt for a given borrower in a given
currency.
APPLICATION
I. The yield curve is one of the best indicators of current economic conditions as
perceived by bond market
II. It is crucial for the pricing of many financial derivatives, as well as consumer
credit and mortgage rates for ordinary borrower.
III. Data from yield curve is used widely by economists in order to predict future
economic trends
Central banks authorities attach important values to the signals emitted by the yield curve in
evaluating the so called inflation expectation of the public.
30
SOLUTION THREE
a) Binomial distribution
𝑃(𝑥) = 𝑛𝐶𝑥. 𝜋 𝑥 (1 − 𝜋)𝑛−𝑥
𝜋 = 0.55, 1 − 𝜋 = 0.45 𝑛=6
i. 𝑝(𝑥 = 3) = 6𝐶3. (0.55)3 (0.45)3
=20 x 0.166375 x 0.091125
= 0.3032
ii. 𝑃(𝑥 > 4) = 𝑃(5) + 𝑃(6)
= 6𝐶5. (0.55)5 (0.45)1 + 6𝐶6. (0.55)6 (0.45)0
= 0.1359 + 0.0277
= 0.1636
iii. 𝐸(𝑋) = 𝑛𝜋 = 6(0.55) = 3.3,

µ=np=6 x 0.55
=3.3
1
b) i. 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 = 20 × [60 + 67 + 71 + 72 + ⋯ … … … … + 101 + 102]
1675
= 20
= 83.75
ii. median is the middle observation if the observation are arranged in
increasing order.
67,67,71,72,75,76,77,79,82,82,84,88,89,92,92,94,94,98,101,102
Since there are 20 observations, the 10 the and 11th are 82 and 84, hence
82+84
Therefore median = 2
= 83
1
iii. 𝑄1 = 20 × 4 = 5 𝑡ℎ 𝑖𝑡𝑒𝑚
= 75
3
iv. 𝑄3 = 20 × 4 = 15𝑡ℎ 𝑖𝑡𝑒𝑚
= 92
31
v. Standard deviation
1
𝑆𝐷 = √𝑛−1 ∑(𝑥 − 𝑥̅ )2
1
= √20−1 [(60 − 83.75)2 + (67 − 83.75)2 + ⋯ ]
= 11.66
∑ 𝑋2 142863
OR SD =√ 𝑛
− 𝑥̅ 2 =√ 20
− 83.752 =√7143.15 − 7014.01=√129.09=11.4
SOLUTION FOUR
𝑟
(a) Effective rate of interest = (1+ 𝑚 )m - 1
0.105 2
(i) Zanaco = (1 + 2
) – 1
= (1 + 0.0525)2 -1
= 1.107756 – 1
= 10.78%
0.12 12
(ii) Stanbic = (1 + 12
) –1
= (1 + 0.01)12 – 1
= 1.1268 – 1
= 0.1268
= 12.68%
0.12
(iii) Finance = ( 1 + ) 4– 1
4
= (1 +0.03)4 – 1
= 1.125509 – 1
= 12.55%
32
The best option is to invest the surplus cash in STANBIC BANK
(b) We first find the monthly payment:
 r   0.05 
R     5000  6 
  985.10
1  1  r   1  1.05 
n
After the first payment, the interest due is 5000  0.05    250 and the amount
applied to the principal is 985.10  250  735.10 . Thus, the unpaid balance after the
first payment is made is 5, 000  735.10   4, 264.90 . We continue this process until
the loan is retired. The amortization schedule is next.
Period R Interest portion of R Principal Unpaid balance

portion of R
0
1 985.10 250.00 735.10 4, 264.90
2 985.10 213.25 771.86 3, 493.04
3 985.10 174.65 810.45 2, 682.59
4 985.10 134.13 850.97 1, 831.62
5 985.10 91.58 893.52 938.10
6 985.10 46.91 938.19 00
Note that the last payment is adjusted so that we end with zero balance.
33
SOLUTION FIVE
(a) Let X = number of boxes for Plain
Let Y = number of boxes for Cream
The objective is to maximise profits.
Max (Z) = X + 1.25Y
Subject to the following constraints;
(i) 2x + 4y ≤ 1,440 (24x60) Mixing
(ii) 10x + 8y ≤ 3,600 (60x60) Cooking
(iii) 3x + y ≤ 900 (15x60) Packaging
(iv) X ≥ 0, Y ≥ 0 Non negative
(b) Prior to graphing we need the various intercepts on the axes.
Mixing If x = 0, y = 360; If y = 0, x = 720
Cooking If x = 0, y = 450; if y = 0, x = 360
Packaging if x = 0, y = 900; if y = 0, x = 300
34
(c) The profits at the coordinates of the feasible region should be calculated.
Vertex X Y x + 1.25y
A 0 360 450
B 120 300 495
C 257 129 418
D 300 0 300
35
The maximum profit is K495 which is obtained by producing 120 boxes of Plain and 300
boxes of Cream biscuits. Alternatively;
Produce: X = 120 boxes and Y = 300 boxes and maximise profits of up to K495.
SOLUTION SIX
(a) Simulation is an imitation of reality. In other words, simulation is the imitation

of the operation of real –world process or system overtime.
(b)
i. The simulated demand for the cakes for the next 10 days can be
obtained from the table below
Allocation of random numbers to demand of cakes

I
Demand n Probability Cumulative Random Random numbers fitted
probability number
o interval
0 r 0.01 0.01 00
15 d 0.15 0.16 01 – 15 09  3 ,15  7  ,14  8  , 09 10 
25 e 0.20 0.36 16 – 35
35 r 0.50 0.86 36 – 85
48 1 , 78  2  ,51 4  ,56  5  , 77  6  , 68  9 
45 0.12 0.98 86 – 97
50 t 0.02 1.00 98 – 99
o
simulate the demand, the number 00 is assigned to zero demand,
numbers 01 – 15 are assigned to demand of 15 cakes, 16 – 35 are
assigned to demand of 25 cakes and so on. The given 10 random
numbers are fitted in the last column corresponding to the ranges
against the demand values. These random numbers give the demand
for cakes for next 10 days. Serial numbers of these random numbers
are shown in brackets.
Therefore, the numbers of cakes demanded in the next 10 days are:

35,35,15,35,35,35,15,15,35 and 15 respectively
36
ii. The stock situation for various days if the decision is made to make 35
cakes every day is given in the table below:
Day Demand Number of cakes made Stock
1 35 35 -
2 35 35 -
3 15 35 20
4 35 35 20
5 35 35 20
6 35 35 20
7 15 35 40
8 15 35 60
9 35 35 60
10 15 35 80
iii. Average daily demand

1 270
 35  35  15  35  35  35  15  15  35  15   27 Cakes
10 10
(c)EMV for items that have a Salvage Value
Market Size: 100 200 400
Probability : 0.2 0.4 0.4
From the data given in the problem, we can calculate the conditional profit values for
each stock and the event (market size) combination. If C denotes the conditional
profit, S the quantity in stock and D the market demand, then
37
  20  10  S  10S , when D  S
C  
 20 D  10S  5  S  D  , when D  S
The resulting pay – off matrix is given below. A stock of 100 flowers each day will result
in daily profit of K1000 irrespective of the demand. A stock of 200 flowers each day will
result in a profit of K2000 when the demand is 200 flowers or more. But when the
demand is 100 flowers, the conditional profit will be
  20 100  10  200  5  200  100     500. The conditional profits for each stock
action – event combination can, therefore, be calculated

Conditional Profit Table
Possible Probability (i) Possible Stock Action (alternative)
demand (event)
100 (ii) 200 (iii) 400 (iv)
K K K
100 0.2 1000 500 -500

200 0.4 1000 2000 1000
400 0.4 1000 2000 4000
Expected Profit Table

Possible Probability (i) Possible Stock Action (alternative)
demand (event)
100 (ii) 200 (iii) 400 (iv)
 i    ii   i    iii   i    iv 
K K K
100 0.2 200 100 -100

200 0.4 400 800 400
400 0.4 400 800 1600
EMV    1000 1700 1900
 EMV for buying 200 dozen roses is K1700.
END OF SOLUTIONS
38
___________________
LEVEL ONE
___________________
DA 3: BUSINESS ECONOMICS
___________________
TUESDAY 12 DECEMBER 2017
___________________

__________________
to start writing.
Section A: Ten (10) compulsory multiple choice questions.
Section B: Any two (2) of three (3) optional questions on Microeconomics.
Any two (2) of three (3) optional questions on Macroeconomics.
booklet.
39
QUESTION ONE
answer you have chosen.
1.1 Consumer surplus in a market is best described as:
A. The total supply to consumers in the market.

B. The total net benefit to consumers in the market.
C. The marginal net loss to consumers in the market.
D. The quantity supplied outweighing the quantity demanded.
(2 marks)
1.2 …………. is a law that bars trade with another country.
A. Embargo
B. Tariff
C. Quota
D. Free Trade
(2 marks)
1.3 If the price elasticity of demand at a point is – 0.8 and the demand curve is linear, a
company wanting to increase its total revenue should.
A. Keep the price the same but decrease the cost of production.
B. Decrease the price of the product.
C. Keep the price the same but increase the quality of service.
D. Increase the price of the product.
(2 marks)
1.4 Diseconomies of scale are experienced when the:
A. Cost per unit increases as output increases.

B. Cost per unit decreases as output increases.
C. Average cost decreases as output decreases.
D. Average cost remains constant as output decreases.
(2 marks)
40
1.5 A perfectly competitive firm maximizes its profit by producing at a point where:
A. MR = P
B. MR ˃ MC
C. MR = MC
D. MR ˂ MC
(2 marks)
1.6 If the central bank wants to decrease the money supply, it should:
A. Decrease the cash reserve requirement.

B. Purchase government bonds.
C. Increase the cash reserve requirement.
D. Ask people to save less.
(2 marks)
1.7 If a consumption function has a formula C = 1250 + 0.75Y; where Y is the change
in national income, and injections are 800, then equilibrium national income will be
at:
A. 2100
B. 2800
C. 1250
D. 8200
(2 marks)
1.8 When money is used as a measure of value for future payments, it fulfils the function
of money as:
A. A medium of exchange.
B. A standard of deferred payment.
C. A unit of account.
D. A store of value.
(2 marks)
1.9 If 2015 is the base year for real gross domestic product calculations, we know for
certain that nominal gross domestic product:
A. Equals real gross domestic product in 2015.

B. Is less than real gross domestic product in 2015?
C. Is greater than real gross domestic product in 2015.
D. In 2014 will be less than nominal gross domestic product in 2015.
(2 marks)
41
1.10 Which of the following is a positive statement?
A. Smoking should be restricted on all airline flights.

B. The minimum wage should not be increased because it would increase
unemployment.
C. All automobile passengers should be required to wear seatbelts for their
safety.
D. None of the above.
(2 marks)
[Total: 20 Marks]
42
SECTION B
This section has two parts: Part 1. Microeconomics and Part 2. Macroeconomics
1. MICROECONOMICS – Attempt two (2) questions out of three (3)

questions: TWO, THREE and FOUR.
QUESTION TWO
(a) Suppose that the supply and demand equations for a perfectly competitive market
are:
Qd = 1625 - 50P and Qs = 25 + 30P
(i) Calculate the market equilibrium price and quantity. (2 marks)
(ii) If there are 25 firms in the industry, find how much each firm in the industry
would produce. (2 marks)
(iii) If the total cost equation of each firm in the industry is:
TC = 5 + 10Q + 0.2Q2, determine whether each firm is producing at its
profit-maximizing level of output.
(4 marks)
(iv) Determine whether each firm in the industry is long-run competitive
equilibrium. (2 marks)
(b) As more output is produced in the short run, marginal cost initially falls, reaches a
minimum and then eventually rises.
(i) Explain why marginal cost exhibits such a pattern. (2 marks)
(ii) Explain why the marginal cost curve intersect the average cost curve when
average cost is at a minimum. (3 marks)
(iii) Using any example, explain the principle of increasing opportunity cost with
reference to the shape of the production possibilities curve. (5 marks)
[Total: 20 Marks]
43
QUESTION THREE
(a) Tobacco companies raise the average price of a pack of cigarettes from K1.95 to
K2.45 because of a legal settlement over health care claims.
Required:
(i) In an event that the projected decline in cigarette sales was 8 percent, explain
what this implies about the elasticity of demand for cigarettes. (3 marks)
(ii) Describe how the addictive nature of cigarettes influences the price elasticity of
demand for cigarettes. (2 marks)
(b) Identify and describe any five (5) essential conditions which are necessary for
economic growth to be attained. (10 marks)
(c) Use a diagram to explain the long run equilibrium condition of a firm operating in a
monopolistic competition market. (5 marks)
[Total: 20 Marks]
QUESTION FOUR
(a) Consider a situation where government imposes a minimum monthly wage of

K700.00 for domestic workers but the market wage is at K500.00 per month.
Required:
(i) Graphically illustrate the scenario described above. (3 marks)
(ii) Explain two (2) possible effects of such a government policy on the
employment of domestic workers. (4 marks)
(b) Mumbi baked 50 cakes in her first month as a sole trader. The total variable cost of
production was K5,000.00 and the average total cost of producing each cake was
K120.
Required:
(i) What is the total cost of producing 50 cakes? (2 marks)

(ii) What is the total fixed cost? (2 marks)
(iii) What is the average fixed cost? (1 mark)
(iv) Mumbi is considering forming a partnership with Chomba and Natasha. What
advice would you give her on any four (4) advantages and any four (4)
disadvantages of being a sole proprietor to help her make an informed
decision? (8 marks)
[Total: 20 Marks]
44
2. MACROECONOMICS – Attempt any two (2) questions out of the three (3)
questions: FIVE, SIX and SEVEN.
QUESTION FIVE
(a) The Central Statistical Office presents you with the following information from the
Labour Force Survey for 2016:
Working age population 8,149,797

Employed persons 5,859,225
Unemployed persons 469,851
Not economically active population 1,820,721
Required:
(i) Determine the labour force participation rate. (2 marks)

(ii) Calculate the unemployment rate. (2 marks)
(iii) Frictional and structural unemployment are two types of unemployment
which exist in Zambia. Describe both of these types of unemployment and
give an example in each case. (6 marks)
(b) Identify any four (4) costs of unemployment in Zambia. (4 marks)
(c) Outline how Zambia’s investment demand will be affected when:

(i) Consumer confidence increases. (2 marks)
(ii) There is a reduction in manufacturers’ use of existing capacity. (2 marks)
(iii) Commercial banks lower interest rates. (2 marks)
[Total: 20 Marks]
QUESTION SIX
(a) What is a flexible exchange rate? (1 mark)
Use a diagram to demonstrate and concisely explain the depreciation of the Zambian
Kwacha against the U.S. Dollar under a flexible exchange rate regime. (7 marks)
(b) Use the two-sector circular flow diagram to explain the movement of income and
spending and goods and services in an economy. (6 marks)
(c) Justify the necessity for financial intermediation in aiding the flow of funds from
surplus to deficit economic units. (6 marks)
[Total: 20 Marks]
45
QUESTION SEVEN
(a) Consider the following information about an open economy:
Consumption (C) = 15000 + 0.4Yd; Disposable income (Yd) = Y – T; Taxes (T) =

0.3Y; Government spending (G) = 4500; Investment (I) = 3000; Exports (X) =
6000; and Imports (M) = 1500 + 0.2Y.
(i) Find the aggregate demand (AD) function. (4 marks)

(ii) Determine the equilibrium income (Y) for this economy. (3 marks)
(iii) By how much will equilibrium income change if exports rise to 9500?
(3 marks)
(b) Discuss the phenomenon of hyperinflation highlighting two (2) main causes, two (2)
consequences and two (2) possible policy solutions. (10 marks)
[Total: 20 Marks]
END OF PAPER
46
DA3: BUSINESS ECONOMICS SOLUTIONS
SECTION A: MULTIPLE CHOICE
SOLUTION ONE
1.1 B
1.2 A
1.3 D
1.4 A
1.5 C
1.6 C
1.7 D
1.8 B
1.9 A
1.10 D
47
SECTION B: MICROECONOMICS
SOLUTION TWO
(a)
(i) Qd = Qs at equilibrium
1625 – 50P = 25 + 30P
80P = 1,600
P = 20
Q = 1625 – 50(20) = 25 + 30(20) = 625
(ii) 625/25 = 25, i.e., each firm in the industry produces 25 units of output.
(iii) TR = PQ = 20Q
Π = TR - TC
Π = 20Q - (5 + 10Q + 0.2Q2)
Π = -5 + 10Q - 0.2Q2
Use the first-order derivative condition for profit maximization, dΠ/dQ = 10 - 0.4Q =
0. Then solve the first-order condition for Q to obtain 25 as the profit maximizing
output. This means that each firm in the industry is producing at the profit
maximizing level of output and there is currently no reason to alter the current level
of production.
(iv) An individual firm in a perfectly competitive industry is in long-run competitive

equilibrium when profit = 0. At the current level of output, the profit of each firm is
120 (-5 + 10(25) - 0.2(25)2). This is not long-run equilibrium since each firm is
earning a positive economic profit and new firms will enter the industry which will
increase industry supply and result in lower prices. This process will continue until
each firm earns zero economic profit.
(b)
(i) This is because as variable inputs are used with some fixed inputs, there may first be
increasing returns, but eventually diminishing returns will set in. As a result, the MC
curve first falls but eventually rises, giving it the “U” shape.
(ii) The MC curve always intersects the AC curve at its lowest point because as long as
MC is below AC, it pulls the average down. When the MC is above AC, it pulls the
average up. Only when MC equals AC is AC neither falling nor rising (i.e., AC is at its
lowest point).
(iii) “Resources are not equally efficient in the production of all goods and services, i.e.,
they are not equally productive when used to produce an alternative good. This
imperfect substitutability of resources is due to differences in the skills of labour and
to the specialized function of most machinery and many buildings. Thus, when the
decision is made to produce more guns and less butter, the new resources allocated
to the production of guns are usually less productive. It therefore follows that as
48
larger amounts of resources are transferred from the production of butter to the
production of guns, increasing units of butter are given up for fewer incremental
units of guns. This increasing opportunity cost of gun production illustrates the
principle of increasing costs.” (Salvatore & Diulio, 2003:7)
SOLUTION THREE
(a)
(i) % change of the price of cigarettes = [(2.45 – 1.95)/1.95]*100
% change of the price of cigarettes = (0.50/1.95)*100
% change of the price of cigarettes = 25.64%
% change of the price of cigarettes = 26% (rounded off figure)
For a price increase of approximately 26%, the decrease in quantity demanded for
cigarettes is estimated to be 8%. This implies that consumers of cigarettes are
not very sensitive to changes in the price of cigarettes in that the change in
quantities demanded is three times bigger than the change in price.
(ii) People become accustomed to consuming certain products so much that they
become addicted to using them for many different reasons. Cigarettes are known to
be such products due to the tobacco content. Due to this addiction, consumers of
cigarettes are not sensitive to price changes. Thus, as in the example above a
change in the price of cigarettes leads to a relatively smaller change in the
consumption of cigarettes.
(b) Some of the essential conditions for growth include:

 Factor endowments: A country can develop if it is well endowed with factors
of production like natural resources e.g. minerals and arable land, human
resources with high labour skills, and capital resources which it uses efficiently
and effectively.
 Social and physical infrastructure: A country can develop when it puts into
place the necessary social and physical infrastructure like access to clean water
and sanitation, health care, energy, railway and road networks.
 Access to markets: Countries with good trade links is likely to attain economic
development because it can expand its access to bigger markets which include
the foreign demand.
 Good investment climate: When a country has an environment characterised

by factors like macroeconomic stability, political stability, political will to
development, the rule of law based on stable laws, favourable tax regimes, and
the protection of property rights, it will be ripe for economic development.
 Access to capital: Development requires that resources are devoted to projects

like power generation, roads, and communication which not only cater for current
49
needs but future needs too. Such projects will usually need high capital outlays.
A country which does not have access to capital, including borrowing from
international financial institutions, will not be able to engage in big projects.
(c)
Price MR: Marginal Revenue
MC AC AR: Average Revenue
MC: Marginal Cost
P=C N AC: Average Cost
T: MC = MR
MR AR
O Q Quantity
The firm maximizes its profit and P and Q are profit maximizing price and profit maximizing
quantity respectively. In the long run there are barriers to entry in the monopolistic
competition market. So the short run supernormal profit of TR >TC will disappear. This will
give way to the long run equilibrium condition which is TR =TC at N on the diagram and
area rectangle PNQO (total revenue) is equal to area rectangle CNQO (total cost).
SOLUTION FOUR
(a)
(i)
Wage rate
Supply of labour
700 (Minimum wage)

E
500
Demand for labour
Q2 Q Q1 Number of workers
50
(ii) At the equilibrium wage of K500.00 there are Q workers employed. After a minimum
wage of K700.00 is imposed, the number of domestic workers employed falls from Q
to Q2.
Possible effects of upward revision of the minimum wage;

 More workers may become unemployed as current employers could decide not
to keep their workers.
 Potential employers could decide not to hire one at all.
 The cost of production for employers who maintain or hire domestic worker will
go up.
 The standard of living for those domestic workers at Q2 who remain employed
will be raised by K200.00. In this case, the workers will be able to afford to
pursue a decent life.
(b)
(i) TC = ATC x Q
TC = 120 x 50
TC = K6,000.00
(ii) TFC = TC – TVC

TFC = 6000 – 5000
TFC = K1,000.00
(iii) AFC = TFC/Q

AFC = 1000/50
AFC = K20.00
(iv) A sole trader is a type of business enterprise that is owned and run by one individual.
There is no legal distinction between the owner and the business. The owner
receives all the profits and has unlimited responsibility for all losses and debts. All the
assets of the business are owned by the individual.
Advantages of sole proprietorship

 It is relatively easy to establish as small amounts of capital are required to start
and run the business.
 It has a high level of flexibility as the owner is the only controller of the
establishment.
 Some creditors are willing to extend credit because the owner has unlimited
liability.
 The owner receives all the profits from the business.
Disadvantages of sole proprietorship

 It has limited resources and formal lending institutions do not usually grant loans
to businesses with small assets and high failure rates.
 The owner is responsible for paying all the business debts and damages.
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 In the event that the business fails to pay its liabilities, the owner’s personal
property can be sold to clear claims.
 The business tends to collapse once the owner is deceased.
SECTION B: MACROECONOMICS
SOLUTION FIVE
(a)
(i) Labour force participation rate (LFPR) = portion of working age population who are
in the labour force
LFPR = (labour force/ working age population) x 100
LFPR = [(employed + unemployed persons)/ working age population] x 100
LFPR = [(5,859,225 + 469,851)/ 8,149,797] x 100
LFPR = (6,329,076/ 8,149,797) x 100
LFPR = 77.66%
(ii) Unemployment rate = portion of labour force who are not employed
Unemployment rate = (unemployed persons/ labour force) x 100
Unemployment rate = (469,851/ 6,329,076) x 100
Unemployment rate = 7.42%
(iii) Frictional unemployment is the type of unemployment which arises because it takes
time to find employment or to move from one job to another. At any point in time
there are people who are moving from one firm to another. This kind of
unemployment is unavoidable but is not considered a serious problem because as
some individuals find jobs, others move on to other new jobs and others are fresh
entrants into the labour force. An example can be that of a person who resigns
from his job at one firm and must wait some weeks to take up their new
appointment at a new company. Another example of frictional unemployment is
the time it takes between the dismissal of an individual from his formal job and when
he forms his own business.
Structural unemployment occurs when there is a mismatch between worker

qualifications and job requirements or when jobs disappear because of structural
changes in the economy like improvement of production methods, shifting consumer
preferences, foreign competition, decline of certain industries, and discrimination.
Structural unemployment poses the biggest challenge for an economy. An example
of a structural change was the introduction of automated teller machines (ATMs)
which reduced the number of job opportunities for bank tellers. Another example
is the closure of some manufacturing industries in Zambia like Kapiri Glass left many
people unemployed but with the skills specific to that industry.
(b) Four negative effects of unemployment in Zambia include:

(i) Loss of output: if labour is unemployed, the economy is not producing as much
output as it could. Thus, total national income is less than it could be, because
economic resources are not being fully used.
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(ii) Loss of human capital, if there is unemployment; the unemployed labour will
gradually lose its skills, because skills can only be maintained by working.
(iii) Increasing inequality in the distribution of income. Unemployed people earn less than
employed people, and so when unemployment is increasing, the poor get poorer.
(iv) Social costs: unemployment brings social problems of personal suffering and distress,
and possibly also increases in crime such as theft and vandalism.
(v) Increased burden of welfare payments: this can have a major impact on government
fiscal policy, because governments will have to pay more in state benefits while
collecting less through tax revenue.
(c)
(i) When consumer confidence rises, investment demand is likely to shift upward. One
area in which this can be seen is through the rise of housing sales as consumers
become more confident. This will in turn entail that builders would construct more
new housing to meet this increased demand.
(ii) Investment demand would shift downward. This is because firms would purchase
less durable equipment since such purchases would expand productive capacity and
there is no need to expand productive capacity when utilization of existing capacity is
declining.
(iii) A lower interest rate is associated with a higher level of investment, and vice versa.
Holding other variables constant, we expect that at a lower rate of interest, more
households are financially able to carry a mortgage, and a greater number of
housing units will be demanded; and businesses are more willing and able to
purchase durable equipment and to carry larger inventories.
SOLUTION SIX
(a) A flexible exchange rate is one which is determined through the free interaction of
market forces and without any government intervention. The diagram below shows
the depreciation of the Zambian Kwacha against the U.S. Dollar under a floating
exchange rate regime.
53
Price of the dollars
(K/$ exchange rate) S
E1
P1
E
P
D1
D
Q Q1 Quantity of dollars
The Kwacha can depreciate if there is a shortage of the US dollar or if there is

increased demand for the US dollar on the market. Initially, the market is in
equilibrium at E where the exchange rate is at P and quantity of the currency at Q.
In the case above, the demand for the U.S. Dollar increases maybe because
domestic firms in the country purchase more U.S. capital goods. This leads to a shift
in the demand curve from D to D1. This, in turn, causes the equilibrium price (or
exchange rate) to increase from P to P1. The rise in the exchange rate implies that
the dollar has become more expensive in term of the kwacha. The kwacha has thus
depreciated while the dollar has appreciated.
(b) The circular flow diagram below shows the interaction between households and firms
in terms of the flow of goods and services and the monetary flows between them.
Households provide their factors of production to the factor market where firms can
purchase them. The firms use these inputs to produce goods and services which they
avail to the goods market for households to buy.
When firms purchase factors of production, this constitutes income to households i.e.
wages, rent, interest, and profits. Households spend their income on goods and
services and this represents revenue to firms.
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Spending by firms Revenue to firms
FIRMS
Inputs for production Goods and services sold
MARKET FOR MARKET FOR

FACTORS OF GOODS AND
PRODUCTION SERVICES
Land, labour, capital Goods and services bought
HOUSEHOLDS
Income to households Spending by households
(c) Ease of saving: Financial intermediaries provide convenient ways for a saver or the
surplus economic unit to save money. The intermediary serves as an easier channel
of funds for net savers to net borrowers.
Source of funds: They are a ready source of funds for the deficit economic unit.
Lender’s capital is secure: Financially sound intermediaries provide security for

the lenders who entrust them with their funds.
Aggregation: This means that intermediaries are able to pool up funds from savers
to lend to borrowers who want to borrow large amounts which would be hard to find
otherwise.
Risk transformation: Financial intermediaries minimise risk by absorbing the

potential bad debts an individual saver may be exposed to if they were to lend to
another individual.
Maturity transformation: Intermediaries bridge the gap between the preference

of most lenders for liquidity and the preference of most borrowers for loans over a
long period of time. It is the process of managing the different time preferences of
savers and borrowers.
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SOLUTION SEVEN
(a)
(i) AD = C + I + G + (X – M)
AD = 15000 + 0.4Yd + 3000 + 4500 + [6000 – (1500 + 0.2Y)]
AD = 15000 + 0.4(Y – 0.3Y) + 3000 + 4500 + 6000 – 1500 – 0.2Y
AD = 15000 + 0.4(0.7Y) + 3000 + 4500 + 6000 – 1500 – 0.2Y
AD = 27000 + 0.28Y – 0.2Y
AD = 27000 + 0.08Y
(ii) Y = AD at equilibrium
Y = 27000 + 0.08Y
Y – 0.08Y = 27000
0.92Y = 27000
Y = 29,347.83
(iii) The increase in exports means that the AD function now becomes AD = 30 500 +
0.08Y. At equilibrium Y = AD, so the new equilibrium becomes:
Y = 30500 + 0.08Y
0.92Y = 30500
Y = 33,152.17
The change in equilibrium income is 33152.17 – 29347.83 = 3,804.34
(b) Hyperinflation is an extreme and accelerating rate of inflation. The main causes of
hyperinflation originate from the monetary sector.
 Hyperinflation is likely to occur when the government prints more money
than an economy needs in order to finance its expenditure.
 Another possible trigger of hyperinflation is an economic collapse in which
output falls drastically and the amount of money in circulation either remains
the same or rises.
Both of the situations described above will give rise to an extraordinary price
increase to clear the imbalance because there will be lots of money but few goods.
Hyperinflation drives the economy into collapse

 It renders the currency useless for trading purposes and people will opt to
use other means of trading like the barter system.
 The real value of savings and loans is eroded taking away the wealth of
savers which results in failed businesses as there is little income to sustain
them.
 There will be massive shortages of essential goods and services in such an
environment and people suffer.
 In a panic to resuscitate the economy, government may use drastic measures
like price controls, capital controls, and credit controls which further
exacerbate the economic meltdown.
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An economy which is in meltdown requires government intervention which will
restore confidence by business and consumers as well as the international
community.
 One way to restore such confidence is for the government to adopt a
currency which is stable. They can allow the use of a foreign currency in
place of the domestic one to conduct exchange until the hyperinflation is
controlled.
 Another way would be to launch a new currency altogether. This new
currency should have a fixed value for it to serve the purpose of stopping
hyperinflation and restoring confidence.
 The government could also use other measures, such as, contractionary fiscal
and monetary policies;
 In addition, wage controls and employment freeze can be other options.
END OF SOLUTIONS
57
___________________
LEVEL ONE
___________________
DA 4: INFORMATION TECHNOLOGY AND COMMUNICATION

___________________
WEDNESDAY 13 DECEMBER 2017
___________________

__________________
to start writing.

Section A: Ten (10) Compulsory multiple choice questions: Five (5) on Information
Technology and five (5) on Communication.
Section B: There are three (3) questions on Information Technology. Attempt
any two (2) questions.
There are also three (3) questions on Communication. Attempt any two
(2) questions.
booklet.
58
QUESTION ONE
answer you have chosen
1.1 What is an attribute in the context of a relational database?
A. A relational table
B. A column of a table
C. A row in a table
D. A key field of a table (2 marks)
1.2 A VDU has just sufficient video RAM to display 256 colours at a resolution of 800 X
600 pixels. The user wishes to display 65, 536 colours. What should the user do?
A. Increase the resolution to 1024 X 1024 pixels
B. Decrease the screen resolution to 320 X480 pixels
C. Use a larger screen
D. Specify that a smaller screen area is to be used? (2 marks)
1.2 Which of the following TWO operating systems are commonly found on smart
devices?
A. Linux and Windows
B. PC DOS and OS/2
C. Android and IOS
D. UNIX and UBUNTU (2 marks)
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1.4 Which of the following key combinations is equivalent to a paste operation?
A. Ctrl + P
B. Ctrl + V
C. Ctrl + S
D. Shift + P (2 marks)
1.5 A point-of-sale (POS) system records transactions (sales and returns) on a

transaction file which is processed each night after the store has closed. Which of
the following data items will not be stored on a transaction records?
A. The transaction type
B. The price of the item
C. The quantity sold or returned
D. The item code (2 marks)
1.6 Which one of the following sets of different communication patterns exist in most
organisations?
A. Wheel, star, Y and chain
B. Star, wheel, circle and network
C. Chain wheel,Y and circle
D. Network, circle, U and chain (2 marks)
1.7 Which of the following consists of a correct matching statement in an official letter?
A. Dear Sir ---------- Yours sincerely
B. Dear John ----------- Yours faithfully
C. Dear Colleague --------- Yours faithfully
D. Dear Rose ------------ Best regards. (2 marks)
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1.8 Which of the following causes communication break down?
A. Using simple Language
B. Having different perceptions
C. Taking note of non-verbal cues
D. Specifying the required information (2 marks)
1.9 Which one of the following physiological changes are types of non-verbal
communication?
A. Smiling, frowning and nodding
B. Looking away when talking to a person
C. Blushing, faster breathing and perspiring
D. Pitch, speed and tremors (2 marks)
1.10 Which of the following statements best describes the term grapevine?
A. Communication along the corridors of an organization
B. Communication from the superior to the subordinate
C. Communication from the subordinates to superiors.
D. Communication among staff at the same level. (2 marks)
[Total: 20 Marks]
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SECTION B
This Section has two parts: 1. INFORMATION TECHNOLOGY AND
2. COMMUNICATION
1. INFORMATION TECHNOLOGY
ATTEMPT ANY TWO (2) FROM QUESTIONS: TWO, THREE AND FOUR
QUESTION TWO
Spreadsheets are important tools for manipulating numerical information.
Required:
(a) Briefly describe the meaning and significance of the following facilities of spreadsheet
software:
(i) Relative and absolute cell references (4 marks)
(ii) Cell content filter (2 marks)
(b) Describe each of the following facilities offered by a Word Processing Software and
explain how it contributes to the efficient production of quality documents.
(i) editing (3 marks)
(ii) spell and grammar checking (3 marks)
(c) (i) Briefly describe what is meant by the term CD-ROM (2 marks)
(ii) Give three (3) advantages CD-ROM has over floppy disks as a secondary
storage medium. (3 marks)
(d) Any computer system should provide adequate controls for the security of the data it
uses to process and these controls can be carried out by the user.
List any three (3) controls which can be applied to each part of the system.
(3 marks)
[Total: 20 Marks]
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QUESTION THREE
You work for a small organisation that has eight stand-alone PCs, some in accounts
department, some in general administration and some in the sales department. There is
regular communication between all departments. The company employs around 30 staff in
total. None of them has anything more than basic computer knowledge and doesn’t know
the benefits of the ‘client-server’ approach.
Required:
(a) State five (5) advantages of client/server computing? (10 marks)
(b) List and explain the five (5) types of validation checks that can be used in the sales
order processing system. (10 marks)
[Total: 20 Marks]
QUESTION FOUR
(a) Identify two (2) business environments most suitable for each of the following types
of computer systems.
(i) Mainframe computer (2 marks)
(ii) Super computer (2 marks)
(b) Distinguish between Read Only Memory (ROM) and Programmable Read Only
Memory (PROM) (4 marks)
(c) Give two (2) situations when a disk may require formatting. (4 marks)
(d) List three (3) types of cell contents in a spreadsheet. (3 marks)
(e) Give three advantages and two disadvantages of using spreadsheets. (5 marks)
[Total: 20 Marks]
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2. COMMUNICATION
ATTEMPT ANY TWO (2) FROM QUESTIONS: FIVE, SIX AND SEVEN
QUESTION FIVE
Public speaking is the process of addressing a group of people in a structured, planned way
in order to inform or influence them.
Required:
Explain how you would assist someone who wishes to prepare and deliver a presentation on
the new accounting software package that you are familiar with, using the ten (10) key
steps that you learnt in the course of your studies. (20 marks)
QUESTION SIX
The accounts department offices are undergoing renovations for a period of three months.
This means that staff is expected to work from somewhere else within your work promises.
Therefore staff is expected to prepare themselves as they get relocated to temporal offices.
All staff has been assured that all electronic forms of communication will still operate
smoothly during the time renovations will be done.
Required:
(a) Write a Memorandum to all staff in the accounts department notifying them about
the relocation of accounts offices within the work promises (16 marks)
(b) Explain the four (4) main features of a Memo.
(i) To
(ii) From
(iii) Date
(iv) subject (4 marks)
[Total: 20 Marks]
QUESTION SEVEN
You have recently graduated with a Diploma in Accounting and saw an advertisement in the
Times of Zambia for a Job vacancy as an Assistant Accountant. However you need to work
on your curriculum vitae to accompany your job application letter.
Required:
(a) Prepare your curriculum vitae that would capture your potential employer’s interest.
(14 marks)
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(b) Briefly explain the contents of the following parts of a business letter
(i) Opening paragraph
(ii) Middle paragraph
(iii) Last paragraph (6 marks)

[Total: 20 Marks]
END OF PAPER
65
D4: INFORMATION TECHNOLOGY AND COMMUNICATION SOLUTIONS
SECTION A:
SOLUTION ONE
1.1 B A column of a table

1.2 A Increase the resolution to 1024 X 1024 pixels
1.3 C Android and IOS
1.4 B Ctrl + V
1.5 B The price of the item
1.6 A Communication along the corridors of an organization
1.7 D Dear Rose ------------ Best regards.
1.8 B Having different perceptions
1.9 C Blushing, faster breathing and perspiring
1.10 A Document used for internal communication only
SOLUTION TWO
a)
i) Spreadsheets
Relative and absolute references – one of the main functions of
spreadsheets is to allow formulae to be written into cells that use the
contents of other specific cells in those formulas. The normal method of
referencing between cells is to use a relative reference. This means that the
formula refers to a specific cell, which could be two cells left, and one cell up
from the current cell. So cell D3 would have a reference to cell B2 (two
columns left and one row up). If that formula is copied to another cell, then
the same relative reference is used to determine which cell is to be used in
the new formula. So copying the formula to cell E6 will mean that the cell C5
is used in the formula.
In some formulae, one specific cell has to be referred to, so even if the
formula is copied, the same absolute cell reference is needed in the new
formula. If the absolute reference is required, then $ are placed before the
cell row and column reference.
66
ii) Cell Filter – function of the spreadsheet which allows the user to limit the
number of data displayed in the workbook cells based on the filter selection.
The filter function is useful when there is a large amount of data to work with
where the use wants to restrict the data to appear on the screen.
b) Facilities of word processors
i) Editing facilities
Word processors allow the text in a document to be amended, or edited, without
having to re-type the whole document. E.g. individual words or sentences can be
deleted; individual words replaced or new words and sentences added. Editing
facilities make document production efficient because existing documents can be
amended rather than retyped. Quality documents will be produced because
amendments can be made to improve it and making it more presentable and
understandable for the recipient.
ii) Spell and Grammar checking
A spell-check checks the work in a document against an electronic dictionary and

brings potentially misspelt words to the attention of the user. Similarly, a grammar
check brings examples of poor grammar to the attention of the user. The user can
then decide whether to amend the spelling or grammar in a document before it is
sent to the intended recipient.
The provision of spell and grammar checking makes document production efficient
because the computer can check documents much faster than any human proof-
reader.
c) (i) CD-ROM stands for Compact Disk – Read Only Memory, which is a storage device
used with computers. A data on CD-ROM cannot be overwritten and normally is used
to distribute software by software suppliers and vendors.
(ii) The advantages of a CD over floppy disk as a storage medium include:
i) Larger storage capacity. A CD can hold up to 700MB of data compared to

1.44MB on a standard floppy disk
ii) A CD tends to be more robust than a floppy disk. The surface can be cleaned
with a non-abrasive cleaner; attempting to clean a floppy disk will normally
destroy the data on it.
67
iii) Data storage on CD is accessed quickly because of their mechanical nature of
using laser lights.
d) Controls which can be applied to each part of the computer system

 Hardware control
 Software control
 Data control
 Administrative control
SOLUTION THREE
a) i) Shared programs and data – Program and data files held on a file server can be
shared by all the PCs in the network. With the stand alone computer, each computer has its
own data files and there is unnecessary duplication of data. A system where everyone uses
the same data will help to improve data processing, communication and decision making
ii) Shared work-loads – each PC in a network can do the same work. With stand-alone
PCs, A does job 1, B does job 2, C does job 3 and so on. In a network, any PC (A,B or C)
could do any job (1,2 or 3). This means that in a peak period for job 1, say, two or more
people can share the work without having to leave their own desk
iii) Scalability – A client-server system is highly scalable, when you need more computers,
you simply add more clients or another server
iv) Shared equipment – e.g. five computers might share a single printer, whereas with
stand-alone computers, each computer would have to be given its own separate printer, or
else not have access to one at all.
v) Communication and time management – LAN can be linked up to the office

communication network, thus adding to the processing capabilities in an office. Electronic
mail can be used to send messages, memos and letters from computer to computer.
b) Validation checks
Validation checks are checks performed by the computer on data being input to the
computer, e.g. the stock code being entered
Validation checks include
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i. Existence check
An existence check ensures that data is valid for that particular system. The
computer program will check that the stock code exists by looking up or comparing
that number with valid numbers in a reference or master file.
ii. Format Check
A format check ensures that the contents and size of the data being entered into one
field is correct, e.g. stock code is always numeric so the computer will ensure that
only numbers have been entered into this field.
iii. Check digit check
To avoid keying errors, the last digit of the code is based on a mathematical
calculation of the earlier numbers. When the code is input, the computer re-performs
this calculation and compares the result with the check digit entered.
iv. Completeness check
A completeness check ensures that all the fields necessary to complete an order or
other similar document have some inputs. If there is no input then an error message
is displayed
v. Limit checks
Either upper or lower limit given
vi. Range checks
Both Upper and lower limit set
SOLUTION FOUR
a) i) Mainframe – Main frame computers are large in size with huge processing power.
The most common business environment are large organisations such as banks
and insurance companies
iii) Supercomputer – these are large in size and have high speed processing
capabilities in millions of instruction per nano seconds. There mostly used in
research and weather forecasting.
b) Distinguish between Read Only Memory (ROM) Programmable Read Only

Memory (PROM)
Read Only Memory is a memory which is nonvolatile which means the information
and data stored on this memory cannot be overwritten and it is permanently
embedded on the memory chip. Data on ROM is burned on the chip at the time
manufacture. PROM also contains permanent data but the chip is bought blank and
the user burns the data using ultra violet light. Once the data has been written it
becomes permanent.
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c) Give two situations when a disk may require formatting
i) New disk or
ii) infected or inefficient disk
d) List three types of cell contents in a spreadsheet

i) Text
ii) Numbers
iii) Formulae
e) Give three advantages and two disadvantages of using spreadsheets

Advantages
i) Allow easy graphical representation of data
ii) Easy to learn and use
iii) Make the calculation and manipulation of data of data easier and quicker
iv) Enable the analysis, reporting and sharing of financial information
iv) Easily show the results of using different values and assumptions
Disadvantages
i) As good as original design-Garbage In Garbage Out (GIGO)
ii) Formulae hidden from sight-Underlying logic not obvious
iii) Presentations may make reports appear infallible
iv) Research shows that a high proportion of large models may contain critical errors
v) a database may be more suitable to use with large volumes of data.
SOLUTION FIVE
There are a number of steps to follow when preparing and delivering a presentation.
Step 1 Decide on your main purpose of your presentation. What do you want to achieve?
what do you want the audience to remember or do afterwards? Ensure that you concentrate
on the main purpose of your message in the presentation.
Step 2 You may need pictures, or stories to persuade and convince the audience, therefore
there is need to plan the best way of putting your message across to people
Step 3 Ensure that you use a successful approach including the three structural elements
(i.e. Provide an interesting introduction that captures the audience’s attention, provide
details of your presentation in your main body and then a conclusion which summarises the
whole presentation)
Step 4 Prepare draft notes in point form. However, have notes with you so that you cover
all the key points in a logical manner. Do not stick to your notes. Ensure that you are
conversational in your presentation.
Step 5 Consider the use of visual aids such as pictures, samples, and diagram power point.
If you use PowerPoint, do not have too many slides and avoid writing long whole sentences.
Information must be presented in point form with power point.
70
Step 6 Improve on the dull patches of your presentation by rehearsing and timing it. Ask a
colleague to be your audience so that inconsistencies and other problems are polished up.
Step 7 Ensure that you are loud enough to be heard. Your voice projection should be clear.
Step 8 Consider providing handouts to your audience. This will allow the audience to
concentrate on the explanation without having to take notes at the same time.
Step 9 Allow time for questions from the audience and ensure that you answer them
correctly
Step 10 As you make your presentation, be polite, friendly and cheerful. Maintain fair
eye contact and do not go beyond your time limit.
SOLUTION SIX
(a) Mutantwe and company
Memorandum
Ref:
Date:
To: All Accounts staff
From: Assistant Accountant
Subject: Rehabilitation of the accounts offices
This serves to inform you that the main accounts office will be rehabilitated for the next
three (3) months. This means that staff will not be able to work from the current offices for
the next three months
Arrangements have been made for staff to be able to work on the 3rd floor, former board
room during that period. Ensure that you pack all the personal accessories that you wish to
take along with you to the relocated offices.
For any further information you are free to contact the undersigned person.
Take this information as official notification.
Writers signature
Mr P. Nyoni
71
(b)
TO……………………..It states where the memo is going or intended recepient.
FROM………………….It states where the is from.
Date------------------The day when the memo was written.
SUBJECT…………….It states what is being talked about.
SOLUTION SEVEN
(a) CURRICULUM VITAE
Curriculum vitae a "CV", as it is commonly known, has no strict format, But its presentation
must be logical, brief and complete with all relevant information about an individual. Its
purpose is to alert a potential employer about an individual’s work experience, his/her
qualifications, and suitability for the job position. Most CVs are laid out as follows:
CURRICULUM VITAE
NPK and Sons Company.
P. O. Box 31243
Lusaka
Telephone:
Email:
PERSONAL DETAILS (personal details are very important and must not be omitted when
writing a curriculum Vitae)
Name:
Age:
Nationality:
Marital status:
Religion:
72
National Registration No:
EDUCARIONAL QUALIFICATIONS: State the university – college or schools you

attended. Indicate start & finish dates, grades
obtained if possible e.g. distinction or merit etc
PROFESSIONAL QUALIFICATIONS: State the institution where you obtained your

area of expertise, the start and finish date and
grades obtained if possible.
WORK EXPERIENCE: in this section of the CV you will include information

about all the jobs you have had since leaving education.
Ensure that it is presented in chronological order, so
that the prospective employer can see the logical
progression of your career so far. Indicate name of
organisation, the year you started work or engagement
and separation dates. Indicate duties or responsibilities
held
ABILITIES & SKILLS: State what you are able to do as an individual, not necessarily
your area of expertise
AWARDS: State the type of awards you won, when and where
SPECIAL PROJECT OR RESEARCH WORK: State the institution, the objectives of the
project, the results of the project & when the research was done
(start & finish dates)
REFERENCES: State the names and addresses of at least references. This should be
prominent people who can recommend you for a job e.g. your former
employer or clergy man
Other information: this is where you have the opportunity to include relevant information
that will show the sort of person you are. Here you will include your various interests and
hobbies, together with any other experience you may have had that will be relevant to your
application.
73
(b)
(i) The opening paragraph

This provides an introductory part of the message in a letter so that the recipient
has the picture of what follows in the letter.
(ii) Middle paragraph gives details of message
This is the main message in a letter. It provides details of the message. The
message needs to be in a logical manner, clear and complete.
(iii) Last paragraph
The last paragraph is usually the conclusion of the letter. It draws the main points
to one central idea and includes what action is required.
END OF SOLUTIONS
74
___________________
LEVEL ONE
___________________
DA 5: COST ACCOUNTING
___________________
TUESDAY 12 DECEMBER 2017
___________________

__________________
to start writing.

Section B: Four (4) Optional Questions. Attempt any Three (3) questions.
booklet.
75
SECTION A
Attempt ALL ten (10) multiple choice questions in this Section.
answer you have chosen in your answer booklet. Marks allocated are indicated against
each question.
QUESTION ONE
1.1 Which of the following is the ‘correct’ definition of Cost Accounting?
A. It is a control technique that reports variances by comparing actual costs to pre-

set standards so facilitating action through management by exception.
B. It is 'a means of attributing overhead to a product or service, based for example
on direct labour hours, direct labour cost or machine hours'.
C. It is the 'gathering of cost information and its attachment to cost objects, the
establishment of budgets, standard costs and actual costs of operations,
processes, activities or products; and the analysis of variances, profitability or the
social use of funds'.
D. It is the process of collecting, recording, summarizing and communicating
financial information.
(2 marks)
1.2 A firm of Chartered Accountants in Lusaka has four Sections namely, Audit, Tax,
Accounting and Secretarial. The Audit section wishes to establish a method of
predicting its total costs in each quarter of the year. The following past two quarterly
costs have been recorded at two activity levels.
Number of Audits Total Costs
(A) (TC)
Quarter 1 22 K83,400
Quarter 2 30 K105,600
The total cost structure for a typical quarter could be represented as:
A. TC = K22,350 + K2,775A
B. TC = K22,200 + K2,794A
C. TC = K13,200 + K2,775A
D. TC = K10, 425 + K2,794A
(2 marks)
76
Use the information given below for November 2017 to answer Questions
1.3 and 1.4.
Balances as at 1 November 2017

K’000
Raw materials control 10
Work in progress control 15
Finished goods control 18
Transactions for November

K'000
Materials received from suppliers on credit 50
Materials issued to production 42
Materials issued to production service departments 5
Production indirect wages incurred 13
Wages and salaries paid: direct wages 28
Production completed and transferred to finished goods store 90
Production cost of goods sold 97
Sales on credit 145
1.3 The closing Balance of the Raw Materials Control on 30 November is:
A. K15,000
B. K13,000
C. K10,000
D. K18,000
(2 marks)
st
1.4 The opening balance in the Finished Goods Control Account on 1 December 2017 is:
A. K97,000
B. K90,000
C. K18,000
D. K11,000
(2 marks)
77
Use the information given below to answer Questions 1.5 and 1.6.
Family Supermarkets (FS) is one of the stores at the newly constructed Mulungushi
Mall in Kabwe. The data at 31 December 2017 is as follows:
Soft Drinks Fresh Produce Packaged Foods

Number of orders placed 144 336 144
Number of deliveries received 120 876 264
The total support costs related to ordering activities were K62,400 whilst the number
of purchase orders received amounted to 624. On the other hand, the total support
costs associated with physical delivery and receipt of merchandise were K100,800
and the number of deliveries were 1,260. Family Supermarkets (FS) allocates store
support costs to product lines using an ABC system.
1.5 The total ordering costs for soft drinks and fresh produce are:
A. K28,800
B. K33,600
C. K48,000
D. K43,200
(2 marks)
1.6 The best apportionment of the delivery costs amongst the product range is:
Soft Drink Fresh Produce Packaged Foods
A. K9,600 K70,080 K21,120
B. K21,120 K70,080 K9,600
C. K70,080 K21,120 K9,600
D. K9,600 K21,120 K70,080
(2 marks)
78
1.7 In the assembly of Hugo Buses in Zambia by the Chinese company, which one of the
following is NOT a direct cost?
A. Cost of tyres used in assembling the buses

B. Cost of labour associated with the assembly process
C. The material costs of making the passenger chairs inside the bus
D. Power costs at the Lusaka plant.
(2 marks)
1.8 The service industry is becoming more popular and relevant in modern economic
environments. Which one of the following is a suitable cost unit for Zambia Railways
Limited freight service?
A. Passenger/Kilometre
B. Tonne/Kilometre
C. Number of tones
D. Fuel/Kilometre
(2 marks)
1.9 In a marginal costing system, the formula ‘Sales – Variable Costs’ is used to
calculate:
A. Gross Profit
B. Net Profit
C. Contribution
D. Over or Under absorption of overheads
(2 marks)
1.10 The basic day-rate for workers at a factory in Ndola is K14 per hour and overtime is
paid at time-and-a-quarter. How much will Mutale Chanda be paid in total if he
works eight hours of overtime on a particular day?
A. K112
B. K140
C. K168
D. K147
(2 marks)
[Total: 20 marks]
79
SECTION B
There are five (5) questions in this section. Attempt any four (4) questions.
QUESTION TWO
Makululu Ltd, a company located in Ndola’s light industrial area, manufactures plastic
containers for the pharmaceutical and cosmetic industries. The plant, in which the company
undertakes all of its production, has two production departments – ‘Cutting’ and ‘Shaping’,
and two service departments –‘Stores’ and ‘Maintenance’.
The information provided below has been extracted from the company’s budget for the next
financial year which ends on 31 December 2012:
Allocated Production Overhead Costs K
Cutting Department 140,000

Shaping Department 160,000
Stores Department 35,000
Maintenance Department 28,000
Apportioned Production Overheads K
Factory rent 525,000

Factory building insurance 70,000
Plant & machinery insurance 39,000
Plant & machinery depreciation 58,500
Canteen subsidy 150,000
The following additional information is also provided:
Cutting Shaping Stores Maintenance

Dept Dept Dept Dept
Floor area (square metres) 18,000 12,000 3,000 2,000

Value of Plant & Machinery (K) 300,000 50,000 25,000 15,000
Number of stores requisitions 1,000 500
Maintenance hours required 2,700 2,000 300
Number of employees 34 60 4 2
Machine hours 12,000 2,200
Labour hours 9,000 15,000
80
Required:
(a) Prepare an overhead analysis sheet based on the above information, clearly state the
basis used for any apportionments. (12 marks)
(b) Re-apportion the service department costs and calculate the most appropriate
overhead rate for each department (Rate should be calculated to two decimal
places).
(5 marks)
(c) During the year ended 31 March 2012, the following hours were actually worked and
the following actual costs actually incurred:
Department Labour Hours Machine Hours Overhead costs

Incurred
Cutting 8,000 14,000 K531,500

Shaping 16,000 3,000 K405,500
Calculate the over/under absorbed overhead for each of the two departments for the
year ended 31 March 2012.
(3 marks)
[Total: 20 marks]
QUESTION THREE
Lushomo Ltd produces and sells chemical XYZ. The standard cost per unit of XYZ as
follows:
Direct material 7.5ltr @ K4.5 per litre

Direct labour 2.5 hours @ K6 per hour
Variable overheads 2.5 hours @ K1.5 per hour
The monthly budgeted fixed overhead were K1,500 for 2,000 budgeted production hours.
Lushomo Ltd is expected to produce and sell 10,000 units.
The actual results for the month were as follows:
Production and sales volume 9,200 units

Material 72,000 litres costing K270,000
Labour hours 27,500 hours costing K137,550
Variable overheads K45,000
Fixed overheads K25,300
81
Required:
(a) Calculate the following variances:
(i) Material price

(ii) Material usage
(iii) Labour rate
(iv) Labour efficiency
(v) Variable overhead expenditure
(vi) Variable overhead efficiency
(vii) Fixed overhead expenditure
(viii) Fixed overhead volume (8 marks)
(b) List any two (2) causes of labour idle variance. (4 marks)
(c) Explain four (4) types of standards that can be used in organisations. (8 marks)
[Total: 20 marks]
QUESTION FOUR
The following information relates to the inventory of raw material D and work-in-progress of
the only product manufactured by KUKE Plc
Raw Material D
01 August Received 1,000kg @ K 9.50 per kg
15 August Received 900kg @ K 11.00 per kg
19 August Issued to production 800 kg
20 August Received 600 kg @ K 10.50 per kg
26 August Issued to production 1,200 kg
Work-in-Progress at 31 August
600 units which are 40% complete
There is no opening stock of raw material D or work-in-progress at 1 August.
Completed finished goods are valued at K30.50 per unit.
82
Required:
(a) Prepare a statement showing the amount charged to production and the total value
of inventory of raw materials held after each inventory transaction (rounding to two
decimal places), using each of the following methods of inventory costing:
(i) First in, First Out (FIFO)

(ii) Last In, First Out (LIFO)
(iii) Weighted Average Cost(AVCO)
(12 marks)
(b) Outline the advantages and disadvantages of each of the above three (3) methods of
inventory costing. (6 marks)
Work-in-Progress at 31 August
There is no opening stock of raw material D or work-in-progress at 1 August.
Completed finished goods are valued at K30.50 per unit.
(c) Calculate the value of the company’s inventory of work-in-progress at 31 August.

(2 marks)
[Total: 20 Marks]
QUESTEION FIVE
The following information relates to Maximax Ltd. It is a manufacturing business that is

considering the introduction of a piece-work incentive scheme in one of its departments,
which has 6 employees.
Current Payroll
Basic working week 38 hours
Over-time premium 20% of normal pay grade.
Normal grade A pay rate is K 22 per hour.
Normal grade B pay rate is K 18 per hour.
Employee Normal Normal Normal

Hours Worked Pay Grade Units
Produced
1 41 A 170
2 44 A 170
3 40 B 150
4 38 B 150
5 38 B 160
6 45 A 180
83
Piecework Incentive Scheme Proposal
Under the proposed incentive scheme, the standard time allowance would be 20 minutes
per unit. The piecework rate would be based on grade A labour rates, with a standard
piecework enhancement of 6%. All employees would receive the same piecework rate.
Required:
(a) Outline the purpose of an incentive scheme. (5 marks)
(b) Calculate the normal pay due to each employee based on the current payroll terms.
(5 marks)
(c) Calculate the standard piecework rate on the basis of the proposed incentive
scheme.
(5 Marks)
(d) Calculate the normal pay due to each employee under the terms of the proposed
incentive scheme. (5 marks)
[Total: 20 Marks]
QUESTION SIX
(a) The Cost Clerk of Nayo Nayo Ltd collated the following company information:
Description Cost (K) Description Cost (K)

Direct materials 50,000 Consumable stores 1,250
Direct labour 15,000 Manager’s Salary 2,500
Wages of foreman 1,250 Directors’ fees 625
Electric power 250 Office Stationery 250
Factory lighting 750 Telephone Charges 62.50
Office lighting 250 Postage and Telegrams 125
Storekeeper’s wages 500 Salesmen’s salary 625
Oil and water 250 Travelling expenses 250
Rent: factory 2,500 Advertising 625
Rent: Office 1,250 Warehouse charges 250
Repairs and renewals: Sales 94,750
Factory plant 1,750 Carriage outward 187.50
Transfer to reserves 500 Dividend 1,000
Discount on shares 250
written off
Depreciation:
Office premises 625
Factory Plant 250
84
Required:
Prepare an operating statement clearly highlighting the following:
(i) Prime cost

(ii) Factory cost
(iii) Cost of production
(iv) Cost of sales
(v) Profit (15 marks)
(b) Define the following terms:
(i) Cost object

(ii) Cost unit
(iii) Cost centre
(iv) Revenue centre
(v) Profit centre (5 marks)
[Total: 20 marks]
END OF PAPER
85
DA 5: COST ACCOUNTING SOLUTIONS
SECTION A
SOLUTION ONE
1.1 C
1.2 A Number of Audits (A) Total Costs (C)

K
High 30 105,600
Low 22 83,400
8 22,200
Variable cost per audit = K22, 200/8 audits = K2, 775
At 30 Audits K
Variable Costs (30 audits @ K2, 775) 83,250
Fixed Costs 22,350
Total Costs 105,600
1.3 B Raw Material Control
K’000 K’000
Balance b/f 10 Work In Progress 42
Production Overhead 5
Accounts Payable 50 Balance c/f 13
60 60
1.4 D Finished Goods Control
K’000 K’000
Balance b/f 18 Cost of sales 97

Work In Progress 90 Balance c/f 11
108 108
1.5 C Cost Driver Rate for Order Activities

= 62,400/624 Orders
= K100 per order
86
Soft Drinks Fresh
Produce
: . Order Costs
(144:336) @K100 per order K14,400 K33,600
Total K48,000
1.6 A Cost Driver Rates for Delivery Activities

= K100,800/1,260 deliveries
= K80 per delivery
Soft Fresh Packaged

Drinks Produce Foods
Delivery Costs 9,600 70,080 21,120

(120:876:264) @K80 per
Delivery
1.7 D
1.8 B
1.9 C
1.10 B Basic pay (8hrs @ K14) 112

Over Time (8hrs @K3.5 28
Gross Pay 140
87
SECTION B –SOLUTIONS
SOLUTION TWO
(a) An overhead Analysis Sheet
Nature of Cost Basis of Total Cutting Shaping Stores Maint

App Dept Dept Dept Dept Dept
K’000 K’000 K’000 K’000
Allocated N/A 363 140 160 35 28
Apportioned
Rent Flr Area 525.00 270.00 180.00 45.00 30.00
Buildings Ins Flr Area 70.00 36.00 24.00 6.00 4.00
P&M Ins Value of P&M 39.00 30.00 5.00 2.50 1.50
P&M Dep’n Value of P&M 58.50 45.00 7.50 3.75 2.25
Canteen # of employs 150.00 51.00 90.00 6.00 3.00
1,205.50 572.00 466.50 98.25 68.75
(b) Re-apportionment of service department’s overheads& Calculation of OARs
Nature of Cost Basis of Total Cutting Shaping Stores Maint

App Dept Dept Dept Dept
K K K K
1,205,500 572,000 466,500 98,250 68,750
Maint Costs Maint Hrs 37,125 27,500 4,125 68,750)
Stores Costs S/Requests 68,250 34,125 (102,375) 0
677,375 528,125 0 0
Overhead Absorption Rates
Cutting Dept = 677,375/12,000 machine hours = K56.45 per machine hour
Shaping Dept = K528,125/15,000 labour hours = K35.21per labour hour
(c) Calculation of over/under absorbed overheads
Cutting Dept
K
Actual overheads 531,500
Absorbed Overheads (14,000 x K56.45) 790,300
Over Absorbed 258,800
Shaping Dept
Actual Overheads 405,500

Absorbed Overheads (16,000x K35.21) 563,360
Over absorbed 157,860
88
SOLUTION THREE
a.
Material Standard Actual
Quantity Rate amount (K) Quantity Rate Amount

(K)
A 30,000 10 300,000 35,000 9 315,000
B 40,000 5 200,000 42,000 6 252,000
C 56,000 6 300,000 53,000 7 371,000
120,000 800,000 130,000 938,000
Material Cost Variance (MCV) = Standard cost for actual output – Actual quantity
= K800,000 – K938,000
K138,000 Adverse
Material Price Variance (MPV) = Standard price – Actual price
A= (10 – 9) x 35 = K35,000 (F)
B= (5 – 6) X 42,000 = K42,000 (A)
B= (6 – 7) X 53,000 = K53,000 (A)
K60,000 (A)
Material Usage Variance (MUV) = SQ for actual output – AQ) X Standard price
A= (30,000 – 35,000) x 10 = K50,000 (A)
B= (40,000 – 42,000) x 5 = K10,000 (A)
C= (50,000 – 53,000) x 6 = K18,000 (A)
K78,000 (A)
Material Mix Variance (MMV) = (Revised SQ – AQ) x Standard price
89
Workings:
1. Revised Standard Quantity = (Total actual weight of mix x Standard Quantity)

Total standard weight of mix
A= 130,000 x 30,000 = K32,500kg

120,000
B= 130,000 x 40,000 = K130,000kg

120,000 3
C= 130,000 x 50,000 = K162,500kg

120,000 3
Material Mix Variance (MMV) = (Revised SQ – AQ) x Standard price
A= (K32,500 – 35,000) x K10 = K25,000

(A)
B= (K130,000 – 42,000) x K5 = K6.667 (F)

3
C= (K162,500 – 53,000) x K6 = K7,000 (F)

3
Total = K11,333
(A)
b. The labour (wage) rate variance is determined by the price paid for labour and the
quantity of labour used. The price (labour rate) variance is calculated by comparing
the standard price per hour with the actual price paid per hour. Labour efficiency
variance represents the quantity variance for direct labour. The quantity of labour
that should be used for the actual output is expressed in terms of standard hours
produced. The labour efficiency variance is the difference between the actual hours
worked and the standard hours required for the same task.
90
SOLUTION FOUR
A (1)
FIFO
METHOD RECEIVED ISSUED BALANCE
Unit Unit Unit
DATE Qty(KG) Price Total Qty Price Total Qty Price Total
1-Aug 1,000 9.5 9,500 - 1,000 9.5 9,500
15-Aug 900 11.0 9,900 - 1,900 19,400
19-Aug - 800 9.5 7,600 1,100 11,800
20-Aug 600 10.5 6,300 - 1,700 18,100
26-Aug - 200 9.5 1,900
- 900 11.0 9,900
- 100 10.5 1,050
- 12,850
- 20,450 500 10.5 5,250
91
A(11) LAST IN FIRST OUT( LIFO) METHOD
LIFO
METHOD
RECEIVED ISSUED BALANCE
Unit Unit Unit
1-Aug 1,000 9.5 9,500 - 1,000 9.5 9,500
15-Aug 900 11.0 9,900 - 1,900 19,400
19-Aug - 800 11.0 8,800 1,100 10,600
20-Aug 600 10.5 6,300 - 1,700 16,900
26-Aug - 600 10.5 6,300
- 100 11.0 1,100
- 500 9.5 4,750
- 12,150
- 20,950 500 9.5 4,750
A (111)-WEIGHTED AVERAGE COST METHOD - (AVCO)
AVCO RECEIVED ISSUED BALANCE

Unit Unit Unit
1-Aug 1,000 9.5 9,500 - 1,000 9.5 9,500
15-Aug 900 11.0 9,900 - 1,900 10.2 19,400
19-Aug - 800 10.2 8,168 1,100 10.2 11,232
20-Aug 600 10.5 6,300 - 1,700 10..31 17,532
26-Aug 1,200 10.3 12,372
12,372
- 20,540 500 10.31 5,155
92
B. Advantages of the methods
FIFO –Advantages
1. Actual costs systems-unrealised profit or loss are eliminated

2. Encourages good store keeping practices by issuing oldest inventory first
3. Inventory Valuations comprises of the most recent valuation
FIFO- Disadvantages
1. Not suitable in times of inflations as it under state products costs and overstates
profit
2. Cam be administratively clumsy
3. Cost Comparisons of batches is difficult
4. It has limited decision making uses
LIFO-Advantages
1. It uses actual cost system

2. Up to date relevant market costs charged to production
3. Realistic costing approach useful in some decision making scenarios
LIFO-Disadvantages
1. It can distort profit as inventory is valued at oldest prices

2. Not acceptable to tax authorities
3. It can be administrative clumsy as purchase batches only partially charged to
production.
Weighted Average –Advantages
1. Relatively straight forward administratively

2. Moderate costs are charged to inventory valuations and production charges
3. Useful for cost comparison exercises
Weighted Average –Disadvantages
1. Although realistic, it is not based on actual meaningful costs
(C) Work in progress at 31st August
Calculation of equivalent units EU
600 units at 40% 240
400 units at 60% 240
300 units at 80% 240
720 units @ K30.50 per unit=K21,960
93
SOLUTION FIVE
(A). Incentive Schemes are a means of remuneration which relate payment to output.
The aims of such schemes are to benefit employees by providing an opportunity to increase
earnings, while encouraging performance and providing for increased productivity, which
may result I reduced cost per unit.
Incentive Schemes can be based upon individual performance or aimed at incentivising

groups of employees.
Incentive Schemes should be based on efficient working methods following comprehensive

work studies and may be financial or non-financial in nature.
(B) NORMAL PAY ON CURRENT PAYROLL TERMS

EMPLOYEE HOURS RATE/HOUR TOTAL(K)
EMPLOYEE 1 38 22 836
3 26.4 79.2
915.2
HOURS RATE/HOUR TOTAL(K)

6 26.4 158.4
994.4

2 21.6 43.2
727.2

0
684

0
684

7 26.4 184.8
1020.8
94
Standard Incentive Piecework
C rate
Standard Weekly Pay ( Grade A) K 836
Standard Weekly 38 hour =2,280 Minutes/20 Min=114
Production units
7.33 per
Basic Piecework rate K unit
Incentive Element 6% 0.44
Standard Incentive Piecework rate K 7.77
NORMAL PAY UNDER PROPOSED INCENTIVE

(D) SCHEME
EMPLOYEE UNITS RATE/UNIT TOTAL(K)
EMPLOYEE 1 170 7.77 1,320.90
EMPLOYEE 2 170 7.77 1,320.90
EMPLOYEE 3 150 7.77 1,165.50
EMPLOYEE 4 150 7.77 1,165.50
EMPLOYEE 5 160 7.77 1,243.20
EMPLOYEE 6 180 7.77 1,398.60
95
SOLUTION SIX
i.
Statement of Cost and Profit (K)
Direct Materials 50,000

Direct Wages 15,000
Prime Cost 65,000
Add: Factory Overheads:
Wages of foreman 1,250
Electric power 250
Storekeeper’s Wages 500
Oil and Water 250
Factory rent 2,500
Repairs and renewals-Factory Plant 1’750
Factory lighting 750
Depreciation-Factory Plant 250
Consumable stores 1,250
8,750
Cost of production 73,750
Add: Administration Overheads:

Office rent 1,250
Repairs and Renewals-Office Premises 250
Office lighting 250
Depreciation : Office Premises 625
Manager’s Salary 2,500
Director’s fees 625
Office Stationery 250
Telephone charges 62.50
Postage and telegrams 125
5,937.50
79,687.50
Add: Selling and Distribution Overheads:
Carriage Outward 187.50
Salesmen’s Salaries 625
Travelling Expenses 250
Advertising 625
Warehouse charges 250
1,937.50
Cost of Sales 81,625
Profit 13,125
Sales 94,750
96
ii)
a. A cost object is any activity for which a separate measurement of cost is

desired. The cost of something is referred to as ‘cost object’. Examples of
cost objects include cost of a product or the cost of rendering service e.g. in
a bank or in a hospital.
b. A cost unit is “a unit of quantity of product, service or time in relation to
which costs may be ascertained or expressed”. The forms of measurement
used as cost units are usually the units of physical measurements like
number, weight, area, length, value, time etc.
c. Cost centre means “a location, person or item of equipment (or group of

these) for which costs may be ascertained and used for the purpose of cost
control”. Cost centre is the smallest organizational subunit for which separate
cost collection is attempted. Thus cost centre refers to one of the convenient
unit into which the whole factory organization has been appropriately divided
for costing purposes. Each such unit consists of a department or a sub-
department or item of equipment or, machinery or a person or a group of
persons.
d. Revenue centres are responsibility centres where managers are mainly

accountable for financial performance in the form of generating sales
revenue. Revenue centre managers are also managing expenses in their
areas of control.
e. A profit centre is that segment of activity of a business which is responsible

for both revenue and expenses and discloses the profit of a particular
segment of activity. Profit centres are created to delegate responsibility to
individuals and measure their performance.
END OF SOLUTIONS
97
___________________
LEVEL ONE
___________________
DA 6: BUSINESS LAW
___________________
FRIDAY 15 DECEMBER 2017
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to start writing.

Section A: One (1) Compulsory scenario question.
Section B: Five (5) Optional Questions. Attempt any four (4) questions.
booklet.
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QUESTION ONE
question.
QUESTION ONE
1.1 All the following are appeal courts except………………………………?

A. The Small Claims Court
B. The Supreme Court
C. Court of Appeal
D. The High Court (2 marks)
1.2 Which one of the following statements explains obiter dicta?

A. By the way statements made by judges
B. A binding resolution of a tribunal
C. An adjudicative statement by the judge
D. A source of law. (2 marks)
1.3 What is vicarious liability?
A. An employer being liable for the actions of an employee

B. A third party being involved in a dispute
C. A ruling of the court on a party liable in a cause of action.
D. Liability by relations (2 marks)
1.4 When does title pass under the Sale of Goods Act of 1893?
A. When the contract was made
B. When buyer takes possession of the goods
C. When buyer states that she accepts the goods
D. When buyer pays for the goods (2 marks)
1.5 Which of the following sentences has the correct definition of law?
A. Law is a set of rules used to regulate conduct
B. Law is a body of moral standards
C. Law consists of ethics that are used to regulate certain professionals
D. Law is a collection of rules used to punish offenders (2 marks)
1.6 Which one of the following is not an example of a tort?

A. Defamation
B. Malicious prosecution
C. False imprisonment
D. Fraud (2 marks)
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1.7 What is statutory interpretation?
A. The process by which judges bring out the meaning of the words used in
Statutes.
B. This is when judges use their discretion to simplify words
C. This is when people use the dictionary to understand words
D. This is the process of understanding words (2 marks)
1.8 Which of the following types of dismissal occurs when no notice is given to the
employee?
A. Constructive dismissal
B. Summary dismissal
C. Unfair dismissal
D. Wrongful dismissal (2 marks)
1.9 Which of the following best explains the concept ‘discharge of a contract’?
A. Termination of a contract
B. Release of parties from their obligations
C. Performance of an obligation
D. Payment of one party by the other (2 marks)
10.0 Which of the following rules does not assist judges in the interpretation of statutes?
A. Mischief rule
B. Noscitur a sociis
C. Contra proferentum rule
D. The context rule (2 marks)
[Total: 20 Marks]
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SECTION B
There are five (5) questions in this section. Attempt any four (4) questions.
QUESTION TWO
Jane advertised for the sale of some decorations for the price of K5,000. Lulu saw
the advert and approached Jane at her office along Swima Street in Wonderful
Township. Lulu offered to buy the decorations; and Jane agreed to her offer. After a
few days, Lulu approached Jane and offered to pay Jane K4,950 instead of the initial
K5,000. Jane refused to accept the amount of money proposed by Lulu and sold off
the decorations to Ali who bought them for K5,000.
Two weeks later, Lulu goes to Jane only to discover that the decorations are all
sold out. She now intends to sue Jane.
(a) Advise Lulu as to whether or not a valid contract was made. (11 marks)
(b) Explain any three remedies available to Lulu in the event it is found that there was
breach of contract. (9 marks)
[Total: 20 Marks]
QUESTION THREE
Dr. Mulenga & Honorable Chanda Mukwendo run a partnership business manufacturing
computers and they recently placed an advertisement in a computer trade magazine stating
that they would supply a particular type of their latest computer which sings and type audio
voices for K7,500. The advert also stated that they would consider a reduction in the price
for substantial orders. Following the advert, they received two enquiries, one from Game
Stores and the other from Home Corp. Each business requested their terms of supply for
500 computers. Doctor Mulenga replied to both offering to supply the required computers at
a cost of K7,000 each.
They both responded to the partners stating that they accepted the offer but that they
would only pay K6, 500 per computer. Honorable Chanda wrote back to Game stores stating
that they would supply the computers but only at the original price of K7,500. When
Chanda's letter arrived, the purchasing director of Game stores did not notice the alteration
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of the price and ordered the 500 computers from the partnership, which they promised to
deliver.
Dr. Mulenga also wrote back to Home Corp, but they responded by saying that they could
only pay K4,500 per computer. Dr. Mulenga once again wrote to say that such a price was
not satisfactory. Home Corp finally sent an order for 1000 computers at the original price of
K7, 500. Dr. Mulenga delivered the computers, he however increased the price to k8,000 per
computer and pocketed the difference. Chanda discovers the crookedness of the Doctor.
Now he has threatened legal action against Dr. Mulenga.
(a) (i) Advise Chanda on the rights and obligations of partners in a partnership.
(4 marks)
(ii) Advise him further on the contractual obligations which arose from the above
scenario. (4 marks)
(b) Suzan, the owner of a factory building, spreads rat poison on slices of bread with the
intention of putting it down to attract and destroy vermin. Peter, an employee with
learning difficulties, who has forgotten his lunch, finds the bread and eats a slice, as
does Brian, a small boy who has wandered into the factory building. Both Peter and
Brian become seriously ill.
(i) Discuss the possible liabilities to Suzan. (3 marks)
(ii) List any two (2) defences available in tort (2 marks)
(iii) Explain the meaning and effect of contributory negligence. (3 marks)
(iv) Discuss the concept of remoteness of damage in the tort of negligence.
(4 marks)
[Total: 20 Marks]
QUESTION FOUR
(a) In the legislative process list the stages that a bill has to pass through before it
becomes legislation. (6 marks)
(b) Explain the difference between disclosed and undisclosed agency. (6 Marks)
(c) Tom Zulu went with his wife Beauty Zulu to the Agricultural and Commercial Show at
the Show grounds in Lusaka. Beauty remained behind watching Nyau Dancers and
got lost in the mammoth crowd. Tom announced on a megaphone that he would
reward whoever found his wife with five hundred kwacha and he would be waiting at
gate B.
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When Beauty Zulu heard the announcement, she rushed to the gate and demanded
for the money arguing that she had found herself, and was entitled to the reward.
Explain if she is entitled to this reward. (8 marks)

[Total: 20 Marks]
QUESTION FIVE
Julius Mubanga went to Kafue National Park Lodge, where he spent a night. He did not see
the notice at the entrance to the car park because it was hidden by flowers and branches of
shrubs. It read as follows:
PARKING NOTICE TO ALL MOTORISTS

This is to inform all motorists who park in these
premises, that they do so at their own risk. The
Lodge or its servants will not be responsible for any
loss or damage to property or for any injuries to
persons who may find themselves legally or illegally
on these premises. However, management reserves
the right to enforce traffic rules regarding parking, to
the exclusion of the traffic police, and to clamp any
vehicle wrongfully parked to the inconvenience of
other motorists.
Mubanga proceeded to the reception, paid for his lodging and parking fees and went to
sleep. He found the following day that the rim covers to the tyres of his car had been stolen.
The management of the hotel referred him to the parking at owner’s risk notice, and insisted
that the Lodge was not responsible for the lost rims.
(a) Explain to Mubanga on whether such notices to avoid liability for loss or damage
have a place in modern business. (11 marks)
(b) Advise him also if there are any legal means to keep such notices out of the main
agreements as people go about their businesses. (9 marks)
[Total: 20 Marks]
QUESTION SIX
(a) TAP employed the Complainant on 1st August 1982 as Personnel Manager on
probation period of three months. In 1982 November, the respondent informed the
complainant that they could not confirm him as Personnel Manager. The Works
Council intervened successfully and the complainants’ period of probation was
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extended. But on 25th March 1983, the respondent terminated the complainants’
contract of employment.
The complainants’ complaint was that his services were terminated because of his
political activities and as such was contrary to section 108 (2) of the Industrial
Relations Act.
The section provides:
“Any employee who has reasonable cause for believing that his services have been
terminated or that he has suffered any other penalty or disadvantages on any of the
grounds set out in subsection (i) may within thirty days of the occurrence or
occurrences which may give rise to such belief, lay a complaint before the Industrial
Relations Court and the court shall if it finds in favour of the complainant, grant to
him such remedy as it deems fit including re – instatement for loss of employment”.
The court was asked to rule whether or not on the evidence before it, the
respondents terminated the contract with the complainant on political ground other
than the reasons advanced. The complainants’ case was that respondents were not
pleased with him because he mixed freely with Workers Councilors, members of the
party committee and work committee members.
Required:
Advise the Personnel Manager in relation to the above facts (10 marks)
(b) Under the Sale of Goods Act 1893, explain any five (5) exceptions to the nemo dat
quod non habet rule. (10 marks)
[Total: 20 Marks]
END OF PAPER
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DA 6: BUSINESS LAW SOLUTIONS
SECTION A
SOLUTION ONE
1.1 A
1.2 A
1.3 A
1.4 D
1.5 A
1.6 D
1.7 A
1.8 B
1.9 B
1.10 C
SECTION B
SOLUTION TWO
A contract is a legally binding agreement where one makes an offer and the other
accepts unconditionally. There are certain elements of a contract that need to be
present for a contract to be a valid contract. The main ones being, offer, acceptance,
consideration and intention to create legal relations.
An offer must always be distinguished from an invitation to treat such adverts,

auction sale, tenders etc. In the case at hand, the advert by Jane was merely an
invitation to treat and therefore, had no legal consequences. Lulu’s statement to Jane
to buy the decorations is what constituted an offer. An offer which is a definite
promise to be bound on certain specific terms. Jane accepted Lulu’s offer, however,
Lulu’s introduction of a payment of a lesser sum of money K4,950 constituted a
counter-offer thereby cancelling the original offer of K5,000.
An example is Hyde v Wrench (1840), where D offered his farm to P for £1,000. P wrote
saying he would give £950 or it. D refused this, and P then said he would pay £1,000 after
all. D had by now decided that he did not wish to sell P for £1,000. P sued for breach. His
action failed because his offer of £950 was a counter offer, which terminated D’s offer of
£1,000, thus when P purported to accept at £1,000 there was no offer in existence and
therefore no contract was formed.
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In the same way, no contract has been formed between Jane and Lulu and
therefore, Lulu cannot succeed even if she was to sue Jane.
(b) The word remedy refers to compensation that is awarded to an innocent party
to a contract in the event that the other party breaches the contract. Thus, Lulu
could have a number of remedies if it is proven there was breach of contract.
i. Damages may be awarded as compensation for loss caused by the breach.

ii. Action for the price is available where the breach is failure to pay
iii. Quantum meruit is payment for the value of what the plaintiff has done
iv. Specific performance is a court order to the defendant to perform the
contract
v. Injunction is a court order for the other party to observe negative
restrictions.
Damages and action for the price are common law remedies and are most
frequently sought when a remedy is needed for breach of contract, since
they arise as of right. A quantum meruit claim is categorized as a claim in
quasi-contract. The other type of remedy is equitable remedies, which are
only appropriate in specialized circumstances.
SOLUTION THREE
a)
i. Rights and Obligations of Partners as Mentioned in the Partnership Act
The relationship of partners among themselves, their rights and obligations are generally
given in the partnership deed. If partnership deed is silent about it, then the partners shall
have rights and obligations mentioned in the Partnership Act.
Right of a Partner:
(i) Every partner has a right to take part in the conduct and management of the business.
(ii) Every partner has a right to be consulted before taking important decisions. The
decisions should be taken by mutual consent. If the decisions are unimportant, then they
can be enforced by majority, but consensus of all partners is necessary for taking important
decisions.
(iii) The partners have a right to inspect books of accounts.
(iv) Every partner will have an equal share in profits, unless otherwise mentioned, in
partnership deed.
(v) No new partner can be admitted into partnership without the consent of all partners.
(vi) Every partner has a right to receive interest at the rate of 6% per annum on the excess
money supplied over his capital.
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(vii) Every partner has a right to be indemnified by the firm in respect of expenses incurred
or losses suffered for the normal conduct of the business.
(viii) A partner has a right to get the firm dissolved under appropriate circumstances.
(ix) The property of the firm shall be held and used exclusively for the purpose of the
business.
Obligations of a Partner:
1) Every partner should carry on the business to the greatest common advantage. He
must perform his duties honestly and diligently.
2) A partner is not entitled to get remuneration for the conduct of business, unless
otherwise it is specially mentioned in the partnership deed.
3) A partner must indemnify the firm for loss suffered because of his fraudulent conduct
or willful neglect.
4) A partner is bound to keep and render true and correct accounts of the business.
5) A partner cannot carry on a competing business. If he carries on such business he
shall account for and pay to the firm all profits made by him in that business.
6) A partner is bound to act within the scope of his authority.
7) No partner can make a secret profit of the partnership business by way of
commission, etc. If he does so, he must return the money to the firm.
ii)
Contract obligations are those duties that each party is legally responsible for in a contract
agreement. In a contract, each party exchanges something of value, whether it be a
product, services, money, etc. On both sides of the agreement, each party has various
obligations in connected with this exchange. An example of contract obligations is with the
sale of a product such as an automobile. One party has the obligation to transfer ownership
of the car, while the other has the obligation to pay for it. The contract will specify the terms
that regulate the obligations, such as the method and amount of payment, and the
time/place of delivery. If either party fails to perform their contractual obligations according
to the contract terms, it will usually result in a breach of contract. This may result in a
damages award to reimburse the non-breaching party for their economic losses.
In the case at hand, it can be argued that the advertisement amounted only to invitation to
treat, this was also highlighted in the case of Fisher v Bell [1961] 1 QB 394 where the
court stated that goods displayed in a shop together with a price label, such display is
treated as an invitation to treat by the seller, and not an offer.
In some cases, contract obligations can be transferred to a third party. For instance, if one
party is obligated to paint the other party’s house, they can sometimes hire an outside party
to do the painting for them. This is known as “contract delegation”. Contract delegation
may or may not be allowed for all obligations; the ability to delegate a contract duty may
depend on the type of obligation as well as state contract laws. It can also be argued that,
the amount pocketed by Dr Mulenga was a violation of the obligation of partners. Suffice
also to state that, counter offers were made as was seen in Hyde v. Wrench.
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b) i. Susan is strictly liable for the offence committed as was seen in Ryland v. Fletcher.
In law, strict liability is a standard for liability which may exist in either a criminal or civil
context. A rule specifying strict liability makes a person legally responsible for the damage
and loss caused by his/her acts and omissions regardless of culpability (including fault in
criminal law terms, typically the presence of mens rea). Under strict liability, there is no
requirement to prove fault, negligence or intention. Strict liability is prominent in tort law
(especially product liability), corporations law, and criminal law. For analysis of the pros and
cons of strict liability as applied to product liability, the most important strict liability regime.
ii. Volenti non fit injuria, negligence, contributory negligence, necessity, mistake, consent
act of God, Inevitable accident, statutory provision
iii. Contributory negligence in common law jurisdictions is generally a defense to a claim

based on negligence, an action in tort. This principle is relevant to the determination of
liability and is applicable when plaintiffs/claimants have, through their own negligence,
contributed to the harm they suffered. In some jurisdictions it may be applied by the court
in a tort matter irrespective of whether it was pleaded as a defense.
The contributory negligence defense can potentially eliminate the defendant's responsibility
to pay damages to an injured plaintiff. For example, a pedestrian crosses a road negligently
and is hit by a driver who was driving negligently. Since the pedestrian has also contributed
to the accident, they may be barred from complete and full recovery of damages from the
driver (or their insurer) because the accident was less likely to occur if it hadn't been for
their failure to keep a proper lookout. Another example of contributory negligence is where
a plaintiff actively disregards warnings or fails to take reasonable steps for his or her safety,
then assumes a certain level of risk in a given activity; such as diving in shallow water
without checking the depth first.
IV. Under English law, remoteness is a rule in both tort and contract, which limits the
amount of compensatory damages for a wrong. In negligence, the test of causation not only
requires that the defendant was the cause in fact, but also requires that the loss or damage
sustained by the claimant was not too remote. As with the policy issues in establishing that
there was a duty of care and that that duty was breached, remoteness is designed as a
further limit on a cause of action to ensure that the liability to pay damages is fairly placed
on the defendant.
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Directness
The traditional approach was that once a breach in the duty of care had been established, a
defendant was liable for all the consequent damage no matter how unusual or unpredictable
that damage might be. In Re Polemis while docked, workers employed to unload the ship
negligently dropped a plank into the hold, which struck something, causing a spark that
ignited petrol vapour lying in the hold. The fire destroyed the whole ship. The Lords held
that although the fire was not a reasonably foreseeable consequence of the plank falling,
there had been a breach of the duty of care and all damage representing a direct
consequence of the negligent act was recoverable. It was determined that once some harm
was foreseeable, the defendant would be liable for the full extent of the harm. That
particular consequences are possible does not make them reasonably foreseeable. This will
particularly be the case when there are a significant number of links constituting the chain.
The more links, the less likely that consequence may be considered reasonably foreseeable.
Foreseeability
However, in The Wagon Mound (No 1) a large quantity of oil was spilt into Sydney Harbour
from the Wagon Mound and it drifted under the wharf where the claimants were
oxyacetylene welding. The resulting fire caused extensive damage to the wharf and to
vessels moored nearby. The Privy Council replaced the direct consequence test with the
requirement that, in order to be recoverable, damage must be foreseeable in all the
circumstances, thus, although pollution was a foreseeable consequence of the spillage, an
outbreak of fire was not. Viscount Simonds held at pp 422–423:
“ A man must be considered to be responsible for the probable consequences of his

act. To demand more of him is too harsh a rule, to demand less is to ignore that civilised
order requires the observance of a minimum standard of behaviour. ”
He went on to say at p 423, that a man should be responsible for the necessary or probable
consequences of his act (or any other similar description of them), "not because they are
natural or necessary or probable, but because, since they have this quality, it is judged by
the standard of the reasonable man that he ought to have foreseen them."
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In Hughes v Lord Advocate a child climbed down a manhole left uncovered and protected
only by a tent and paraffin lamp. When he came out he kicked over one of the lamps, which
fell into the hole and caused an explosion. The child was burned. Lord Reid said at 845,
“ So we have (first) a duty owed by the workmen, (secondly) the fact that if they had
done as they ought to have done there would have been no accident, and (thirdly) the fact
that the injuries suffered by the appellant, though perhaps different in degree, did not differ
in kind from injuries that might have resulted from an accident of a foreseeable nature. The
ground on which this case has been decided against the appellant is that the accident was
of an unforeseeable type. Of course, the pursuer has to prove that the defender's fault
caused the accident and there could be a case where the intrusion of a new and unexpected
factor could be regarded as the cause of the accident rather than the fault of the defender.
But that is not this case. The cause of this accident was a known source of danger, the
lamp, but it behaved in an unpredictable way.
Note that the student need not cite all the cases but the principle or correct
explanation is key from the above cases
SOLUTION FOUR
(a)The legislative process consist of the following stages:
i. First Reading
ii. Second Reading
iii. Committee Stage
iv. Report Stage
v. Third Reading
vi. Presidential Assent
(b) A disclosed agency is an agency relationship where the agent discloses to the
third party that he is acting on behalf of the principal, while undisclosed agency is
where the agent conceals that he is acting on behalf of the principal to the third
party. Thus, in disclosed agency the principal is held liable while in undisclosed agency the
agent will be held personally liable.
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(c) It must be noted that a reward is legal at law and what is vital is doing the terms of the
reward. These fall under unilateral contract where one party does a contract without
accepting it directly but does exactly the offers asserted. For example, finding a lost dog.
However, the party finding the dog must be aware of the promise so as to avoid past
consideration and voluntary acts meant only to help.
Thus, Beauty is not entitled because she was the subject matter of the contract (item to be
found) made between her husband, the offeror and the public at large.
SOLUTION FIVE
(a) An exemption clause is an additional term to contract by one party seeking to deny or
limit liability for loss. Although they are express terms, courts are reluctant to enforce
them, and interpret them in such a way as to prevent their application. This is because
they defeat the spirit of agreement as they are added by one party. However, exclusion
clauses have their proper place in business: they apportion risk, and courts are aware of
this contribution to commerce. If one is constantly compensating those who have
incurred loss, then one is likely to close his business. It is therefore imperative to
allocate contractual loss, determine who bares the loss and insure against the risk. In
such eventuality, courts are keen to ensure that the party seeking to rely on the
exclusion clause did not act unilaterally but involved the other party and that there was a
spirit of agreement. Otherwise, courts may use the following rules that they have
designed to prevent incorporation of the exemption clause into the main contract,
namely:
(b) Courts have designed three rules to assist them in keeping exemption clauses out of the
main agreements, namely:
 Contra preferentem rule – in case of ambiguity or uncertainty in the

exclusion clause, it must be interpreted in such way that it does not
benefit the party that inserted into the contract.
 The Repugnancy rule or doctrine of fundamental breach - if the

exclusion clause goes against the purpose of the main contract, then it
must be struck out of the contract. For example where a warehouse for
storage of goods states in a contract of storage that it will not be
responsible for any goods lost during storage.
 The Four Corners Rule – this refers to the main contract. The party
that seeks protection of the exclusion clause must act within the confines
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of the main agreement and any departure from the same, means that
the protection is lost.
 Customer needs to be informed of the existence of the exclusion

clause or directed where it before a contract is made.
SOLUTION SIX
(a) Unfair dismissal is when an employee is dismissed from their job in a harsh, unjust or
unreasonable manner including political ground. In sort the employee is discriminated
contrary to section 108 of the IRC.
An example is the case of REDRILZA LIMITED v ABUID NKAZI AND OTHERS (S.C.Z.
Judgment No. 7 of 2011) which was an appeal against the judgment of the Industrial
Relations Court. In the complaint before the Industrial Relations Court, the respondents
whose contracts of employment were terminated by notice claimed, amongst other things,
their salary for the unexpired term of their contracts. The Industrial Relations Court found in
favour of the respondents, on the basis that the appellant invoked the termination clause in
the respondent's contract of employment in bad faith, and consequently ordered that they
be paid six months salary as damages. Hence the appeal.
Section 108 (2) of the Industrial Relations Act.
The section provides:
“Any employee who has reasonable cause for believing that his services have been
terminated or that he has suffered any other penalty or disadvantages on any of the
grounds set out in subsection (i) may within thirty days of the occurrence or occurrences
which may give rise to such belief, lay a complaint before the Industrial Relations Court and
the court shall if it finds in favour of the complainant, grant to him such remedy as it deems
fit including re – instatement for loss of employment”. It therefore means that the
termination was unfair and as reinstatement is the best with adequate damages.
In ZAMBIA PRIVATISATION AGENCY v JAMES MATALE (1996) S.J. ... The contract
of employment made no provision for prior termination and the Court ... was a proper and
lawful way of terminating the respondent's on the basis that in the .... marital status,
religion, political opinion or affiliation, tribe extraction or social status.
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Therefore, in the above scenario, the personnel manager was unfairly dismissed and must
be reinstated or compensated for loss of employment as provided for in the Act.
(b) Exceptions to the nemo dat quod non habet rule are:
(i) Estoppel – This occurs where the owner of the goods being sold conducts himself as
if the seller has title to the goods and in an event that the seller sells the
goods based on the owner’s conduct, the owner will be estopped
(stopped) from denying that he conducted himself as if he gave the seller
powers to sell – Eastern Distributors Ltd v. Goldring (1957).
(ii) Agency – An agent has authority to sell the principal’s goods which are not his.
Therefore, if the villagers/fishermen sold the phones as CHM Electronics
Ltd’s agents, they would have the right to pass title even if they were not
owners.
(iii) Sale under Common Law or Statutory Power – This is where a creditor or
pawnbroker may sale pledged goods when the debtor defaults. Thus can
transfer title even if he is not the owner.
(iv) Sale by a person with voidable title – A person who acquires goods under a voidable
title will acquire a good title to the goods provided he buys under good
faith and can pass title anytime before revocation.
(v) Sale under Disposal of Uncollected Goods Act CAP 410 – This Act provides for
disposal of uncollected goods after a certain period of time e.g. 6
months.
(vi) Sale under market overt - This is one of the common law exceptions to nemo dat
quod non habet rule which states that a buyer who buys the goods in
good faith from an open market between 06:00 and 18:00 hours would
get good title because all those who sale in open markets are presumed
to be owners.
(vii) Sale by seller in possession of goods or documents – This is an exception to the

nemo dat rule which mean that if a seller has sold goods to buyer 1 but
retains the goods or documents of title to the goods, he would have the
right to sell the same goods to buyer 2 even if he is not infact the owner
as he could have sold to buyer 1 already.
(viii) Resale by buyer in possession of goods with consent of seller – where a buyer gets
goods from the seller with his consent, e.g if he has not finished paying,
he can still pass good title to the new buyer as long as the new buyer is
not aware of his status.
END OF SOLUTIONS
113
___________________
LEVEL ONE
___________________
DA 7: PRINCIPLES OF MANAGEMENT
___________________
MONDAY 11 DECEMBER 2017
___________________

__________________
to start writing.

Section B: Five (5) Optional Questions. Attempt any four (4) questions.
booklet.
114
QUESTION ONE
question.
1.1 Who is considered to be the father of scientific management theory?
A. Henry Gantt
B. Fredrick W Taylor
C. Henri Fayol
D. Elton Mayo (2 marks)
2.2 Mubita was analyzing the age distribution of the population of Lusaka and Copperbelt
provinces for the purpose of making a marketing decision. Which business
environmental factor was he considering?
A. Market environmental factor

B. Legal environmental factor
C. Social environmental factor
D. Political environmental factor (2 marks)
1.3 ………………………………… is a horizontal extension of the job by increasing task variety

and reducing task repetition.
A. Job rotation
B. Job enlargement
C. Job enrichment
D. Job optimization (2 marks)
1.4 Which stages are correct in managing a successful change according to Kurt Lewin?
A. De-freeze, unfreeze and change

B. Re-freeze, change and unfreeze
C. Unfreeze, re-freeze and change
D. Unfreeze, change and re-freeze (2 marks)
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1.5 Which management term best describes the number of subordinates who
directly report to an immediate superior?
A. Span of control
B. Chain of command
C. Delegation
D. Unity of command (2 marks)
1.6 Mutinta, who is a Human Resource Officer, was given a task to determine the
purpose, responsibilities and duties of an assistant accountant job. Which human
resource term is used to describe this process?
A. Job analysis
B. Job description
C. Job specification
D. Person specification (2 marks)
1.7 The organizational structure with a formal structure, well defined rules, regulations
and procedures is associated with which organisational culture.
A. Role culture
B. Power culture
C. Task culture
D. Person culture (2 marks)
1.8 Content theories of motivation explain.
A. How employees can be motivated

B. What motivates employees
C. When employees can be motivated
D. How and what motivates employees (2 marks)
1.9 An element of emotional intelligence that deals with the leaders self-confidence and
accurate self-assessment is called:
A. Self-awareness
B. Empathy
C. Self-management
D. Social skills (2 marks)
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1.10 The Zambian government made a decision to commercialize some of the
public organizations such as Zambia State Insurance Corporation(ZSIC).
Which of the following explains commercialization?
A. Selling public organizations to private sector

B. Having an objective of making profits
C. Providing goods and services at break even
D. Being transparent and accountable (2 marks)
[Total: 20 Marks]
117
SECTION B
There are FIVE (5) questions in this section. Attempt any FOUR (4) questions.
QUESTION TWO
(a) Change in business organizations is inevitable due to changing factors in the

business environment.
Required:
Explain how a manager can manage change among employees using Lewin’s three
stage change process approach. (12 marks)
(b) Explain four (4) skills that managers apply in the management of organizations.
(8 marks)
[Total: 20 Marks]
QUESTION THREE
(a) Performance evaluation of employees plays an important role towards the success of
an organization.
Required:
Outline the four (4) requirements for an effective performance appraisal approach
system. (12 marks)
(b) Give four (4) differences between a public and private sector. (8 marks)
[Total: 20 Marks]
QUESTION FOUR
(a) Discuss the theory of motivation according to Douglas McGregor. (10 marks)
(b) Give reasons why many Zambian entrepreneurs are operating as sole traders.
(10 marks)
[Total: 20 Marks]
118
QUESTION FIVE
(a) State any ten (10) principles of management by Henri Fayol. (10 marks)
(b) Explain any five (5) macro-environmental factors that affect the business
environment. (10 marks)
[Total: 20 Marks]
QUESTION SIX
(a) Discuss the traits theory of leadership and its limitations. (10 marks)
(b) Define the following management terms.
(i) Delegation (2 marks)

(ii) Organisational culture (2 marks)
(iii) Performance appraisal (2 marks)
(iv) Limited liability (2 marks)
(v) Decentralisation (2 marks)
[Total: 20 Marks]
END OF PAPER
119
DA 7: PRINCIPLES OF MANAGEMENT SOLUTIONS
SECTION A
SOLUTION ONE
1.1 B
1.2 C
1.3 B
1.4 D
1.5 A
1.6 B
1.7 A
1.8 B
1.9 A
1.10 B
SECTION B
SOLUTION TWO
(a) Kurt Lewin developed a three phase process to manage change and these are as
follows:
1. Unfreezing
This involves reducing those forces in employees which maintain behaviour in the
present form and recognizing the need for change. This stage entails a manager
giving full information to employees on the need for change and explaining the
benefits to both employees and organisation. Benefits could be improved profitability
and better conditions of work.
2. Change/Movement
This involves developing new behaviours, attitudes and values among employees
and implementing change. New attitudes and behaviours to be exhibited by
employees are reporting for work on time, minimizing on wastage of resources,
upholding high standard of quality control etc
3. Refreezing
Stabilizing the implemented change and reinforcing new behaviours among

employees by awarding those who are adapting to change. Reinforcement can also
be done through developing new policies, systems, procedures, structures etc.
120
(b)The following are the skills a manager must possess:
1. Conceptual skill.
This is the ability of a manager to assess and analyse the complexity of the
business environment the organisation is operating in. The manager must be able to
asses and understand both internal and external factors influencing the operations of
the business in order to make sound business decisions.
2. Technical skill
This is the ability of the manager to have knowledge and expertise in the aspect
of business being managed. The specific skills could be in accounting, engineering,
purchasing etc. This will enable the manger to apply the specific knowledge in an
area of specialization. Senior managers/managing directors/CEOs also need to
develop management skills in planning and control.
3. Social /interpersonal skill
This is the ability of a manager to interact with others at all levels of management
that include top, middle and lower. He also makes interpersonal relationships with
external stakeholders. That is a manager needs excellent skills in people
management.
4. Leadership skill
This is the ability to influence, direct and motivate subordinates in order for them
to achieve their assigned tasks. Once subordinates achieve their targets it means the
organisation has achieved its goal.
121
SOLUTION THREE
(a) 1. Target Formulation
The following are the requirements for performance appraisal system.
Developing individual employee targets which are used to appraise. The employee’s
performance is evaluated at a pre-determined timeframe against the set targets to
ascertain whether the targets have been achieved or not.
2. Recording Assessments
After the evaluation of an employees performance, the actual performance is

recorded and assessed by the immediate supervisor.
3. Feedback
Feedback must be formally given to the appraised employee on his or her

performance by the supervisor. The feedback information could be on achieving the
target or performance below the expected standards.
4. Deciding what to do
Making a decision based on feedback. Based on the performance results, the

decision could be made to award outstanding performance with promotions, bonuses
or merit salary increment. Also recommendation could be made for training.
(b)The following are the differences between public and private sector.
1. Public sector involves organizations that are owned and controlled by the
government while private sector involves organizations owned and controlled by
private individuals.
2. Public sector has the objective of providing services and goods not at a profit but
the private sector has the objective of maximizing on profits.
3. The public sector is financed using public funds generated through tax while
private sector is financed by its owners or shareholders using their personal finances.
4. In private sectors managers are held accountable to the shareholders and in

Public sector managers are held accountable to the citizens or government.
122
SOLUTION FOUR
(a) Douglas developed a theory of motivation in 1960 known as theory X and theory Y,
which are based on assumptions about people and work.
Theory X assumes that:
1. An average employee is lazy and has an inherent dislike for work.

2. Therefore, employees or people must be coerced, controlled and directed for
them to work and achieve objectives.
3. An average person avoids responsibility, prefers to be directed and values job
security.
4. Therefore, a manager who uses theory X usually applies close supervision, uses
strict rules and controls. Generally apply authoritarian type of leadership.
Theory Y assumes that:
1. Most employees work is as natural as play or rest.

2. People will exercise self-direction and control in the service of objectives to which
they are committed.
3. Given the right conditions, the average employee can learn to accept and to seek
responsibility.
4. A manager usually adopts democratic type of leadership to motivate employees.
(b) The following are the reasons for Zambian entrepreneaurs operating as sole traders.
1. Sole trader as a form of business is easy to register with PACRA as it does not
require a lot of legal procedures in comparison to limited companies.
2. All the profits generated under this form of a business is retained and enjoyed by the
owner.
3. Business decisions are made quickly by the owner since it is owned by one person.
4. It requires a small amount of capital to start.
5. The books of accounts are kept privately by the owner without publication to the
general public.
SOLUTION FIVE
(a) Any 10 of the 14 principles of management of Henri Fayol
1. Divisoin of labour: Workers must have areas of specialization to improve efficiency

and quality of work.
2. Authority and responsibility: Authority the right a manager must have to give
instructions to subordinates for them to carry out tasks. If a Manager has authority,
then must be responsible to superiors for their actions.
3. Discipline: The employees must be obedient to the rules and regulations of the
organisation.
123
4. Unity of Command: Each subordinate must have one immediate superior to
report to.
5. Unity of Direction: Group of activities with same objectives must be under one
plan and supervisor.
6. Subordination of individual interest to the general interest: The interest of
the organisation must come before the individual.
7. Remuneration: Pay to employees must be fair.
8. Centralisation: There should be one central point in the organisation that exercise
control of all the departments.
9. Scalar Chain: This is the hierarchy of authority in an organisation ranging from top,
middle and lower management.
10. Order: There must be order among employees by following the rules and
regulations.
11. Equity: Managers must practice fairness and justice in the management of workers.
Therefore, if employees perceive fairness and justice they will be motivated.
12. Stability of tenure of personnel: Maintaining employees in their job improves
their efficiency, therefore, management must reduce labour turnover.
13. Initiative: This is encouraging employees to be creative and participating in
decision making.
14. Esprit de corps: By working as a team success is easily achieved. Team spirit and
work should be encouraged among workers.
(c) The macro-environmental factor represented by an acronym PESTEL are
1. Political: This involves the social and economical policies that are formulated by
the government which affect the operations of the business. Also it involves the
degree of political stability of the country which affect investment climate.
2. Economical: This involves the economical performance of the country through its
ecomomical indicators or fundamentals such as level of inflation, employment rate,
foreign exchange rate, interest rates etc
3. Social and Culture: This encompasses the beliefs, values and culture of people
that have an influence of the nature of goods to produce and the marketing
strategies to employ. Social factors will also includes demographic factors such as
sex, population size, education levels etc
4. Technology: Rapid advancement in technology has affected production and
marketing. The prominent one is the use of computer which is both used in the
production of goods, provision of services and marketing.
5. Enviromental: This entails the use of environmentally friendly production processes
that does not pollute the environment. Companies are encouraged to go green by
use of solar energy, hydro-electricity, use of natural fertilizer etc.
6. Legal: This is the formulation of various laws that govern the operations of business
organizations. The laws that affect business are company law, environmental laws,
labour laws, consumer protection laws etc. Therefore, business organizations are
expected to comply with the various laws and failure results into punishment.
124
SOLUTION SIX
(a) Traits theory is a leadership theory that assumes that leaders are born and not made.
Therefore, leaders have certain mental and physical characteristics that make them to be
successful. The identified general characteristics are:
i) Self-confidence
ii) Creative and innovative
iii) Intelligent
iv) Emotional stability
v) Dependability
vi) Human relations skills
vii) Foresight
viii) Energy
The following are the limitations
1. The list of possible traits is broad and there is no agreement on the most important.
2. It ignores the fact that leadership can be situational.
(b)
i) Delegation is the process of entrusting authority and responsibility to lower

management. This means lower management or subordinates are given authority to
carry out certain tasks.
ii) Organisational culture is the pattern of assumptions, values, beliefs and norms
that are commonly shared by employees in an organisation.
iii) Performance appraisal is the process of evaluating the performance of an
employee against the set targets at a predetermined period.
iv) Limited liability means that in the event where a company fails to pay for its
debt, shareholder’s personal assets cannot be seized.
v) Decentralisation is the devolution of authority to make decisions to other centres
or divisions that are away from the headquarters.
END OF SOLUTIONS
125

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DIPLOMA IN ACCOUNTING PROGRAMME EXAMINATIONS

TOTAL MARKS – 100; TIME ALLOWED: THREE (3) HOURS

2. This paper is divided into TWO sections:

4. Do NOT write in pencil (except for graphs and diagrams).

5. Cell Phones are NOT allowed in the Examination Room.

7. All workings must be done in the answer booklet.

8. Present legible and tidy work.

Attempt all ten (10) multiple choice questions

What were the purchases for the year?

Bank 12,000 20,000

8% Debentures 30,000 25,000

Capital and Reserves

Share Capital 50,000 40,000

Share Premium 15,000 10,000

Retained earnings 23,000 17,000

D. Decrease of K8,000 (2 marks)

Which of the corrections will result in an entry in the general ledger?

C. International funding organizations

A. A transaction has been completely missed in the accounts

1. The partners’ individual exposure to debt is limited.

A. The substance over from concept.

A. Dr Depreciation charge K36,000

B. Dr Depreciation charge K36.000

C. Dr Acculated depreciation K36,000

D. Dr Acculated depreciation K108,000

1.9 The bank statement on 31 October 2016 showed an overdraft of K5,600. On

The following additional information is relevant:

(i) Depreciation is to be provided as follows:

(1) Building at 5% straight line, charged to Administrative expenses.

(ii) Salaries amounting to K3,900 were outstanding at the year end.

(iii) No final divided is being proposed.

(vi) Closing inventory is K12,800.

(viii) The tax charge provided for the year is K6,000.

Note: the above statements must be prepared in accordance with the

The proportion of the total floor area occupied by each

The apportionment should be made by using the methods as shown:

Balances on 1 Jan 2016 K

Total for the month to 31 Jan 2016 K

(a) Prepare accounts receivable ledger control account. (4½ marks)

(c) The following errors have been discovered:

Enelesi Rotary Club

As at 31 July 2015 2016

(i) The subscriptions account. (2½ marks)

(ii) The competition prizes expense account. (2½ marks)

3. The sales journal had been undercast by K20,000.

4. Repairs to a machine amounting to K3,900 had been charged to machinery account.

(b) Distinguish between capital and revenue expenditure.

Balance at 1 July 2015 8,000 4,000 - 12,880 24,880

(c) Statement of financial position as at 30 June 2017

4. Property, plant and equipment:

Departmental income statement for the year ending 31 December 2016:

Details Basis of Total Dept. A Dept. B

(a) Account Receivable Ledger Control

(b) Account Payables Ledger Control

(c) (i) Increase of K1,980

Accumulated fund at 1st August, 2015

(b) (i) Subscriptions Account

(ii) Competitions Prizes account

(c) Rotary Club