Acca P3

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Professional Level – Essentials Module

Business Analysis
Wednesday 15 June 2011

Time allowed Reading and planning: Writing:

15 minutes 3 hours

This paper is divided into two sections: Section A – This ONE question is compulsory and MUST be attempted Section B – TWO questions ONLY to be attempted Do NOT open this paper until instructed by the supervisor. During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper P3

This is a blank page. The question paper begins on page 3.


Section A – This ONE question is compulsory and MUST be attempted The following information should be used when answering question 1 1 Introduction The EcoCar company was formed six years ago to commercially exploit the pioneering work of Professor Jacques of Midshire University, a university in the country of Erewhon. Over a number of years he had patented processes that allowed him to use Lithium-ion batteries to power an electric car, which could travel up to 160 kilometres before it needed recharging. Together with two colleagues from the university, he set up EcoCar to put the car into commercial production. Coincidentally, an area in the south of Midshire was suffering from major industrial decline. This area was centred on the former Lags Lane factory of Leopard Cars, which had recently been shut down by its parent company, bringing to an end 60 years of continuous vehicle manufacture on that site. Many skilled car production workers had been made redundant in an area that already suffered significant unemployment. Grants from the regional council and interest-free loans from the government allowed EcoCar to purchase and re-furbish part of the Lags Lane site and take on a hundred of the skilled workers made redundant by Leopard Cars. The company now manufactures three car models: the original Eco, the EcoPlus, and the EcoLite. The EcoPlus is a luxury version of the Eco and shares 95% of the same components. The EcoLite is a cheaper town car and uses only 70% of the components used in the Eco. The rest of the components are unique to the EcoLite. A comparison of an Eco with a similar petrol-fuelled car (Kyutia 215) is given in Figure 1. This table also gives a comparison with a hybrid car (Xdos-HybridC) where the petrol engine is supplemented by power from an electric motor. Hybrids are a popular way of reducing emissions and fuel consumption. Petrol currently costs $5 per litre in Erewhon. There are also experimental cars, not yet in production, which are fuelled by other low-emission alternatives to petrol such as hydrogen. Model Power source Price Emissions (CO2) Economy Eco Lithium-ion batteries, electric motor $9,999 Zero Approximately $1 per 20 kilometres (electricity charge) 0–100 kph: 18 seconds Max speed: 120kph 160 kilometres until the battery needs re-charging Petrol $7,999 180gram/kilometre 8 litres/100km Kyutia 215 Xdos-HybridC Petrol with assistance from an electric motor $9,500 95gram/kilometre 5 litres/100km

Performance Range

0–100kph: 10 seconds Max speed: 180kph 550 kilometres on a tank full of petrol

0–100kph: 12 seconds Max speed: 170kph 1,200 kilometres on a tank full of petrol

Figure 1 Comparison of the Eco with comparable conventional and hybrid cars The Eco model range can be re-charged from a domestic electricity supply. However, to supplement this, the government has recently funded the development of 130 charging stations for electric cars spread throughout the country. It has also given businesses tax incentives to switch to electric cars and is heavily taxing cars with high CO2 emissions because of the detrimental effect of excess CO2 on the environment. It has also enacted a number of laws on car safety which EcoCar has to comply with. Erewhon itself remains a...
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