ECR Exam Margin of Safety

System
System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
edited June 18 in AAT student discussion
Did anyone have difficulty with Margin of Safety task?

:roll:
ยซ1

Comments

  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    Yes i did and so did most people in my class, i think i was a bit naughty the way they gave you the profit calculation instead of the unit contribution and tried to confuse us with breakeven per batch instead of units!

    :?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    Hi,

    Yeah I had a bit of difficulty.

    Not quite sure why I did though.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    Hi yes i really had problems with this, i got so stressed that in the end i just put any figures in.hope i wont fail because of this task.

    Aly :(
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I did as well i spent about an hour trying to get it right the sales revenue part i was fine, coz of that i left 10 mins before time was up, i feel really worn out form today..... but to be honest im not phased by it the rest of the paper seemed fine, if i only got that bit wrong i recks i will have passed.

    :D
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    Glad it's not just me!

    I had finshed the rest of the exam with no real problems within two hours and spent the last hour or so trying to get this task right!

    Hopefully, I will have done enough to pass? :roll:
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I had real problems with it and the more I looked at it the more I doubted my answers so I kept changing them. I just hope that the rest of my answers were ok.
    I was more comfortable with section 1 than section 2
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    same here daisy chain :)
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    HI guys from what I can recall, they tried to confuse us by asking for sales revenue for the brekeven point, which was just the breakeven firgure Xร‚ยฃ6, and margin of safety is always calculated in units, as long as you calculated unit contribution correctly u were ok, did anyone find the payback period to be approx 1.8years, and compnay policy was to only accept the project if it was 1.5yrs or below.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got 1 year 10 months and not accepting cause of the company policy.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    oh no! I got 2 yrs 2 months :oops:
    The more I am reading these threads the more I am doubtin a pass for me!! EEK!! :roll:
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    im really starting to panic now after reading all these! i got 1.2years and accepted the project! ahhhhhhhhh
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    i got 1.2 years and accepted also.

    Someone in my class got 2.2 years and recommended that the project was taken on anyway due to the positive Net Present Value.

    I am sooo confused now about how well i did or didnt do.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety


    that makes me feel a bit better that someone got the same as me!!

    i got the NPV as ร‚ยฃ260,000 does that sound about right??
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I also got 2years 2months! :wink:
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got ร‚ยฃ260K for NPV and 1.78 yrs for payback. Said despite encouraging NPV project must be rejected as it conflicted with company policy. Added that we may want to reconsider if the expected life cycle of the product could be more than 3 years. Added a bit about IRR as well.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    Can't remember exactly what I got for the payback period but it was certainly in the 1.78 ballpark and the project was rejected as this was outside the period required by company poilcy.

    I just waffled on a bit about IRR.

    Chris
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    We all got 1 year 10 months in our class. Well 1 year and 9.4 which adds up to the same. Think I had word blindness though as I never noticed the bit in the memo that said based on Payback only, recommend what you would do. So I wrote this thing about recommending it on NPV and discounting it on PAyback :cry:

    what calculation did you use to get 2 years? I don't know if you would get a different value if you didn't take the net cash inflows ie, sales revenue - operating costs but did it on sales revenue instead
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got 1 year 10 months I think. But... I made a boo boo again! I didn't see the thing about 1 1/2 years for payback so I recommended to go ahead with the project on the basis of the positive NPV and the payback was less than the project life. D'oh!! This is looking less and less good.... lol
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I think I am right in saying the Payback period is calculated using the net cash flow i.e. without taking into account the discounting factors, this is probably why there is a variation in answers as some people calculated the payback period using the discounted values, which would obviously increase the length of the payback period. I got 1.8 (1.78 ) years
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I also got 1 year and 10 months, but excepted the project, I must have missed the company policy part! :roll:
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    i got 1 year 10months aswel, and rejected :wink:
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got 1.2 years as well and recommended the project as it was well within the company's guidelines :?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    Think I got 1.9 years and said on basis of NPV I would recommend the project but as Company policy is only to accept the project if it repays within 1.5years, then it had to be rejected or perhaps somebody could review the policy as it doesn't take into account any future profits made. Then waffled about IRR. (tried to cover all bases)..LOL.

    Carole
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got the same, but recommended anyway on basis of NPV. Don't think it matters whether you recommended accept or not, as long as you showed you were aware that Payback exceeded existing company policy! Hope so, anyway!!
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got 1.7 years as well...so they pay back in 1 year 7 months..?

    Was it supposed to be an amount divided by another amount x 12 or not?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I thought 1.783 years
    as this exceeds half the project's expected economic life I said the policy suggests we reject it.

    Clearly this will cost us lost NPV and further thought might be needed as the shareholder value would increase by ร‚ยฃ260,000 if the project was to go ahead.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I got 1.8 yrs and said could be accepted as NPV was positive but due to company policy being 1.5yrs then shouldn't be accepted.
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    I also got 2 years and 2 months :D
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    OOps I got 1year 10 months and cant remember seeing company policy ? I think I accepted it?

    MOS/Breakeven that was a stinker and really held me up never seen it asked like that before. I went blank.

    Now worried that I have lost more points.

    :?
  • System
    System Posts: 100,534 ๐Ÿค– Admin ๐Ÿค–
    Re:ECR Exam Margin of Safety

    for question 2.5 I wrote to to proceed with the project because the NPV was postive & that using payback period was not acceptable under the company payback terms.
    I'm hoping this was correct.

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