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Management Accounting Question Paper

Management Accounting

Course:Master Of Business Administration

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
INSTITUTE OF OPEN LEARNING (IOL)
UNIVERSITY EXAMINATIONS 2007/2008
SPECIAL/SUPPLEMENTARY EXAMINATION FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION

BAC 501:
MANAGEMENT ACCOUNTING

DATE: Monday, 6th October, 2008

TIME: 2.00 p.m. – 5.00 p.m.
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INSTRUCTIONS:
1.
All the questions are compulsory.
2.
Give suitable illustrations for every question
3.
Present your answers logically and completely
4.
Marks will be awarded on the basis of clarity and illustrations
Question 1
You have been requested in your capacity as a consultant to present a case for the
establishment of management accounting division for a company. Discuss
a)
What should be considered as the positive sides of such a proposal.
b)
If at all there is any, what would you consider as the ills of setting up such a
division?
c)
In your view is managerial accounting useful for the success of a business?
Discuss.

Question 2
“Decision Making is a pervasive activity which is a preserve of management.”
a)
Explain what is meant by decision making.

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b)
State and explain three levels of decision making.
c)
Itemize and explain the seven steps involve with planning and controlling a
function of a management accountant.

Question 3
A company operates three plants. Each plant produces a single product. When it
operates at normal capacity it produces 20,000 units from plant III. The unit cost of
manufacturing at normal capacity is given to be:-

Sh.
Material 6.50
Labour
2.60
Variable
overhead
3.30
Fixed
overhead 4.00
Each unit of product is sold at Sh.20 with a variable selling and administrative cost sh.
0.60 per unit. In the subsequent period, the company estimates that only 2000 units may
be sold. Management therefore, contemplates shutting down the plant. They estimate
that the fixed cost will be reduced to sh.45,000 during the year. When the plant is
operating the fixed costs are incurred at a uniform rate throughout the year. Additional
costs of plant shut are estimated to be sh.15,000.
Required:
a)
Explain with supporting figures whether or not the plant should be shut-down.
b)
What is the shut-down point both in units and sales reverse
c)
What are shut-down costs
d)
Itemize and explain the options available other than shut-down in such a case.

Question 4
The information given here were taken from the costing records of an engineering works
in respect of Job No.303.

2

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Sh.

Materials
4,010

Wages : Dept. A – 60 hrs @ sh. – 3 per hour

B – 40 hrs @ sh. - 2 per hour
C – 20 hrs @ sh. – 5 per hour
Overhead expenses for these three departments were estimated as follows:
Variable
overheads:

Dept A – sh. 5000 for 5000 labour hours

B – sh. 3000 for 1500 labour hours
C – sh. 2000 for 500 labour hours

Fixed overheads were fixed at sh.20,000 for 10.,000 normal working hours.
Required:
Construct a cost sheet for job No. 303 and calculate the price to give a profit of 25% on
selling price.

GOOD LUCK

3

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Management Accounting Question Paper

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