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Introduction To Management Accounting Question Paper
Introduction To Management Accounting
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
SECOND YEAR STAGE 3 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 201-A: INTRODUCTION TO MANAGEMENT ACCOUNTING
DATE: APRIL 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
Given below is the balance sheet of Yoga Ltd as at 31st December 2009
Non current assets:
Land 425,000
Buildings and equipment 3,230,000
Less depreciation 637,500 2,592,500
3,017,500
Current assets:
Stock: Finished goods 247,690
Raw materials 473,000
Debtors 722,500
Cash 85,000
1,528,190
Less current liabilities:
Creditors 622,000
906,190
3,923,690
Ordinary share capital 3,000,000
Reserves 923,690
3,923,690
The following are estimates for the year ending 31st December 2010:
2
(i) Sales: 8,500 units of product Alpha @Sh.1,000 and 1,600 units of product
Sigma @ Sh. 1,400
(ii) Cash receipts from debtors Sh. 10,762,500
(iii) Materials to be purchased on credit:
Direct materials Sh 4,463,520
Indirect materials Sh 354,150
(iv) Cash payments to creditors Sh. 4,669,960
(v) Direct labour: 12,600 hours@ Sh 300
(vi) Factory production overheads Sh. 2,013,750 including depreciation on buildings and equipment of
Sh. 450,000
(vii) Balance as at 31st December 2010
Sh
Finished goods 1,664,960
Raw materials 251,600
Cash 497,940
(viii) Selling expenses Sh. 590,000
(ix) Administration expenses Sh. 100,000
Prepare a master budget for the year ending 31st December 2010. (20 Marks)
QUESTION TWO
a) Distinguish between operational and planning variance and explain why they are calculated.
(4 Marks)
b) The firm for which you are management accountant produces a wide range of products, one of
which contains a material for which there is substitute and which is budgeted to cost sh. 100 per kg.
5 kg of the material is required to make the product. Subsequent to the completion of the budget,
the price of the raw material increases to sh. 110 but if the substitute had been used this would have
cost sh.105 per kg.
During the period 19,800 units were produced with a material cost of sh. 12,000,000.
Required
Calculate
i) Operational variance (3 Marks)
ii) Planning variance (3 Marks)
3
iii) Avoidable variance (3 Marks)
iv) Unavoidable variance (3 Marks)
v) Prepare a summarized statement from the actual cost of 19,800 units (4 Marks)
QUESTION THREE
a) i. Explain the role played by the Management Accountant in the management process.(4 Marks)
ii. The annual demand for an item of raw material is 4,000 units, and the purchase price is expected
to be kshs. 90.00 per unit. The incremental cost of processing an order is kshs. 135.00 and the cost of
storage is estimated to be kshs. 12.00 per unit.
Calculate
- the optimal order quantity and
- the total relevant cost of this order quantity. (4 Marks)
b) The following information relates to an oil factory for twelve months, ending 30th June 2008
Month Machine Fuel oil
Hours expense
(shs)
July 34 640
August 30 620
September 34 620
October 39 590
November 42 500
December 32 530
January 26 500
February 26 500
March 31 530
April 35 550
May 43 580
June 48 680
The annual total and monthly average figures for the year ending 30th June 2008 were as
follows:
Machine Fuel oil
Hours expenses
(shs)
Annual total 420 6840
Monthly average 35 570
4
You are required to:
Estimate fixed and variable elements of fuel oil expense and from the above data by the following
methods:
i) High and low points
ii) Least-squares regression analysis (7 Marks)
QUESTION FOUR
A wholesaler stocks an item for which demand is uncertain, he wishes to assess two reordering policies
i.e order 10 units or order 15 units at a reorder level of ten units and 15 units to see which is most
economical over a ten day period.
The following information is available
Demand per day in (Units) Probability
4 0.10
5 0.15
6 0.25
7 0.30
8 0.20
Carrying costs sh 15 per unit per day. Ordering costs sh 50 per order. Loss of good will for each
unit out of stock sh 30. Lead time 3 days. Opening stock is 17 units. The probability distribution
is to be based on the following random numbers
41 92 05 44 66 07 00 00 14 62
20 07 95 05 79 95 64 26 06 48
a) Which order policy is more economical over the ten days using simulation principles?
(12 Marks)
b) Explain THREE reasons why a firm would hold stock? (3 Marks)
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