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Caa 201 Introduction To Management Accounting Question Paper
Caa 201 Introduction To Management Accounting
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2011/2012
YEAR II EXAMINATION FOR THE BACHELOR OF COMMERCE
CAA 201 INTRODUCTION TO MANAGEMENT ACCOUNTING
(Saturday)
DATE: APRIL 2012 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
a) Describe four cost estimation methods: (10 Marks)
b) The number of units (x) and their associated direct labour cost (y) in Kshs. are given below:
Number of units (x) 15 12 20 17 12 25 22 9 18 30
Direct labour cost
(y)
180 140 230 190 160 300 270 110 240 320
Required:
a) Use the high-low method to determine the direct labour cost estimation function.
b) Use the function to estimate the direct labour cost when number of units x = 40.
(10 Marks)
2
QUESTION TWO
Fatuma Ltd. plans to manufacture a new product called Beauty 92 which requires a substantial amount
of direct labour on each unit. Based on the company’s experience with other products which require
similar amounts of direct labour, the management of Fatuma Ltd. believes that there is a learning factor
in the production process used to manufacture Beauty 92. Each unit of Beauty 92 requires 50 square
metres of raw material at a cost of Sh.30 per square metre. The standard direct labour rate is Sh.25 per
direct labour hour. Variable manufacturing overhead is assigned to products at a rate of Sh.40 per
direct labour hour. The company adds a markup of 30% on variable manufacturing costs in
determining an initial price offer for all its products.
Data on the production of the first two lots (16 units) of Beauty 92 is as follows:
(i) The first lot of 8 units required a total of 3200 direct labour hours.
(ii) The second lot of 8 units required a total of 2240 direct labour hours.
Based on prior production experience, Fatuma Ltd. anticipates that there will be no significant
improvement in production time after the first 32 units. Therefore a standard for direct labour hours
will be established based on the average hours per unit for units 17 to 32.
Required:
a) Based on the data presented above for the first 16 units, calculate the learning rate applicable to
the direct labour required to produce Beauty 92. (5 Marks)
b) Calculate the standard for direct labour hours which Fatuma Ltd. should establish for each unit
of Beauty 92. (5 Marks)
c) After 32 units have been manufactured, Fatuma Ltd. receives an order of 96 units. What price
per unit should Fatuma Ltd charge on this order. (5 Marks
QUESTION THREE
A firm manufactures 3½ inch diskettes. The firm faces the following price and cost structures on these
diskettes.
Average price per diskette = Sh.40
Variable manufacturing cost per unit = Sh.12.50
Variable selling and shipping costs = Sh.2.50
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Fixed annual manufacturing costs = Sh.80 million
Annual fixed selling and administration costs = Sh.100 million
Required:
a) Determine the anticipated profit if sales are 15 million diskettes. (4 Marks)
b) Determine the B.E.P in physical units and in monetary units. (6 Marks)
c) A special one time order has been received to manufacture one million diskettes. Capacity is
available and the order would not affect the firm’s other sales.Special ordering and shipping
costs of Sh.7.5 million will be incurred. The variable manufacturing costs will remain at
Sh.12.50 per unit and no variable selling and shipping costs will be required.Determine the
minimum price per diskette that the firm can accept on this special order so as to at least break
even. (10 Marks)
QUESTION FOUR
The scent makers company produces perfumes. To make this perfume three different types of fluids
are used Dycone, Cycone and Bycone are applied in proportions of 4/10, 3/10 and 3/10 respectively at
standard and their standard costs are $6, $3.5 and $2.5 per pint respectively.
The chief engineer reported that in the past few months the standard yield has been at 80% on 100,000
pints of mix. The company maintains a policy of not carrying any direct materials as storage space is
costly. Production has been set at 4,160,000 pints of perfume for the year. Last week the company
produced 75,000 pints of perfume at a total direct materials cost of $449,500. Actual number of pints
used and costs per pint for the three fluids follow:
Direct material Actual Quantity (Pints) Actual Price (cost per pint)
Dycone
Cycone
Bycone
45,000
35,000
20,000
100,000
$5.50
$4.20
$2.75
Required
Compute the price, yield and mix variances for each of the three direct materials. (15 Marks)
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