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Caa 201 Introduction To Management Accounting - Saturday Question Paper
Caa 201 Introduction To Management Accounting - Saturday
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2010/2011
SECOND YEAR EXAMINATION FOR THE BACHELOR OF COMMERCE
CAA 201 INTRODUCTION TO MANAGEMENT ACCOUNTING -
SATURDAY
DATE: DECEMBER 2011 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
Question 1
(a) The following data was obtained from ledger accounts of African Limited
Total variable cost = Sh.120,000
Fixed cost = Sh.30,000
Level of activity (units produced and sold) = 12,000 units
If linearity of the cost function is assumed and there is no change in activity, find the cost
function.
If 14,000 units are predicted next year, find the expected total cost. ( 6 marks)
(b) The number of units (x) and their associated direct labour cost (y) in K£ 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.
(c) State the advantages and disadvantages of the high-low method.
(14 marks)
(Total 20 marks)
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
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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)
(Total: 15 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
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)
( 20 marks)
3
Question four
The following information relates to Baldings Company for the year 2011.
Budget Actual Variance
Sales and production (units) 10,000 8,000 2,000 A
Sh. Sh. Sh.
Sales
Direct materials
Direct labour
Variable production overhead
Fixed production overhead
Profit
50,000
10,000
10,000
5,000
15,000
40,000
10,000
39,000
8,500
7,500
5,500
15,500
37,000
2,000
11,000
1,500
2,500
500
500
3,000
8,000
A
F
F
A
A
A
A
Selling price per unit
Materials price per tonne
Materials purchased & used
Direct labour rate
5
1
10,000 tonnes
0,5
4.875
8500/7750
7,750 tonnes
7,500/16,500
Direct labour hours worked
Direct labour hours paid
Variable overhead cost per direct
labour hour
Fixed overhead cost per direct
labour
20,000 hrs
20,000 hrs
0.25
0.75
15,500 hrs
16,500 hrs
5,500
15,500
1
Required:
(i) Compute the variances below
(a) Material cost variance
(b) Material price variance
(c) Material usage variance
(d) Labour cost variance
(e) Labour rate variance
(f) Labour efficiency variance
(g) Labour idle time variance
(h) Variable overhead cost variance
(i) Variable overhead expenditure variance
(j) Variable overhead efficiency variance
(20 marks)
Question Five
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:
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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)
(Total 15 marks)
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