Get premium membership and access revision papers, questions with answers as well as video lessons.
Caa 303-A: Advanced Management Accounting (Day +Eve) Question Paper
Caa 303-A: Advanced Management Accounting (Day +Eve)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
1
UNIVERSITY EXAMINATIONS: 2010/2011
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 303-A: ADVANCED MANAGEMENT ACCOUNTING (DAY +eve)
DATE: DECEMBER2011 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
a) Outline and briefly explain the essential factors for continuous improvement under the
kaizen principle and discuss their relevance to the modern day organizations. (5 Marks)
b) Discuss the following techniques as used in the contemporary management accounting
theory and assess their practical usefulness in modern organizations:
i. Target costing (5 Marks)
ii. JIT inventory policy (5 Marks)
(Total 15 Marks)
QUESTION TWO
Having attended a course on activity based costing (ABC) you decide to experiment by applying
the principles of ABC to the four products currently made and sold by your company. Details of
the four products and relevant information are given below for one period.
Product A B C D
Output in units
Cost per unit
Direct material (Ksh)
Direct labour (Ksh)
120
40
28
100
50
21
80
30
14
120
60
21
2
Machine hours per unit (hours) 4 3 2 3
The four products are similar and are usually produced in production runs of 20 units and sold in
batches of 10 units. The production overhead is currently absorbed by using a machine hour rate
and the total of the production overhead for the period has been analyzed as follows:
Ksh
Machine department costs (rent, business rates, depreciation and supervision)
Set up costs
Stores receiving
Inspection/quality control
Materials handling and dispatch
10,430
5,250
3,600
2,100
4,620
26,000
You have ascertained that the cost drivers to be used are as listed below for the overhead costs
shown:
Costs Cost driver
Set up costs
Stores receiving
Inspection/Quality control
Materials handling and dispatch
Number of production runs
Requisitions raised
Number of production runs
Orders executed
The number of requisitions raised on the stores was 20 for each product and the number of orders
executed was 42, each order being for a batch of 10 of a product.
Required:
a) Calculate the total costs for each product if all overhead costs are absorbed on a machine
hour basis. (4 Marks)
b) Calculate the total costs for each product using activity based costing (4 Marks)
c) Calculate and list the unit product costs from your figures in (a) and (b) (8 Marks)
d) Comment briefly on any conclusions which may be drawn which could have pricing and
profit implications (4 Marks)
( Total 20 Marks)
3
QUESTION THREE
a) Explain the pertinent issues in balanced scorecard highlighting the practical benefits and
potential challenges that an organization is likely to encounter in using this appraisal tool.
(7 Marks)
b) The Nairobi Metropolitan College (NMC) and the Millennium College of Business (MCB) are
government funded institutions which are managed by the Ministry of Higher Education. The
following information is available for the year ended 31st May 2010.
NMC MCB MCB
(Actual) (Budget) (Actual)
Total registered students 25,000 26,500 30,000
Number of students waiting for 2 weeks for admission after
applying
4,500 4,100 3,000
Number of students waiting for 3 weeks for admission after
applying
2,100 2,500 1,200
Number of days after opening date before lectures start 3 1 1
% of lectures that materialize within the first week of a semester 60% 100% 90%
Duration for processing exams and release of results (in weeks) 4 4 5
% of lecturers with PhD 40% 100% 70%
Number of staff training programmes undertaken in the year 2 4 2
The degree of utilization of e-learning platform among lecturers 60% 100% 80%
Number of papers published by the teaching staff the year 15 40 22
Number of complaints received from students 203 0 56
Number of complaints responded to within 5 days 50 All 40
Customer satisfaction index 70% 99% 93%
Number of staff shortages 8 5 7
Staff productivity measure (% of students graduating per cohort) 84% 100% 92%
Revenue from fees (ksh. millions) 154.2 255.2 260.2
Lecturing staff costs (ksh. Millions) 42.3 82.2 99.6
Other staff costs (ksh. Millions) 25.5 45.5 54.0
Income and expenditure surplus margin (13%) 0.0 24%
Number of days cash in hand 37 30 35
4
Additional information:
1) Both institutions were in operation for 365 days during the year
2) The Ministry of Higher Education uses a “balanced scorecard” approach in order to assess the
performance of each institution. Their balanced score card has 4 dimensions which are as follows:
i. Financial perspective (2 Marks)
ii. Internal business processes (2 Marks)
iii. Customer perspective (2 Marks)
iv. Learning and growth (2 Marks)
Required:
Prepare a report to the Ministry of Higher Education which critically assesses, on the basis of the
above information, the performance of Millennium College of Business (MCB) which is currently
under review. You should use the four dimensions to perform your assessment as per note (2)
above. (8 Marks)
(Total 15 Marks)
QUESTION FOUR
a) State and explain any FIVE areas in corporate management where strategic management
accounting can provide useful information. (5 Marks)
b) Explain any FIVE symptoms of business failure (5 Marks)
c) Cundy Aquatic Pursuits (CAP) was founded in 1978 by its managing director, Jody Cundy.
CAP owns and operates a chain of Aqua Parks in the country of Lizland. Each Aqua Park
has a number of large indoor and outdoor swimming pools together with a range of
attractions such as water-slides, toboggan runs and surfi ng rides.
Jody Cundy fi rmly believes that growth in the number of Aqua Parks is the key to success
for CAP, and therefore CAP pursued organic growth which has been financed from
retained profi ts and public share issues. At present, Jody Cundy owns 55% of the ordinary
share capital of CAP.
Jody has stated on many occasions that ‘I always want to control this business’.
The following information is available:
Summary Income Statement for year ended 30 November 2010
Ksh. Millions
5
Revenue 280
Operating cost 240
Profit before tax 40
Corporation Tax (25%) (10)
Profit after taxation 30
Summary Statement of Financial Position at 30 November 2010
Ksh. Millions
Non-current assets 220
Net current assets 30
Total 250
Financed by:
9% Redeemable preference shares 100
Ordinary shares ksh 1 each 28
Retained profits 122
Total 250
Additional information:
1. The company had during the year to November 2010 paid an advertisement company an
amount ksh 80 million to carry out an aggressive marketing campaign aimed at boosting
the company’s market position. It’s felt that this expenditure will produce incremental
returns to the company over a period of 5 year.
2. The accountant had included the advertisement cost above in the operating expenses for the
year.
3. The non-current assets are believed to have a market value which is 20% above their
current book values above.
4. The company uses a risk adjusted weighted average cost of capital of 10% like all other
players in the same industry.
Required:
i. Calculate the company’s economic value added (EVA) for the year to November 2010.
(5 Marks)
ii. How would the EVA in (i) above differ from the residual income of the company?(5 Marks)
(Total 20 Marks)
More Question Papers
Popular Exams
Return to Question Papers