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Kbt311 Agribussiness Management Accounting Question Paper
Kbt311 Agribussiness Management Accounting
Course:Bachelor Of Science
Institution: Kenyatta University question papers
Exam Year:2011
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
SCIENCE (AGRIBUSINESS MANAGEMENT & TRADE)
KBT 311: AGRIBUSINESS MANAGEMENT ACCOUNTING
DATE: Friday 30th March, 2012
TIME: 8.00 a.m. – 10.00 a.m
INSTRUCTIONS
Answer Question ONE and any other TWO Questions
Q.1) (a)
Examine the difference between gross margin and contribution margin. (5 marks)
(b)
Assume KU Ltd purchases raw material from an outside supplier at cost of
Kshs.100 per Unit. The total annual demand for the product is 12,000 Units. The
holding cost is Kshs.54 per Unit and the ordering cost is Kshs.60 per order.
Calculate the Economic Order Quantity (EOQ) and the associated cost. (5 marks)
(c)
Critically evaluate the main advantages of the Just-In-Time (JIT) inventory
system.
(5 marks)
(d)
Assume that Brookside Ltd. is trying to set the selling price for one of its Milk
products and three prices are under consideration, Kshs.40, Kshs.45 and Kshs.50.
the following information is also provided
Alternatives
Kshs.40 Kshs.45
Kshs.50
Best possible
16,000
14,000
12,500
Most likely
14,000
12,500
12,000
Worst possible
10,000
8,000
6,000
Fixed cost = Ksh.200,000, Variable cost per Unit = Ksh.20. By use of Laplace
Criterion of Rationality decision making criteria, advice the company on the best
price to set.
(5 marks)
(e) Discuss how the CVP analysis and breakeven analysis interrelated. (5 marks)
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(f) A division in a company has a product costing Kshs.12 which is transferred
within a group of sections. Calculate a transfer price for the division for each of
the following mutually exclusive divisional targets:
(i)
A net profit margin of 15%.
(1 mark)
(ii)
A net assets turnover rate of 14 and a region’s return on capital employed
(ROCE) of 20%.
(2 marks)
(iii)
An output of 150,000 Units, a capital employed of Kshs.1.5 million and
an ROCE of 20%.
(2 marks)
(g) Discuss briefly the main environment within which business decisions
are made.
(5 marks)
(h) Assume that Oserian Ltd. produces two products, fresh mangoes and dried
mangoes and the following budge has been prepared.
Products
Fresh mangoes Dried mangoes
Sales in units
120,000
40,000
Sales per Unit (Ksh/Unit)
5
10
Variable cost per unit (Ksh/Unit
4
4
Total fixed costs for both products (Kshs.)
200,000
The company proposes to change the sales mix in units to 1:1 for dried mangoes
and fresh mangoes. Advice the company on whether this change is
desirable.
(5 marks)
Q.2) (a)
A company has budgeted sales of 200,000, a profit of 60,000 and fixed
expenses of 40,000. Calculate contribution margin ratio.
(5 marks)
(b)
Discuss in detail the main steps of developing a cost estimating
relationship.
(10 marks)
Q.3) (a)
Describe briefly the key assumptions of cost-volume profit analysis.(5 marks)
(b)
The KU Company produces two products: mango juice and passion juice. The
raw material requirements, space needed for storage, production rates and selling
prices for these products are given below:
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PRODUCT
Mango Juice
Passion Juice
Storage space (m2/unit)
4
5
Raw material (kg/unit)
5
3
Production rat (units/hr)
60
30
Selling price (Ks/unit)
13
11
The total amount of raw material available [per day for both products is 1,575kg.
The total storage space for all products is 1,500m2, and a maximum of 7 hours
per day can be used for production. As an accountant, help the company to
determine how many units of each product to produce per day to maximize its
total profit.
(10 marks)
Q.4) (a)
Assess the key differences between financial and managerial
accounting.
(5 marks)
(b)
Kenyatta University farm sells two milk products cheese and yoghurt and with
contribution margin ratios of 40 and 30% and selling prices of shs.50 and shs.35 a
unit. Fixed costs amount to shs.100,000 a month. Monthly sales average 50,000
units of cheese and 60,000 units of yoghurt.
(i)
Assuming that three units of cheese are sold for every four units of
yoghurt, calculate the sales volume necessary to breakeven, in shillings
and in units.
(4 marks)
(ii)
Calculate the margin of safety in sales shillings.
(2 marks)
(iii)
If the company spends an additional shs.10,600 on advertising, sales of
cheese can increase to 60,000 units a month while sales of yoghurt fall to
45,000 units per month.
(4 marks)
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