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Bcom 210: Management Accounting I Question Paper
Bcom 210: Management Accounting I
Course:Bachelor Of Commerce
Institution: Chuka University question papers
Exam Year:2012
CHUKA UNIVERSITY
COLLEGE
UNIVERSITY EXAMINATIONS
SECOND YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF COMMERCE
BCOM 210: MANAGEMENT ACCOUNTING I
STREAMS: BCOM Y2S1 (EMBU/CHUKA CAMPUS) TIME: 2 HOURS
DAY/DATE: TUESDAY 11/12/2012 2.30 P.M – 4.30 P.M.
INSTRUCTIONS:
(a) Answer question ONE and any other TWO questions.
(b) Show all your workings.
(c) Do not write on the question paper.
QUESTION ONE
(a) Discuss briefly the role of the Management Accounting in the management process.
[3 marks]
(b) State and discuss FIVE characteristics of a good cost accounting system. [10 marks]
(c) The following cost data has been observed at a certain college for the last five years.
Number of
Total costs incurred in
Year students (shs)
2007 180 3,200,000
2008 200 3,600,000
2009 400 7,000,000
2010 300 3,530,000
2011 320 3,820,000
Calculate the cost-estimation equation that can be used to predict the costs of this college
using:
(i) The high-low method.
(ii) Regression analysis
(iii) Using the two equations, estimate the costs for 2012, when the school expects to
enroll 732 students. [17 marks]
QUESTION TWO
(a) Briefly discuss the bases of classification of costs. [10 marks]
(b) The following balances remained in the books of Nyahururu Ltd a manufacturing company after balancing off ledgers on 30th November 2010. You are required to prepare, a cost statement and a profit and loss account for the year ended 30th November 2010.
Shs
Stock on 1st December 2009:
Raw materials 500,000
Work in progress 200,000
Finished goods 1,500,000
Purchases of raw materials 4,000,000
Return of raw materials to suppliers 50,000
Repairs to factory building 250,000
Salaries and wages:
Factory workers 900,000
Sales men 180,000
Administrative staff 420,000
Insurance 500,000
Royalties paid 200,000
Depreciation of plant 120,000
Depreciation of buildings 400,000
Advertising expenses 40,000
Discount allowed 5,000
Cleaning expenses of buildings 15,000
Bank charges 14,000
Depreciation of delivery vans 26,000
Stocks on 30th November 2010:
Raw materials 480,000
Work in progress 300,000
Finished goods 1,200,000
Rent 2,000,000
Direct expenses 230,000
Sales 12,000,000
Sales returns 500,000
Additional information
(i) The factory building had been badly damaged as a result of faulty electrical wiring. A provision of Sh.100,000 is required to cater for the repairs.
(ii) The building used by the company occupies an area of 10,000m2. Of this area, the factory occupies 5,000m2, the warehouse 2,000m2, and the administrative offices occupy the remaining area.
(iii) Insurance prepaid on 30th November 2010 amounted to Shs.50,000. The insurance expense is to be apportioned in the ratio 2:2:1 to the factory, warehouse and administrative expenses respectively.
(iv) A provision of Shs.50,000 needs to be made for a bonus payable to the factory supervisor who helped to reduce the idle time during the year. [10 marks]
QUESTION THREE
(a) Discuss briefly how information concerning the cost of individual jobs can be used.
[6 marks]
(b) The following data are extracts from the books of Kenya Machines Engineering. It has received an order (Job No. 989) to install one Chilling Machine for Brookside Dairy Ltd.
Estimated cost for the job is:
Shs
Direct materials purchased 295,900
Stores issued to job 989 139,920
Materials returned to supplier 13,200
Materials returned to store 26,620
Direct labour:
Machining 299,200
Turning 52,360
Assembly, packing etc 110,440
Installation cost:
Labour & other expenses 47,520
Absorb factory overhead to jobs at 66?% of total factory wages and selling and administrative overheads at 25% factory production costs (including installation charges).
Delivery Overheads: Shs.
Carriage & Insurance (actual) 40,700
Sales price (customer quotation) 1,705,000
Required: Prepare a Job-order account and show total costs and net profit on selling
price. [14 marks]
QUESTION FOUR
(a) Briefly discuss three advantages and three disadvantages of marginal costing approach.
[6 marks]
(b) XYZ a mining company currently produces four products A,B,C and D. Details of the products and other relevant information for the period ended December 31 2010 are given below:
Product A B C D
Output in units 120 100 80 120
Cost per unit Sh Sh Sh sh
Direct materials 40 50 30 60
Direct labour 28 21 14 21
Machine hours per
unit) 4 3 2 3
The products are similar and are produced in production runs of 20 units and sold in batches of 10 units. The production overheads are absorbed on a machine hour rate and total overheads for a period are analysed as below:
Shs
Machine department costs (rent, rates, depreciation & supervision) 10,430
Set up costs 5,250
Store receiving 3,600
Quality assurance 2,100
Materials handling and dispatch 4,620
The following cost drives may be used for the overheads shown below:
Cost Cost drivers
Set up costs Number of production runs
Number of requisition
Store receiving raised
Quality assurance Number of production runs
Material handling and
dispatch Number of orders executed
The number of requisitions raised in the stores was 20 for each product and number of orders executed was 42, each order being a batch of 10 for each product. You are required to:
(i) Compute the total cost for each product if all overheads are absorbed on machine hour basis.
(ii) Compute the total costs for each product using activity based costing. [14 marks]
QUESTION FIVE
(a) Explain the meaning of the term ‘standard cost’ and elucidate on the difficulties encountered when setting standard costs. [4 marks]
(b) State and briefly discuss the budget making stages. [5 marks]
(c) The Mitheru Tea Factory had a long history of using bonuses that were specifically tied to performance. Minimal inventories of any kind were kept. The purchasing manager was given a bonus of 5% of the favourable purchase price variance for the year. The production manager was given a bonus of 5% of the favourable direct material efficiency for the year plus additional bonuses regarding labour overhead variances. In 2007, the performance regarding material AXZ, an important chemical ingredients was:
Standard kilograms allowed per finished unit – 1kg at Shs. 10.00
Actual kilograms used were 5,000,000
Actual production was 5,200,000 finished units
Actual unit purchase is Shs.9.
Required:
(i) Compute the material price and efficiency variance.
(ii) As the purchasing manager, would you be pleased by the favourable efficiency variance? Why or why not? Would your attitude change if the actual unit price were Shs. 11? [11 marks]
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