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Bust 421: Management Accounting Ii Question Paper
Bust 421: Management Accounting Ii
Course:Bachelor Of Education Arts
Institution: Chuka University question papers
Exam Year:2013
CHUKA
UNIVERSITY
UNIVERSITY EXAMINATIONS
FOURTH YEAR EXAMINATIONS FOR THE AWARD OF DEGREE OF
BACHELOR OF EDUCATION (ARTS)
BUST 421: MANAGEMENT ACCOUNTING II
STREAMS: Y4 TIME: 2 HOURS
DAY/DATE: THURSDAY 25/4/2013 2.30 PM – 4.30 PM
INSTRUCTIONS:
ANSWER QUESTION ONE AND ANY OTHER TWO QUESTIONS
1. (a) Wildlife escape generates average revenue of 4000/= per person on its five day
package tours to wildlife parks in Kenya. The variable costs per person are:-
Air fare 1500
Hotel accommodation 1000
Meals 300
Ground transport 600
Pare tickets and other costs 200
3600
====
Annual fixed costs total 480,000/=
Required:
(i) Calculate the number of package tours that must be sold to be bread even.
[2 Marks]
(ii) Calculate revenue needed to earn a target operating income of 100,000/=
[2 Marks]
(iii) If fixed costs increase by 24000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in (i) above.
[4 Marks]
(b) Explain the following terms as used in management accounting
(i) Differential costs [2 Marks]
(ii) Behavioral considerations [3 Marks]
(iii) Joint product and by product [2 Marks]
(iv) Explain two functions of a management accounting system. [4 Marks]
(v) Financial performance measures of performance evaluation.
[3 Marks]
(c) Kamau operates a continuous process producing three products and one by-product. Output from the process for a month was as follows:-
Product Selling price per unit Units of output from process
1 18 10000
2 25 20000
3 20 20000
4(by product) 2 3500
Allocate the joint costs of Ksh 500,000 to main products using rates revenue basis. [2 Marks]
(d) The standard cost card of a company for the period
0.90 litres of liquidised vegetables @ 0.80/litres 0.72
0.05 litres of melted butter @ 4/litre 0.20
1.10 litres of stock @ 0.50/litre 0.55
Total cost to produce 1 litre of 50 soup. 1.47
The board has asked that variances be calculated for month 4
In month 4 the production department data is as follows.
Liquidised vegetables - Bought 82000 litres, costing 69700/=
Melted butter - Bought 4900 litres costing 21070/=
Stock - Bought 122000 litres costing 58560/=
Actual production was 112000 litres of soup
Compute:
(i) Material mix variance
(ii) Material yield variance. [6 Marks]
2. The following data are supplied relating to two investment projects, only one of which may be selected.
Project A
Ksh Project B
Ksh
Initial capital expenditure
50,000
50,000
Profit (loss) year 1 25,000 10,000
2 20,000 10,000
3 15,000 14,000
4 10,000 26,000
Estimated resale value at the end of year 4 10,000 10,000
Notes
1. Profit is calculated after deducting straight line depreciation
2. The cost of capital is 10%.
Required:
(i) Calculate for each profit:
- Average annual rate of return on average capital investment.
- Pay back period
- Net present value [12 Marks]
(ii) Briefly discuss the relative merits NPV and pay back. [5 Marks]
(iii) Explain which project you would recommend. [3 Marks]
3. (a) Using weighted average method apportion the costs on the following data
relating to a certain company
Units Materials Labour overheads
Opening W.I.P 1000 540 (USD) 355 (USD)
Degree of completion of opening W.I.P 100% 50%
Completed production 3800
Costs incurred in current process 2255(USD) 1748(USD)
Closing W.I.P 1300
Degree of completion of closing W.I.P 100% 75%
There were no process losses. [12 Marks]
C
(b) A department with no opening work in introduced 1000 units into the process. 700 are completed and 150 are 20% complete, and 150 are lost as normal loss. Losses are detected upon completion. Material costs are 10000/= (all introduced at the start of the process) and conversion costs are 6000/=.
Required:
Compute the unit cost calculations and show the process account. [8 Marks]
4. The following data relates to the year ending 30th June 2000.
Month Machine hours Fuel oil expense (‘000’)
July 340 640
August 300 620
September 340 620
October 390 590
November 420 500
December 320 530
January 260 500
February 260 500
March 310 530
April 350 550
May 430 580
June 480 680
4200
==== 6840
====
Assuming an estimate of an equation of the form y = a+bx where Y is the total expense at an activity level x,a is the fixed expense and b is the rate of variable cost.
Required:
(i) Estimate fixed and variable elements of fuel oil expense from the above data by both
- High – low method [4 Marks]
- Least – squares regression analysis [8 Marks]
(ii) Determine the coefficient of determination and interpret the significance. [8 Marks]
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