Management Accounting Ii Question Paper

Management Accounting Ii

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING PROGRAMME
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 403: MANAGEMENT ACCOUNTING II

DATE: Tuesday 11th August, 2009 TIME: 8.00 a.m. – 10.00 a.m.

INSTRUCTIONS
1. Answer ALL questions.
2. Show ALL your workings.

QUESTION ONE
A company produces a certain product in three separate factories X, Y and Z. It is
required to deliver this product to three distributors A, B and C.

The factories have the following weekly production capacities:
X
75
units
Y
25
units
Z
40 units

140 units

The distributors’ weekly requirements are
A
45
units
B
45
units
C
50 units

140 units
The cost (£s) of transporting one unit of the product from any factory X, Y or Z to any
distributor A, B or C are given in the following table:
Page 1 of 3

Distributors
Factory

A
B
C
X
3 4 6
Y
1 4 3
Z
4 3 4
How should the products be allocated to the distributors so that transportation costs are
minimized?

[20 marks]

Question Two
Kenya Seed Limited is considering a project which requires the following activities
Activity Must
be Duration in days
Total Cost
preceded by
Normal
Activity
(£)
Normal
Crash
time

A
-
7
5
750
B
-
6
3
600
C
-
2
2
250
D
A
5
4
600
E
B
5
4
700
F
E
6
2
800
G
E
7
6
600
H
C
6
5
720
I
H
8
5
980
J
D
4
4
350
K
J
6
5
360
L
F
3
2
700
M
G, I
8
4
920
N
K, L, M
4
2
770

Activities can be crashed upto the maximum shown above, although time can be saved on
any activity in multiples of one day. The cost of crashing an activity is £100 per day
saved.

Page 2 of 3
Required
a)
Calculate the normal duration of the project, its normal cost and the critical path.

[15 marks]
b)
State the number of different paths from start to finish.

[5 marks]

[Total 20 marks]
Question Three
a)
Highlight the assumptions of cost-volume-profit analysis.
[5 marks]
b)
State any four objectives of transfer
pricing
system.
[4
marks]
c)
Briefly explain any three limitations of the use of game theory in decision
making.

[6 marks]

[Total 15 marks]

Question Four
The K division of ABC Ltd, produces a component which it sells externally and can also
be transferred to other divisions within the organization. The division has set a
performance target for the coming financial year of residual income of shs.5,000,000.
The following budgeted information relating to K division has been prepared for the
coming financial year.
1.
Maximum production/sales capacity 800,000 units.
2.
Sales to external customers: 500,000 units at sh 37.
3.
Variable cost per component sh 25.
4.
Fixed costs directly attributable to the division sh 1,400,000.
5.
Capital employed: sh 20,000,000 with cost of capital of 13%.
The X division of ABC Ltd has asked K division to quote a transfer price for units of the
component.
Required
a)
Calculate the transfer price per component which K division should quote to x
division so that its residual income target is achieved. [11
marks]
b)
Explain why the transfer price calculated in (a) above may lead to sub-optimal
decision making from the point of view of ABC Ltd taken as a whole.

[4 marks]

[Total 15 marks]
……………………………………
Page 3 of 3

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