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Bac 300: Management Accounting 1 Question Paper
Bac 300: Management Accounting 1
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2011
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 300: MANAGEMENT ACCOUNTING 1
DATE: Thursday 1st December, 2011 TIME: 8.00 a.m. – 10.00 a.m.
______________________________________________________________________________
INSTRUCTIONS
1.
Answer ALL the questions.
2.
Show all your workings.
3.
Marks for each question are shown at the end of every question.
Q1.
A company which makes shoes has experienced a steady growth in sales for the past five years.
However, increase competition has led the management to believe that an aggressive advertising
campaign will be necessary in order to maintain the company’s trend in growth.
To prepare for next year’s advertising campaign, the company’s accountant has prepared and
presented the following data for current year 2011 to the management:
Variable costs per unit (pair of shoes)
Sh.
Direct labour
120.00
Direct materials
48.75
Variable overheads
37.50
206.25
Fixed costs:
Manufacturing
375,000
Selling
600,000
Administrative
1,050,000
2,025,000
Selling price per unit is sh.375.
Expected sales, current (20,000 units) shs.7,500,000.
Tax rate: 40%
Page 1 of 3
Required:
a)
What is the projected profit for the current year before and after tax?
[4 marks]
b)
What is the break-even point?
[2 marks]
c)
The projected sales for next year is sh.8,250,000 management believe that additional selling
expense of sh.168,750 for advertising will be necessary with all other costs remaining constant.
What will be the after tax income for next year after the additional advertisement cost?
[8 marks]
d)
What will be the break-even point in shillings if the additional sh.168,750 is spent on
advertising?
[3 marks]
e)
If the sh.168,750 is spent, how much sales would it require to equal the profit of the current
year?
[4 marks]
f)
At a sales level f 22,000 units, what is the maximum amount to be spent on advertising when an
after tax income of sh.900,000 is desired?
[4 marks]
[Total 25 marks]
Q2.
The standard quantity and standard price of raw material required for one unit of product A are
given as follows:
Material
Quantity
Selling price
X
2 kg
Sh.3 per kg
Y
4 kg
Sh.2 per kg
The actual production and relevant data are as follows: Output for product A is 500 units
Material
Total Quantity for 500 units
Total cost (sh)
X
1,100 kg
3,410
Y
1,800 kg
3,960
Required:
Calculate;
a)
Material cost variance.
[7 marks]
b)
Material usage variance.
[4 marks]
c)
Material mixture variance.
[4 marks]
d)
Material price variance.
[5 marks]
Page 2 of 3
Q3.
a)
Discuss giving a suitable example the various categories of decision making under capital
budgeting.
[3 marks]
b)
Explain the three steps involved when making capital decisions.
[3 marks]
c)
A Jua Kali artisan proposes to invest sh.600,000 in a project with a lifespan of 4 years. It
is estimated that the project would yield cash inflows of sh.150,000, sh.200,000,
sh.300,000 and sh.200,000 from year 1 through year 4.
The machine is expected to be sold for sh.150,000 after the four years.
Required:
(a)
Determine the project’s NPV assuming a cost of capital at 15%.
[10 marks]
(b)
Explain the rationale of Net present value.
[3 marks]
(c)
Would you recommend the project? Explain.
[2 marks]
Q4.
(a)
Explain the functions through which management accounting achieves its objectives.
[6 marks]
(b)
Explain the role of management accounting in the success of a business. [4 marks]
………………………
Page 3 of 3
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