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Agbm 330:Managerial Accounting1 Question Paper
Agbm 330:Managerial Accounting1
Course:Agribusiness Management
Institution: Chuka University question papers
Exam Year:2011
INSTRUCTIONS:
(i) Answer Question ONE Compulsory and any other two questions. (ii) Do not write on the question paper. (iii) Show all your workings where necessary.
1. (a) Give three distinctions between cost accounting and management accounting. [3 marks]
(b) Ken-Tankers Ltd is a manufacturing company of plastic tanks. The top management intends to plan production of tanks for next financial year 2011/2012. The following data was provided for manufacture of 1000 tanks.
Opening Stocks 2010/2011 Sh. Raw material 80,000 Work-in-Progress 24,000 Finished goods 40,000 Closing stocks 2010/2011 Raw materials 70,000 Work-in-Progress 34,000 Finished goods 46,000 Annual purchases raw materials 500,000 Other costs Factory wages 160,000 Salaries of supervisors 60,000 Factory rent 20,000 Power 10,000
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Factory expenses 30,000 Office salaries 26,000 Office expenses 14,000 Salesmen’s salaries 36,000 Sales expenditures 12,000 Sales 1,000,000
Required to prepare the following statement for managerial use clearly show each classifications of cost for year 2010/11.
(i) Production cost statement. [9 marks] (ii) Trading and profit & loss statement. [5 marks]
(c) A particular brand of Phenyle passed through three important processes. During the week ended 15th June 2011, 600 gross of bottles were produced. The cost book shows the following information:
Process 1 Process 2 Process 2
(Sh) (Sh) (Sh)
Materials 4000 2000 1500
Labour 3000 2500 2300
Direct expenses 600 200 500
Cost of bottles Nil 2030 Nil
Cost of corks Nil Nil Nil
- The indirect expenses for the period were Sh.1,600. - The bye-products were sold for Sh.240 in Process 2. - The residue sold for Sh.125.50 in Process 3. - Indirect expenses were charged to three processes in labour basis.
Required:
(i) Process account in respect of each process showing its cost and cost of production of the finished product per gross of bottle. [10 marks]
(ii) The management has decided to sale the product at a profit of 10% on selling price. Advice the management on the price to sale each unit bearing in mind Sh.1.35 as selling expenses per unit (show your workings). [3 marks]
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2. The following data was provided by management of Mambo Enterprises Ltd, a manufacturing company based in Meru town.
- Sales (16,000 units) Sh.320,000 - Variable costs (Sh.5 per unit) Sh.240,000 - Fixed costs Sh.60,000
(a) Required marginal cost statement of the company. [3 marks] (b) Profit volume relation ratio (PVR). [2 marks] (c) BEP in value. [2 marks] (d) Due to market behaviour and change of costs the management has detected the following:
(i) Sales will reduce to 40% but profit volume ratio shall be stable. Compute the sales for that level. [3 marks]
(ii) Desired to adjust sales to sh.256,000. Compute for management the desired contribution and profits at this sales volume. [6 marks]
(iii) Management has decided to earn a profit Sh.40,000. Compute the desired sales (Hint PVR is stable). [4 marks]
3. (a) Outline any six advantages of standard costing. [6 marks]
(b) Maua Chemicals ltd produces an agricultural chemical in its industry,. The product is produced through the mix of two types of materials A and B. The following are the details of the mix and the standards.
Particulars Standards Actuals Qty (Kg) Price/Kg Qty(Kg) Price/Kg Material A 500 Sh. 30 450 Sh.35 Material B 1,000 Sh. 40 1,050 Sh.37.5 Total 1,500 ==== 1,500 ====
Required:
(i) Material Cost Variance (MCV) [4 marks] (ii) Material Price Variance (MPV) [3 marks] (iii) Material Mix Variance (MMV) [4 marks] (c) The management board desire to discuss causes of adverse variances (if any) on (b) above. List the possible causes of each case. [3 marks]
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4. The following data is available from a manufacturing company for the year ended 30th June 2011.
Sh (00,000) Fixed expenses Wages and salaries 9.5 Rent and rates 6.6 Depreciation 7.4 Administrative expenses 6.5 Semi-Variable cost (at 50% capacity) Maintenance and repairs 3.5 Indirect labour 7.9 Sales dept salaries 3.8 Sundry administrative expenses 2.8 Variable expenses (50% capacity) Materials 21.7 Labour 20.4 Other expenses 7.9 Grand total 98.0 ===
Assume that the fixed expenses remain constant for all levels of production, semivariable expenses remain constant between 45% and 65% of capacity, increase by 10% between 65% and 80% capacity and by 20% between 80% and 100% capacity. Sales totals are 13,560,000, 15, 260, 000 and 15,760,000 for 75%, 90% and 100% capacity respectively.
The management are deciding on sales levels as follows:
Sales capacity level Sales Sh(000,00) 50% capacity level 100 60% capacity level 120 75% capacity level 150 90% capacity level 180 100% capacity level 200
Required:
(a) Prepare flexible budget for the levels of production 75%, 90% and 10% capacity. [16 marks]
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(b) Management desires your advice on the best level of production in relation to profitability. Advice and show your workings evidence. [4 marks]
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