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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
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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