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Introduction To Management Accounting Question Paper

Introduction To Management Accounting

Course:

Exam Year:2011

Question One
"If we expect to stay competitive, we need better information for planning purposes and for control of our costs," said Sal Varney, president for Argyle Company. "The industry literature I've been reading lately says that the way to get better information is to use a contribution - type income statement that separates fixed and variable costs," Accordingly, Mr. Varney has directed the accounting department of prepare the following analysis.
Cost Cost Formula
Cost of goods sold ksh 28 per unit
Sales commissions 12% of sales
Advertising expenses ksh 150,000 per month
Administrative salaries ksh 80,000 per month
Billing expenses ?
Depreciation expenses ksh 31,000 per month

The accounting department feels that billing expenses is a mixed cost, containing both fixed and variable cost elements. Tabulation has been made of billing expense and sales over the last several months, as follow:
Month units sold (000) Billing expenses
January 8 Ksh 15,200
February 10 17,000
March 13 19,400
April 16 21,800
May 14 20,000
June 11 18,200
Mr. Varney would like a cost formula developed for billing expense so that a contribution - type income statement can be prepared for management use.
Required
a) Using the least - squares method, derive a cost formula for billing expense.
b) Assume that the company plans to sell 15,000 units during July at a selling price of Ksh 60 per unit. Prepare a budgeted income statement for the month, using the contribution format.

Question 2
Discuss the following terms as used in management accounting
i) Job order costing
ii) Process costing
iii) Opportunity cost
iv) Product costs
v) Standard costs

Introduction To Management Accounting Question Paper

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