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Introduction To Management Accounting Question Paper
Introduction To Management Accounting
Course:Bachelor Of Commerce
Institution: University Of Nairobi question papers
Exam Year:2010
UNIVERSITY OF NAIROBI
MODULE II DEGREE PROGRAMME 2010/2011 (NAIROBI DAY)
SECOND YEAR EXAMINATIONS FOR THE DEGREE OF BACHELOR OF COMMERCE DAC 203: INTRODUCTION TO MANAGEMENT ACCOUNTING
INSTRUCTIONS
1. Answer ALL questions.
2. Be neat and clear in your workings.
OUESTION ONE
(a) Prepare a report for the managing director of your company explaining how costs may be classified by their behaviour, with particular reference to the effects both on total and on unit costs. Your report should:
i) Say why it is necessary t classify costs by their behaviour
(ii) Be illustrated by sketch graphs within the body of the report. (15 Marks)
(b) A drug company has initiated a research project which is intended to develop a new product: Expenditures to date on this particular research total Sh 500,000 but it is now estimated that a further Sh.200, 000 will need to be spent before the product can be marketed, Over the estimated life of the product the project potential has a net present value of sh 350,000.
Required:-
Advice management whether it should continue or abandon the project. Support your conclusion with a numerate statement and state what kind of cost is the Sh.500, 000 (10 Marks)
QUESTION TWO
Daewoo Co. Ltd has two departments, milling and assembly. The company uses a job-order cost system and computes a predetermined overhead rate in each department. The milling department bases its rate on machine hour, and the assembly department bases its rate on direct labour cost. At the beginning of the year 2010, the company made the following estimates:
Department
Milling Assembly
Direct labour hours 8,000 75,000
Machine hours 60,000 3,000
Manufacturing O/H cost Sh 510,000 Sh.800,000
Direct labour cost 72,000 640,000
Required:-
(a)Compute the predetermined overhead rate to be used in each department during 2010.(8 Marks)
(b) Assume that the overhead rates you computed in (a) above are in effect.
The job cost sheet for job 407., which was started and completed during the year, showed the following:
Department
Milling Assembly
Direct labour hours 5 20
Machine hours 90 4
Materials requisitioned, sh 800 sh 370
Direct labour cost 45 160
Compute the total overhead cost of job 407. (12 Marks)
( c) Would you expect substantially different amounts of overhead cost, to be charged to some jobs if the company used a plantwide overhead rate based on direct-labour-cost instead of using department rates? Explain. No computations are necessary. (5 Marks)
QUESTION THREE
ABC Co. Ltd has just organized a new division to manufacture and sell specially designed tables for mounting and using personal computers. The company's new plant is highly automated and thus requires high monthly fixed costs, as shown in the schedule below:
Manufacturing costs:
Variable costs per unit:
Direct materials sh50
Direct labour 36
Variable overhead 4
Fixed overhead costs (total) 240,000
Selling and administration costs:
Variable 15% of sales
Fixed (total) Sh.160,000
During June 2009, the first month of operations, the following activity was recorded:
Units produced 4,000
Units sold 3,200
Selling price per unit sh250
(a) Compute the cost of a single unit of product under:
(i) Absorption costing
(ii) Direct costing
(b) Prepare an income statement for the month, using absorption costing. (9 Marks)
( c) Prepare an income statement for the month, using direct costing. (9 Marks)
(d) Reconcile the absorption costing and direct costing net income figures in (b) and (c) above for the month. (3 Marks)
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