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Bac 300:Management Accounting I Question Paper

Bac 300:Management Accounting I

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2012

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2012/2013
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

BAC 300:MANAGEMENT ACCOUNTING I
DATE:FRIDAY,30TH NOVEMBER,2012 TIME:4.30PM-6.30PM
INSTRUCTIONS
1.Answer ALL questions.
2.Marks for each question are indicated.
3.Be clear in your presentations.

Q1.(a)Describe FIVE assumptions that underlie the use of break-even point.(5 marks)
(b)During the month of October 2011,a company produced and sold 20,000 units whose cost details were given as follows:
Sh.
Sales 4,000,000
Variable costs 3,000,000
Fixed cost 800,000

It is expected that the relationship would hold in November 2011.The company had wanted to increase its sales for the month of November.To do so it had the following options.

1.Reduce selling price per unit by 20 percent.
2.To improve the quality of the product which would result into an increase of variable cost per unit by Sh.30.
3.Spend Sh.300,000 on advertisement
4.To improve the efficiency by increasing fixed cost by Sh.450,000 per month.

Required:(i)Determine the break even point for each of the options. (16 marks)
(ii)Suggest which option is good for the business and why? (4 marks)

Q2.The extracts below were obtained from the records of Mamamia enterprises for the month of September,2011.

Budgeted production and sales 2000 units.
Unit revenue and costs Sh.
Selling price 300
variable costs:
Direct material (7 KGS@ Sh.20 per Kg) 140
Direct labour(5 hrs @ Sh.10 per hour) 50
Fixed overhead(5 direct labour hours at Sh.12 per hour) 60
Budgeted profit 50

Actual production and sales 2,200 units
Actual selling price per unit 290
Actual direct material(8 Kgs @ Sh.13 per Kg) 104
Actual direct labour hours(4 hrs @ Sh.12 per hour) 48
Actual total fixed cost 130,000

Determine:
i)Direct materials material price variance. (4 marks)
ii)Direct material usage variance. (8 marks)
iii)Direct labour rate variance. (6 marks)
iv)Direct labour efficiency variance. (6 marks)

Q3.Magik bicycles developed three different products, a mall bike for children and youths,a road bike ,and a mountain bike.Total fixed costs for the company are Sh.14,700,000.
Forecasted sales volume and sales mix are as follows.
Youth Road Mountain Total.
Forecasted volume(units) 10,000 18,000 12,000 40,000
Expected sales mix in units 25% 45% 30% 100%

The company's income tax tax rate is 30%.The expected unit selling prices ,variable costs and contribution margins for each product are as follows:
Youth Road Mountain
Price per unit Shs. 200 700 800
variable cost per unit (75) (250) (300)
contribution margin per unit Shs. 125 450 500

REQUIRED:
Calculate the quantity to be sold in order to achieve an after tax profit of KSH.210,000(10 marks)

Q4.Cittilect Ltd is a small company that operates an electronics equipment business along Luthuli Avenue in Nairobi City.The firm sales all its equipment on credit and its suppliers also extend the same to the firm.

The company's account expects the 1st January,2013 opening cash balance to be Sh.30,000.
The company's projected sales budget is given below.

November(year 2012)............Shs. 80,000
December(year 2012)............ 90,000
January(year 2013)............. 75,000
February(year 2013)............ 75,000
March(year 2013)............... 80,000
The company's debt collection policy stipulates that 65 percent of the sales are collected within the actual month of sale,25 percent of the sales are collected a month after the actual sale while 10 percent of the sales are collected the second month after the sale.

The company's projected purchases are presented below:
December(year 2012)........Shs. 60,000
January(year 2013)......... 55,000
February(year 2013)........ 45,000
March(year)................ 55,000

All the purchases are made on credit and past experience shows that 90 percent of the purchases are paid in the actual month when the purchase occurs while the 10 percent is paid the month after the purchase.

The firm has employed three support staff who earn an equal monthly salary of Sh.5,000(ignore income tax and other deductions).

The firm also incurs factory overheads of Sh.20,000 on a monthly basis (the figure for the overheads includes monthly depreciation of Sh.5,000)

Taxation of Sh.8,000 will be settled in the month of February 2013.The company expects to be paid an insurance settlement of Sh.25,000 in the month of March 2013.

REQUIRED:
i)Prepare the firm's cash collection schedule for January-March 2013 (6 marks)
ii)Prepare the firm's cash payments schedule for January-March 2013 (6 marks)
iii)Prepare the firm's cash budget for January-March 2013 (10 marks)
iv)What is your understanding of a Master budget? (2 marks)

*****END******

Bac 300:Management Accounting I Question Paper

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