REVISION QUESTIONS ACCT 321 MANAGERIAL ACCOUNTING BUSINESS AND ECONOMICS ACCOUNTING, FINANCE AND INVESTMENT - $12.98   Add to cart

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REVISION QUESTIONS ACCT 321 MANAGERIAL ACCOUNTING BUSINESS AND ECONOMICS ACCOUNTING, FINANCE AND INVESTMENT

REVISION QUESTIONS ACCT 321 MANAGERIAL ACCOUNTING BUSINESS AND ECONOMICS ACCOUNTING, FINANCE AND INVESTMENT Question One a. Company manufactures a single product W. The summarized profitability statement for the year is as under; Sales 100, 000 units @ sh. 15 per unit 1, 500, 000 Cost of sales: Direct materials 300,000 Direct labor 200,000 Production Overhead; variable 60,000 Fixed 300,000 Administration overhead (fixed) 150,000 Selling and distribution overheads: variable 90,000 Fixed 150,000 1,250,000 Profit 250,000 Required: i) Compute the break-even in units and shillings. (3 Marks) ii) How many units must be sold to realize a profit of shs.60, 000? (3 Marks) iii) Suppose the company would like to earn operating income equal to 20% of sales revenue. How many units must she sell for this to be realized? (3 Marks) iv) For the projected level sales, compute the margin of safety in percentage. (3 Marks) v) Assuming a tax rate of 30%, how many units must be sold each after-tax profit of $25,200 vi) If 35,000 units are sold what will be the store’s operating income (loss)? (3 Marks) vii) What will be breakeven point revenues for the next year 2013, if an additional sh.30, 000 is spent for advertising? (3 Marks) viii) If it is decided to introduce selling commission of sh. 3 each, how many units of product W would require to be sold to earn a net income of sh. 200, 000. (4 Marks) ix) Explain five assumptions of cost-volume profit analysis. (5 Marks) Question Two The following data relates to Tegat Trading Company. The actual and budgeted sales are summarized as under: Shs September 2012 (actual) 1,200,000 October 2012 1,400,000 November 2012 1,600,000 December 2012 600,000 January 2013 800,000 February 2013 1,200,000 April 2013 1,000,000 Credit sales are 75% and cash sales amount to 25% of total sales. 60% of the credit sales are collected in the month after the sale, 30% in the second month and 10% in the third. No bad debts are expected. Anticipated sales of each month are purchased and paid for in the preceding month. The company has a gross profit margin of 20%. Prices and costs are assumed to remain unchanged over the period under review. The anticipated wages and salaries are as below; December 2012 120,000 January 2013 160,000 February 2013 200,000 March 2013 200,000 Interest on shs.2, 000,000 of 6% debentures is due on 31 March 2013 A tax prepayment on 2012 incomes of sh.200, 000 is due in March. In addition, a capital expenditure of sh.200, 000 is planned for May. The monthly depreciation charge will continue at sh.10, 000 every month. The company has a cash balance of sh.400, 000 at 30 November. This represents the minimum desired level cash. Funds can be borrowed in multiples of sh.20, 000 on a monthly basis at 6% per annum, interest is payable on the first month following the borrowing and is not accrued. Rent is shs.8, 000 every month Required: A cash budget for the months of December 2012, January, February and March 2013. The forecasts should be prepared side by side in columnar form. (20 Marks) Question Three a. XYZ Ltd makes two products A and B; the following units variable cost: A (Shs) B(Shs) Direct materials 1 3 Direct labour 6 3 Variables overheads 1 1 Selling prince per unit 14 11 During the current month the available direct labor will be limited to 8,000 labor hours, demand is expected to be 3, 000 and 5, 000 units for A and B respectively Required: i) Compute the number of units to be produced each product to maximize contribution. ii) Assuming that the fixed cost are sh.20,000 compute the net profits at optimal mix obtained in (i) above b. Jomvu Ltd makes a single product which sells for sh.20 and for which there is a great demand. It has a variable cost of sh.12 made up as follows Shs. Direct material 4 Direct labor (2 hours) 6 Variable overheads 2 12 The labor force is currently working at full capacity and no extra time can be made available. A customer has approached the company with a request for a special order for which he is willing to pay sh.5, 000. The cost of the order is sh. 2,000 for direct labor and 500 labor hours will be required (variable overheads directly related to variable direct labor hours). Required: Advise the management on whether to accept the special order. (20 Marks) Question Four The following information is available from the records of SF Ltd, which follows the partial plan for accounting for standard cost for November, 2012 Materials purchase (10,000 units @2.20 per unit 22,000 Materials consumed (9,500 units @ $2.20 per unit 20,900 Actual wages paid (2,472 hours @ $ 5 per hour) 12,375 Factory overhead budgeted 20,000 Standard costing 13.59 Actual production 900 units and actual sales 800 units Standard rate and prices are; Direct material rate $ 2.00 per unit Standard input; 10 units per unit of output produced Direct labor rate: $ 4 per hour Standard required 2.50 hours per unit produced Overhead: $ 8 per labor hour Required: a. The standard cost per unit b. Compute the following variances i) Material price variance (4 Marks) ii) Material usage variance (4 Marks) iii) Labor rate variance (4 Marks) iv) Labor efficiency variance (4 Marks) v) Factory overhead efficiency variance (4 Marks) Question Five The following information has been extracted from the accounts of Star Ltd for the year ended 30 November 2012 Shs. Shs Sales (125, 000 units) 3,000,000 Cost of goods made and delivered Finished goods stock (115 units) Variable costs 250,000 Fixed costs 312,500 Valuation of units in finished goods stock at both 1 December 2012 and 30 November 2013 are to be based on the following information Shs. Cost: variable 4.50 Fixed 3.50 At 1 December 2012 there were 18,750 units in finished goods stock Required: (20 Marks) i) A statement showing the profit on a marginal costing basis. ii) A statement showing the profit on an absorption basis Reconciliation of profits obtained in (i) and (ii) above Question One The budget of Wisdom Ltd provides for the manufacture and sale of 10,000 units per month. The unit standard cost being Ksh. 60 made up as follows: Ksh Direct materials 35 Direct labour 5 Fixed overhead 20 60 The selling price of each unit is ksh. 90 production and sales quantifies for the first and second quarters were as follows: 1st Quarter 2nd Quarter Production 10,000 10,000 Sales 8,000 12,000 Required: (a) Operating statement for each of the two periods assuming the company uses: (i) Marginal costing methods (10 Mks) (ii) Absorption costing method (10 Mks) (b) Reconcile the profits for each quarter. (5 Mks) (c) Distinguish between a flexible and fixed budget, giving a characteristic of each type. (5 Mks) Question Two (a) Discuss three differences between managerial accounting and financial accounting. (6 Mks) (b) Jumuhia Co. Ltd manufactures and sells a single product. The following information regarding the company’s operations for the year ended 3rd September 2013 was presented to you. Profits/loss account for the year ended 30th September 2013 Sh. ‘000’ Sh. ‘000’ Sales 30,000 Less production costs: Direct materials 6,500 Direct labour 5,400 Production overhead variable 7,000 18,900 Prime cost 11,100 Other expenses: Selling - variable 2,600 - Fixed costs 1,997 Administration 2,100 (6,697) Net profit 4,4403 The following charges are expected to occur during the year ending 30th September 2014. (i) Selling price will be adjusted downwards by 3% in order to attract more customers. (ii) Material prices will rise by 2% due to inflation. (iii) There will be a reduction in labour costs of 4%. (iv) Production overheads will increase by 3%. (v) Increase in the efficiency of sales persons will reduce direct selling costs by 5%. All other factors are expected to remain constant. Required: (a) Break-area point in sales value. (4 Mks) (b) Margin of safety in sales value. (2 Mks) (c) The sales value at which profit of sh. 4.5 million will be achieved. (2 Mks) (d) A summary operating system report that shows the net profit of sh. 4.5 million. (6 Mks) Question Three (a) Magari Limited a manufacturing company is in the process of preparing it’s budget for the upcoming production period. The following data relate to the company for the year ended 30th November 2013. Sh. ‘000’ Year Months Machine hours “000” Electricity expenses 2012 December 51.0 960 2013 January 45.0 930 2013 February 51.0 930 2013 March 58.5 885 2013 April 63.0 750 2013 May 48.0 795 2013 June 39.0 750 2013 July 39.0 750 2013 August 46,5 795 2013 September 52.5 825 2013 October 64.5 870 2013 November 72.0 1020 The total annual and monthly average expenditures for the year ended 30 November 2013 were as follows: Machine hours Electricity expenses Sh. Annual (total) 630,000 10,260,000 Monthly (average) 52,000 855,000 Required: Estimate the fixed and variable elements of the electricity cost using. (i) The high low method (ii) The least squares regression analysis. (20 Mks) Question Four (a) BL Ltd is a manufacturing Co. that makes 3 products PQ & R data for the period ended last month were as follows: P Q P Units produced and sold 12,000 16,000 8,000 Selling price per unit 50 70 60 Material cost per unit 16 24 20 Labour cost per unit 8 12 8 Production overhead cost Total Sh. Cost delivery Machine cost 102,000 Machine hours per unit Production scheduling 84,000 Number of products unit Set up cost 54,000 Number of products unit Quality control 49,200 Number of products unit Receiving materials 64,800 Number of Corporation Received Packaging materials 36,000 Number of customer orders Information on cost dairies is given as: P Q R Direct labour per unit 1 1½ 1 Machine hours per unit ½ 1 1½ Number of components per unit 3 5 8 Number of components receipts 18 80 64 Number of customer orders 6 20 10 Number of production units 6 16 8 Required: (i) Using ABC show the cost and gross profit per unit for each product the period. (15 Mks) (ii) Highlight the shortfalls of the activity based costing method. (5 Mks) Question Four Maputo Ltd manufactures and sells one brand of washing soap. The sale price per one dozen packet is sh. 50. The standard production cost is sh. 42.80 per dozen arrived at as follows: Shs. Direct materials; material A – 3kg @sh. 4 12 Material b – 2 litres @ sh. 5 10 Direct labour - ½ hours @sh. 20 10 Overheads Variable 7.20 Fixed 3.60 42.80 Factory overheads are allocated on the basis of machine at the rate of sh. 12 per hour. During the last financial year the company had budgeted to produce 72,000 dozen packets. However material shortages limited production to 64,000 dozen packets for which the following costs were incurred. Material A 194,000kg Shs. B 130,000 litres 780,800 Direct labour 35,000 hours 625,000 Variable overheads 684,000 Fixed overheads 384,000 250,000 The company utilized 60,000 machine hours. Required: (a) Calculate the following variances: (i) Material price and usage variance (6 Mks) (ii) Labour rate and efficiency variances (6 Mks) (iii) Variable overhead spending and efficiency variances (4 Mks) (iv) Fixed overhead volume variances. (4 Mks) Question One a. Maridadi Company Limited manufactures plastic egg trays. The company estimates to sell 20,000 units of egg trays with an average unit of cost of Sh. Direct material 30 Direct labor 10 Overhead: fixed 10 Variable 10 60 The management accountant is preparing a budget for the next financial year Additional Information i) Due to prevailing economic conditions prices of raw materials are expected to rise by 20%, direct labor 5%, variable overheads by 5% and fixed overheads by 25% ii) A cheaper material costing sh.31.25 per unit could however be used in place of the current material iii) If the cheaper material is used, 5% of completed output would be rejected by customers and an inspection process be introduced at a cost of sh.40,000 per annum (including sh.10,000 allocation of existing factory overheads). The 5% rejected output translates into sh.2.75 per unit iv) The company charges a mark up of 5% v) The previous year’s selling price was sh.90 per unit but it is now expected to vary with demand as follows Price per tray (sh.) 80 84 88 90 92 96 100 Demand (thousands of units) 25 23 21 20 19 17 15 Required: i) Advice the management on whether to adopt the cheaper material or continue using the current materials (20 Marks) ii) Determine the best selling price per tray based on your recommendation in (b) (i) above (10 marks) Question Two a. XYZ Ltd took 60 hours to produce the 1st unit of a product, industry experience associates such products with 80% learning rate Required: Determine how long it will take to produce i) 8 units ii) The 2nd unit iii) The 8th unit (6 marks) b. Swaza company ltd manufactures and sells three products namely; D, E and F. The company’s products department consists of processing and assembling. The management accountant of Swaza company ltd has provided you with the following budgeted information for the six month period ending 31 December 2013 Product Production Unit Selling price Sh. Direct Material cost per unit Sh. Direct labor cost per unit Sh. Machine Per unit Direct labor hours per unit D 100,000 45 16 14 4 14 E 80,000 95 50 30 10 6 F 60,000 70 30 30 8 4 In a bid to embrace modern business techniques, the management accountant intends adopt the activity based costly (ABC) method of cost allocation and has identified the following activities as the main cost drivers for the overhead costs; Overhead costs Cost drivers Processing services Machine hours Assembly services Direct labor hours Quality control Number of inspections Materials handling and dispatch Number of internal requisitions Selling and administration Number of customer orders Machine set ups Number of production runs The following additional information is provided (i) The company’s projected overhead costs for the period are; Cost pools Sh. Processing services 714,000 Assembly services 636,000 Quality control 52,000 Materials handling and dispatch 156,000 Selling and administration 168,000 Machine set up 156,000 1,882,000 (ii) All units produced will be sold within the six month period (iii) Production takes place in batches of 1000 units (iv) The following estimates have also been provided for the period Product Number of inspection Number of internal requisitions Number of customer orders D 240 8000 3000 E 400 8000 4000 F 400 16,000 4200 Required: i) Prepare budgeted income statement for the period ending 31 December 2013 based on activity based costing (ABC) (12 Marks) ii) Highlight the shortfalls of the actively based costing method over the conventional cost allocation methods (2 Marks) Question Three a. State and explain five differences between management and financial accounting (10 marks) b. XYZ ltd produces product W. The projected income statement for the year 2013 is as follows: Sh. Sh. Sales (50,000 units) 2,500,000 Variable cost Direct materials 600,000 Direct labor 300,000 Direct expenses 400,000 Variable overheads 140,000 (1,440,000) Contribution Margin 1,060,000 Less fixed costs 816,412 Net profit 243,588 Required: i) Break-even point in units and revenue (4 Marks) ii) How many units to be sold to earn a profit of sh.150,000 (4 marks) iii) For the projected level of sales, compute the margin of safety in units (2 marks) iv) Assuming a tax rate of 30%, how many units must be sold to realize an after tax profit of sh.84,000 (3 Marks) v) Suppose 30,000 units are sold above the break- even point, what is the operating profit for the company (3 Marks) vi) Assuming the price per unit increased by 20% fixed cost by sh.20,000, while variable costs remain the same, compute the break-even point in units and the contribution margin ration for the company (4 marks) Question Four a. A radio manufacturing company finds that it costs $625 to make each component XYZ. The same is available in the market at $485 each, with an assurance of continued supply. The breakdown of cost is $ Direct materials 275 Direct labor 175 Variable overheads 50 Depreciation 125 625 Required; (i) Should the company make or buy? (4 Marks) (ii) Explain two qualitative factors that the firm should consider for the decision made in (i) above (4 Marks) b. Due to industrial depression, a plant is currently operating at 50% capacity The following details are available; Cost of production per units $ Direct materials 2 Direct labor 1 Variable overhead 3 Fixed overhead 2 8 Production per month 20,000 units Total cost of production 160,000 Sales price 140,000 Loss (20,000) An exporter offer to buy 5,000 units per month at the rate of $6.50 per unit and the company hesitates to accept the offer for fear of increasing its already operating losses Required: Advice whether company should accept or decline this offer (12 Marks) Question Five a. Discuss the types of budgets (5 Marks) b. Elaborate on the importance of budgeting (10 marks) c. Discuss the limitations of budgeting (5 marks) Question One a. List five assumptions of Break even points (5 marks) b. Discuss any three uses of the break even points (3 marks) c. A company produced 10 units and only sold 8,500 units. The selling price per unit issh.20 while the costs per unit are Variable selling costs sh.2 Variable administrative sh.2 Direct materials sh.2 Direct labor sh.3 Fixed Costs Production sh.15,000 Administrative sh.15,000 Selling sh.20,000 Required: i) P.v ratio (2 marks) ii) Break even points in units and sales (5 Marks) iii) Sales and units needed to achieve a point of sh.40,000 (5 Marks) iv) Actual sales/profits realized (4 Marks) v) Margin of safety (4 Marks) vi) Limitation of break even analysis (2 Marks) Question Two The following data was presented regarding sales and advertising expenditure Sales advertising expenditure (Ksh. M) (Ksh. ‘000’) 3.5 210 92 250 7.9 290 8.6 330 9.4 370 10.1 410 Calculate a. Determine the a and b coefficients for the functions Y=a bx (8 Marks) b. Calculate r and interpret (4 Marks) c. Calculate r2 and interpret (4 marks) d. Determine the advertising expenditure needed to generate sales of sh.9,500,000 (4 Marks) Question Three a. Discuss any five differences between management accounting and financial accounting (10 Marks) b. Discuss the functions of management accounting with reference to the five functions of management. (10 Marks) Question Four The following information has been extracted from the books of Solacasts Ltd for the year 31 march 2010 Production 30,000 units Sales 24,000 units Production Costs sh.’000’ Direct materials 7,200 Direct labor 1,800 Variable overheads 1,500 Fixed overheads 2,700 Selling and administrations costs Sales and salaries 450 Variable sales commission 300 Promotion and advertising 480 Other fixed costs 720 Company unit selling per sh.550 Required a) Marginal cost statement (8 Marks) b) Absorption cost statements (8 marks) c) Profit reconciliation statement (4 Marks) Question Five A company has budgeted to produce 2750 articles in 22,000 hours with fixed costs of sh.88, 000 and variable overheads of sh.55, 000 The company’s production during the period of the budget was 2,700 articles in 21,500 working hours with fixed overheads costing sh.90, 000 and variable overheads sh.58, 000 Calculate a. Fixed production overhead variances (5 Marks) b. Variable productions overhead variances (5 Marks) c. Discuss any five causes of variances in production (10 marks) Question One a) Distinguish between the “breakeven point” and the “cost indifference point” as used in cost volume profit C-ve analysis. (4mks) b) Outline the purpose of budgeting in an organization. (4mks) c) The following data related to the products activities of Mambo ltd for the financial year ended 31st December 2007: Unit cost (shs.) Direct materials 22.50 Direct wages 6.00 Variable overhead 1.50 Fixed factory overhead (sh) 1,620,000 per annum Fixed selling and administration overhead (sh). 1,020,000 per annum Capital employed in fixed assets (sh) 1,800,000 Additional information (i) Capital employed on current assets (ii) The annual sales amounted to 800,000 units. Required Determine the selling price per unit required to yield a 20% return on capital employed. (8mks) d) Management accounting approaches differ among different organization. In this regard, the contingency theory approach advocates that the design of management accounting information systems should depend upon the contigent variables. Required Discuss the contingent variables that influence the design of management accounting information systems. (10mks) e) Describe the key considerations that should be applied in presenting information for product mix decision when capacity constraints exist. (4mks) Question Two a) State the advantages of using standard costs in the manufacturing industry. (8mks) b) Ufundi furniture ltd. Manufactures a wide range of home furniture. Recently the company added to tis range a side board. The standard cost specification for each side board is given below: Material L Timber (sh. 280 per kg) 6kg Varnish. (sh. 300 per litre) 0.5 litres Labour (sh. 60 per hour) 8 hours During the month of September 2004, 620 side boards were manufactured. The actual quantities and costs incurred were as follows: Quantity shs. Materials Timver ksh 4,500 1,125,000 Varruish 290 364,000 Labour hours 5,200 364,000 The abnormal idle hours were recorded as 4800 hours Required (i) Materials price variance (for both materials) (2mks) (ii) Materials usage variance (for bot materials) (2mks) (iii) Labour rate of pay variance. (2mks) (iv) Labour efficiency variance (2mks) (v) Idle time variance (2mks) (vi) Suggest possible causes of the materials variances. (2mks) Question Three a) Outline four standards of ethical conduct for management accountants. (4mks) b) Wawera ltd produces a wide range of electronic components. The company is preparing budgets for the financial year 2013. The management accountant has obtained the following data on components X a key element in the Master budget. Year 2009 2010 2011 2012 Sales (units) Sales revenue (shs) Variable cost (shs) 150,000 294,820 132,820 180,000 346,706 102,706 200,000 363,000 179,000 230,000 448,800 200,000 Sales for the year 2013 have been estimated at 260,000 units. Required (i) Using linear regression, project the trend and estimated the contribution for the year 2013. (ii) Calculate the 95% confidence interval of the contribution forecast for the year 2013 in (b) (i) above, given that the standard error of the forecast is sh. 14,500 and the t-value is 4.303 interpret your answer. (6mks) (iii) Comment briefly on the appropriateness of using linear regression of forecast. (4mks) Question Four You are a management accountant of Wananchi consultants ltd, a firm engaged in organizing workshops and service on the implementation of public sector policies. Recently, the firm worn a major training contract that will involve organizing workshops in eight towns in the country. The workshops will be organized on a weekly business in all the eight towns throughout the year. As part of the preparations for the workshops, the firm intends to enter into a one year contract with Mikutano properties ltd which owns workshop facilities in each of the eight towns. Facility Capacity (no of participants) Cost per worships. A 100 600,000 B 200 1,080,000 C 300 1,440,000 D 400 1,600,000 Additional information (i) Under the terms of the contract with Mikutano properties ltd, only one type of facility can be selected to bear all the workshops. (ii) Wajuzi consultant’s ltd will charge a standard fee of sh. 8000 per workshop participants. (iii) Facilitators for the workshops will be drawn from Wananchi consultants ltd, the central and country governments. From the past examples, the number of worshop participants will depend on whether the workshop is facilitated by Wananchi consultants ltd, the county government or the country government. The proportion of worshop to be facilitated by each of the three entries and the expected number of participants is as follows Facilitator % of Workshop to facilitate Expected no of participants per workshop wananchi consultant ltd 20 100 Central government 30 400 County government 50 200 Assume a 52 week year Required a) Using the expected value (EV) criteria, advise Wananchi consultants ltd on the workshop facility to select the contract with Wananchi properties ltd. (10mks) b) Assess whether your decision in (a) above would change if the following criteria were used (i) Maxmin criteria (5mks) (ii) Minimax criteria (5mks) Question Five Write explanatory notes on each of the following a) Just in Time production (JIT) (3mks) b) Equivalent units in process costing. (3mks) c) Activity based costing. (4mks) d) Learning curve theory. (3mks) e) Set up time. (3mks) f) Product costing. (3mks)

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REVISION QUESTIONS ACCT 321 MANAGERIAL ACCOUNTING BUSINESS AND ECONOMICS ACCOUNTING, FINANCE AND INVESTMENT

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