REVISION QUESTIONS MANAGERIAL ACCOUNTING ACCT 321
REVISION QUESTIONS MANAGERIAL ACCOUNTING ACCT 321
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:
Direct materials				35
Direct labour				 5
Fixed overhead 				20
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
(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)
(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’
Less production costs:
Direct materials		6,500
Direct labour		5,400
Production overhead variable 	7,000			18,900
Prime cost 						11,100
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.
(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)
(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.
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
Annual (total) 					630,000		10,260,000
Monthly (average)					 52,000		 855,000
Estimate the fixed and variable elements of the electricity cost using.
(i)	The high low method
(ii)	The least squares regression analysis.					(20 Mks)
(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
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
(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)
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:
Direct materials; material A – 3kg @sh. 4		12
Material b – 2 litres @ sh. 5				10
Direct labour - ½ hours @sh. 20			10
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
The company utilized 60,000 machine hours.
(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)