Exam (elaborations)


REVISION QUESTIONS MANAGERIAL ACCOUNTING ACCT 321 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)

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