Exam (elaborations)


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