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Hbc2217:Management Accounting Question Paper
Hbc2217:Management Accounting
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2012
QUESTION ONE – (30MARKS)
(a) Discuss two assumptions underlying the cost volume profit analysis and their corresponding limitations thereof: (4 Marks) (b) Under what circumstances can the Industrial Engineering methods be used to estimate cost. (2 Marks) (c) Myres Ltd has the following demand and cost functions; = 80 3 , where p is the unit selling price and q is quantity in thousands. ; = 2 + 20 + 100; where TC is total cost in millions
Required (i) Optimal price to maximize project. (2 Marks) (ii) Maximum profit (2 Marks) (d) A hospital’s records show that the cost of carrying out health checks in the last five accounting periods have been as follows: Period No. of patients Total cost – Sh. 1 1100 18000 2 1240 19600 3 940 16900 4 1150 18360 5 990 17980
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Required (i) Using the Range method, find the estimated cost of carrying out health checks on 1360 patients for period six. (3 Marks) (ii) Using the least square method, estimate the number of tests the hospital could manage to carry out at a budgeted cost of Sh.21000 in period seven. (5 Marks) (iii) List down any two assumptions you have made in (ii) above. (2 Marks) (e) The publication committee of a scientific society is to publish a booklet of 50 pages. The printing is to be performed in its own office on an office printing machine. The text of the booklet will be recorded on to metal masters by means of a typewriter. One master, containing an average of 500 words will be used to print one page. Sheets will be printed on both sides and the booklet will have a cover which will be purchased. The following information is supplied: (i) The author will be paid sh.6 per 1000 words; (ii) Editing cost of Sh.2 per hour and it takes 12 minutes per 1000 words (iii) Typing and checking one master and placing on the printing machine in readiness to print takes half an hour at a cost of Sh.1.50 per hour (iv) Masters are purchased at Sh1 for 10 (v) Paper, cut to the correct size, costs Sh.0.8 per 1000 sheets (vi) Printing, collating and binding sheets together takes 20 minutes per 1000 sheets at a cost of Sh.1.5 per hour (vii) Covers will be purchased at Sh.5 per 1000 The committee, wishing to review the quantity of booklets to be produced, has suggested that 1000, 5000 and 10000 booklets should be considered.
Required To compile for the management and for the three quantities of booklets: i. Total cost (6 Marks) ii. Unit cost (2 Marks) iii. Selling prices per booklet if a profit of 20% on sales were expected.(2Marks)
QUESTION TWO – (20 MARKS)
(a) Outline the various ways of dealing with uncertainty in cost volume profit analysis. (5 Marks) (b) Wampa ltd is establishing a production schedule for its products. Fixed cost is expected to be Shs.200,000 per annum and selling price per unit will be Sh.1500 with variable cost of Sh.1000 per unit. The company expects sales to be normally distributed with equal chances of the range being 350 units to 450 units. Required:
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(i) The expected profit and its standard deviation. (3 Marks) (ii) The probability of at least breaking even (3 Marks) (iii) The probability of making at least Sh.40000 (3 Marks) (iv) The probability of making a loss of at least Sh.50000 (3 Marks) (v) The probability that profit is between Sh.70000 and Sh.100000 (3 Marks)
QUESTION THREE – (20 MARKS)
(a) A company has budgeted to produce 2750 articles in 22000 hours, with fixed overheads of Sh88000 and variable overheads of Sh55000. The company’s production during the period was 27000 articles in 21500 working hours with fixed overheads costing Sh90000 and variable overheads of Sh58,000. Required: Calculated the following variance: (i) Overhead variance (2 Marks) (ii) Fixed production overhead variance (2 Marks) (iii) Variable production overhead variance (2 Marks) (iv) Fixed production overhead expenditure variance (2 Marks) (v) Fixed production overhead volume variance (2 Marks) (b) Batch size of a biven product ‘Jasho’ and its associated cost are shown as follows; No of batch batch size (units) labour cost (Sh.000) 1 15 180 2 12 140 3 20 230 4 17 190 5 12 160 6 25 300 7 22 270 8 9 110 9 18 240 10 30 320
Required
(i) Draw a scatter graph and deduce regression line. (6 Marks) (ii) From the diagram in (i) above, deduce the variable cost per unit, fixed cost and the cost of producing the 11th batch of 32 units. (4 Marks)
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QUESTION FOUR – (20 MARKS)
(a) Discuss the relevance of management accounting in corporate governance today. (4 Marks) (b) Citing a firm with which you are familiar, explain the significance of responsibility accounting, problems experienced in implementing this system and possible solutions there off. (6 Marks) (c) The following data relate to Kenya ltd for the year ended 31 December 2013; Sh.000
Sales 24000
Less; total costs (20000)
Net profit 4000
Variable costs account for 60% of the total cost
Required:
(i) Margin of safety (2 Marks) (ii) Breakeven point in sales (2 Marks) (iii) Sales required to earn profit of Sh6000000 (2 Marks) (iv) In order to increase sales the management has the following two options; 1. To increase sales by 25% on incurring Sh.2 500 000 sales promotion costs or 2. To increase sales by 15% on reducing selling price by 5% Required Advise the management on which option they should take. (4 Marks)
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