Hbc2217:Management Accounting Question Paper
Hbc2217:Management Accounting
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2013
QUESTION ONE
(a) Management Accounting is a mere duplication of inancial Accounting. herefore it is of no conseuence in a corporate set up iscuss. (6Marks) (b) A drug company has initiated research project which is intended to develop a new product. Expenditure to date on this particular research total Sh. 500,000 but it is now estimated that a further Sh. 200,000 will need to be spent before the product can be marketed. Over the estimated life to the product potential has a net present value of Sh. 350,000. Required: Advice the management whether they should continue or abandon the project. Support your answer with a numerate statement and state what kind of cost is the Sh. 500,000. (4Marks) (c) Explain five limitations of cost volume profit analysis as a profit planning model. (5Marks) (d) The following details have been extracted from M. Ltd for the year 2011.
Sh. 000
Materials 600 - All variable
Labour costs 500 - 10% fixed Maintenance costs 780 - 40% fixed Rent 540 - All fixed Overheads 900 - 50% fixed Level of output 1968 units. Required:
Determine the cost of producing 2000 units for year 2012 using Accounts Analysis Method.
(5Marks)
2
(e) Define the term ransfer ricing’ and explain different methods which may be adopted in transfer pricing. (5Marks)
QUESTION TWO (15 MARKS)
The following details were extracted from Unique Shuttle Ltd, which operates a fleet of vehicles plying Meru-Maua road.
$ Cost of Motor car 5,500 Trade in price after 2 years 1,500 Maintenance: 6monthly serve 60 Spares replacement cost per 1000 miles 20 Vehicle license per annum 80 Tyre replacement after 25000 miles 150 Insurance per annum 150 Petrol per mile 1.90
Required: (a) Prepare a schedule to be presented to management showing for the miles of 5000, 10,000 and 30,000 miles per annum. (i) Total variable cost (2Marks) (ii) Total Fixed cost (2Marks) (iii) Total cost (2Marks) (iv) Variable cost per mile (to the nearest whole number (2Marks) (v) Fixed cost per mile (to the nearest penny) (2Marks) (vi) Total cost per mile (to the nearest penny) (2Marks)
(b) Explain the trend of cost per unit of output and advise the management accordingly. (3Marks)
QUESTION THREE (15MARKS) ariobangi ight ndustries produces a toxic product Sox’ that must be sold in the month produced or else discarded. The company can manufacture this product at a variable cost of Sh. 40 per unit or purchase it from an outside supplier at a cost of Sh. 70 per unit. The selling price is Sh. 80 per unit. The production process is such that at least 9000 units must be produced during the period. The management must decide whether to produce or produce the product from the outside supplier.
The possible sales and probabilities of the product are:-
Demand Probability (Units) 4000 .4 7000 .5 11000 .1
3
Required:
Expected demand (3Marks)
Expected profit from purchasing and selling (3Marks)
Expected profit from manufacturing the product and selling (3Marks)
Standard deviation of profits from each alternative (3Marks)
Coefficient of variation for each alternative (3Marks)
QUESTION FOUR (15 MARKS)
(a) Explain clearly the four main types of standards as enumerated in standard costing. (4Marks)
(b) How can a manager apply standard costing in performance measurement? (1Mark)
(c) Citing relevant examples, write short notes on the following:-
(i) Responsibility Accounting (2Marks)
(ii) Pricing decisions (2Marks)
(iii)Emerging issues in management accounting (2Marks)
(iv) Relevant information for decision making (2Marks)
(v) Replacement analysis (2Marks)
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