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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:2013
QUESTION ONE – (30 MARKS)
a) It is always very important for managers to understand the economic environment is which they operate for them to make rational decisions. Citing relevant examples, discuss the relevance of management accounting in decision making to managers. ( 6 Marks) b) Why is it important for a firm to prepare budget? ( 2 Marks) c) Briefly discuss how standards are developed and used as enumerated in standard costing. ( 4 Marks) d) The following data relate to T Ltd for the year ended 31.12. 2013. Sales in units 6,000 Price per unit sh 20 Variable cost per unit sh 12 Fixed cast sh 20,000
Required: i. Draw following charts: - Breakeven showing the BEP and the Margin of safety. - Contribution chart and; profit volume chart
( 6 Marks)
e) What is the rationale of responsibility accounting’? Citing significance of responsibility accounting, the problem experience in implementing this system and possible solutions thereof. ( 12 Marks)
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QUESTION TWO – (20 MARKS)
a) At the Board of Directors, meeting a director, Dr Amhel argued that “Management accounting is no different from financial Accounting. Therefore its installation is a mere waste of resources discuss ( 8 Marks) b) Discuss four methods which can be used in analyzing cost volume profit. Model under uncertainty. ( 4 Marks) c) Koje Ltd produces single product “ Betta” at a fixed cost of sh. 240,000 per annum. The selling price is sh. 1500 per unit while variable cost is sh. 750. The company estimates the year’s sales to be 200 with a probability of 0.5. Production and sales of the product is expected to be normal.
Required:
i. The expected profit and its standard deviation ( 2 Marks) ii. The probability of not breaking even ( 2 Marks) iii. The probability of making atleast sh, 20,000 ( 2 Marks) iv. The probability of making a profit ranging from sh. 10,000 to sh. 40,000. ( 2 Marks
QUESTION THREE – (20 MARKS)
a) Outline the disadvantages of standard costing in an organization ( 5 marks) b) Meru county Hospital has prepared a schedule of estimated overhead cost for its blood test unit on assumption that production will be 80000 test. Overhead cost have been classified as fixed cost and variable costs.
Overheads: Costs (sh)
Supplier 375,000 (all variable)
Indirect labour 1942 000 (sh 1710 000 fixed)
Rent 2 364 200 (all Fixed)
Utilities 272 100 (all variable)
Depreciation 810 00 (all fixed)
Maintenance 243 300 (85 000 fixed)
Data processing 253 200 (158 200 fixed)
Technical support 169 (all fixed)
Required:
i. A cost estimation equation using the account analysis approach taking the number of test as the only cost driver ( 6 Marks) ii. Using the equation in b (i) above, estimate the cost of conducting 95000 tests.
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( 3 Marks) iii. A computerized regression program produced the following equation: Overhead cost = 6 265,000 + 51x (x is the number of tests) Using this equation estimate overhead costs when production is anticipated to be 120 000 tests. iv. The co efficient of determination (n2) of the equation is 0.978. Explain what this means in relation to the estimation line ( 3 Marks)
QUESTION FOUR– (20 MARKS)
Rwathia Ltd produces three products A,Q and R in a single product for the month ended December 2012. The following budgeted figures were available;
Basic input 300.000 @ sh. 24 per kg
Direct wages 27 000 hours @ sh 30 per hour
Variable overheads 45 000 hours @ sh. 30 per hour
Additional information:
1. Fixed overheads were absorbed at 50% of labour cost. 2. There was normal loss of 10% of material input and no abnormal loss. The unit loss units were sold at soap at sh 15/kg which was credited to the process A/C. 3. P, Q and R were produced in the ratio of 5:3:2 respectively. 4. There was neither opening nor closing work in progress. 5. The products were sold as follow: Product Selling price/kg P 225 Q 180 R 150
Required:
a) Determine the cost per unit of output of each joint product using: i. Relative weight of output method ii. Sales value of output. b) On further proceeding products P, Q and R were converted to product X, Y and Z respectively. The selling prices per kg were sh. 270, shs 225 and sh 180 respectively. Further proceeding cost the company sh. 15 per kg of materials input. In addition the normal loss was 10% of materials input with no sales value.
Required:
Advice the firm of further processing was desirable. (support your decision with income statements.
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