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Bcom 210: Management Accounting 1 Question Paper
Bcom 210: Management Accounting 1
Course:Bachelor Of Commerce
Institution: Chuka University question papers
Exam Year:2013
Exam Year:2013
UNIVERSITY EXAMINATIONS
SECOND YEAR EXAMINATION FOR THE
AWARD OF
DEGREE OF BACHELOR OF COMMERCE
BCOM 210: MANAGEMENT ACCOUNTING 1
STREAMS: BCOM Y2S1 TIME: 2 HOURS
DAY/DATE: WEDNESDAY 7/8/2013 2.30PM
– 4.30 PM
INSTRUCTIONS:
1. Answer all Questions
2. Show all your workings
3. Do not write on the Question Paper
1. (a) Explain five distinctions between
management accounting and
financial
accounting. [10 Marks]
(b) Giving examples in each case, explain the
following terminologies. [4
Marks]
(i) Sunk costs
(ii) Relevant costs
(c) “All avoidable costs are relevant costs”.
Discuss [4 Marks]
(d) The following information on the number
of fridges shipped and the
shipping expenses has been complied by Air
Vents Ltd which customizes
fridges for customers and ships them via
courier:
Month Fridges Shipped Shipping costs in Ksh
January 3 180
February 6 230
March 4 170
April 5 200
May 7 230
June 8 270
July 2 120
Using the high low method, derive the cost
function and use this function
to show how much the company would incur
if it customized and shipped 10
fridges in August. [4 Marks]
(e) Marvels Company sells branded pens at
Ksh 30 per unit. The variable
cost per pen is Ksh 20 and fixed costs amount
to Ksh 7,500 per month.
(i) State any 2 assumptions of CVP analysis.
[2 Marks]
(ii) How many pens should the company sell
to breakeven. [2 Marks]
(iii) If the company sells 1,000 pens per
month, what is the margin of
safety? [2 Marks]
(iv) What would be the breakeven point if the
company runs advertisements
amounting to Ksh 5, 000 per month? [2
Marks]
2. (a) What is a job cost sheet? [2 Marks]
(b) The following information relates to the
refining process of bulk
refineries of the month of July 2013.
Production data:
1st May: Work in progress of 10,000 kgs 100%
complete for materials and 80%
complete for conversion costs.
Units started in the month: 100,000 kgs.
31st May: Work in progress of 15,000 units
which are 60% complete for
materials and 20% complete for conversion
costs.
Cost data:
1st May: Work in progress inventory:
Materials cost Ksh 150,000 and
conversion cost Ksh 720,000.
Material costs added in May: Ksh 15,450,000.
Conversion costs added during the period:
Ksh 9,080,000.
The company uses the weighted average
method.
Required:
(i) Compute the equivalent units of production
for May [6 Marks]
(ii) Calculate the cost per kgs for the month
[6 Marks]
(iii) Show the process account for the month
[6 Marks]
3. (a) Define a budget and highlight any five
reasons why budgeting is
important in an
organization. [6 Marks]
(b) Zamba Ltd makes and sells a single
product. It is considering its plans
for next financial year. The budgeted costs
and selling prices for the
product are as follows:
Ksh per unit
Selling price 45
Direct materials 11
Direct labour 8
Production overhead:
Variable 4
Fixed 3
Selling overhead:
Variable 5
Fixed 2
Administration overhead:
Fixed 3
Fixed costs per unit are based on a normal
annual activity level of 96,000
units. These costs are expected to be incurred
at a constant rate
throughout the year.
Activity levels in January are expected to be
as follows:
January
Sales in units 7,000
Production in units 8,500
There will be no stock held at the beginning of
January
Required:
(a) Prepare the profit statement for January
using:
(i) Absorption costing [5 Marks]
(ii) Marginal costing [5 Marks]
(c) Weywey Company produces several
products form Calcitate. The costs per
ton of producing Calcitate are Ksh 60,000,
one third of which is allocated
to product Saltin. 7,000 units of Saltin are
produced from each ton of
Calcitate. The units can be sold at the split
off point at Ksh 9 per unit
or they can be processed further at a total
cost of Ksh 9,500 and then sold
for Ksh 12. Should product Saltin be sold at
the split off point or it
should be processed further? [4 Marks]
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