KASNEB Advanced Management Accounting - Question 1c

Compute the maximisation value payable to acquire perfect information under (b) above. ... [Click to view full question and step-by-step solution]

KASNEB Advanced Management Accounting - Question 2b

Describe three assumptions of the learning curve theory. ... [Click to view full question and step-by-step solution]

KASNEB Advanced Management Accounting - Question 2c

Explain three characteristics of the Just-in-Time (JIT) inventory system. ... [Click to view full question and step-by-step solution]

KASNEB Advanced Management Accounting - Question 4a

Evaluate three benefits of life cycle costing. ... [Click to view full question and step-by-step solution]

KASNEB Advanced Management Accounting - Question 5b

Rigid Ltd. prepared fixed and flexible budgets for the financial year 2020/2021 as provided below: Fixed budget for full capacityFlexible budget for 75% le... [Click to view full question and step-by-step solution]

April 2022

Q: KASNEB Advanced Management Accounting - Question 1a

In control theory, a 'feedback control' mechanism is the one which supplies information to determine whether corrective action should be taken to re-establis... [Click to view full question and step-by-step solution]

Q: KASNEB Advanced Management Accounting - Question 1d

BB Ltd. sells two types of products branded 'D' and 'A'. The Financial Controller has prepared the following information based on the sales forecast for th... [Click to view full question and step-by-step solution]

1a

Budgetary control techniques

In control theory, a "feedback control" mechanism is the one which supplies information to determine whether corrective action should be taken to re-establish control of a system.

In the context of the above statement, distinguish between "feedforward" and "feedback" controls giving an example of each as used in management accounting.

1b

Planning and decision making techniques

Jumbo Ltd. is proposing to introduce to the market a home security appliance system. It has three different possible models; Micro, Basic and Macro which vary in sophistication and complexity, but currently the company has capacity to manufacture only one model. An analysis of the probable acceptance of the models has been carried out and the resulting profit estimated. The results are as follows:

		Profits (Sh."000")
Model acceptance	Acceptance Probability	Micro	Basic	Macro
Excellent	20%	60	100	120
Moderate	50%	40	60	80
Poor	30%	20	0	-40

The Finance Director of Jumbo Ltd. estimates the utilities for various sums of money from Sh.-40,000 to Sh. 120,000 as follows:

Monetary value (Sh. "000")	-40	-20	0	20	40	60	80	100	120
Utility	0	0.20	0.37	0.52	0.65	0.78	0.89	0.96	1.00

Required:

Using scenario analysis, determine which model should be introduced to the market under:

(i) Maximisation of expected monetary value.

(ii) The criterion of maximisation of expected utility.

1c

Planning and decision making techniques

Compute the maximisation value payable to acquire perfect information under (b) above.

1d

Planning and decision making techniques

BB Ltd. sells two types of products branded "D" and "A". The Financial Controller has prepared the following information based on the sales forecast for the period:

Product	D	A	Total
Sales volume (units)	1,200	600	-
	Sh.	Sh.	Sh.
Unit selling price	300	200	-
Unit variable cost	150	110	-
Unit contribution	150	90	-
Total sales revenue	360,000	120,000	480,000
Less: Total variable costs	180,000	66,000	246,000
Contribution to direct and common fixed costs	180,000	54,000	234,000
Less: Direct avoidable fixed costs	90,000	27,000	117,000
Operating profit	90,000	27,000	117,000
Less: Common indirect fixed costs	-	-	39,000
Operating profit	-	-	78,000

The common fixed costs relate to the costs of common facilities and can only be avoided if neither of the products is sold. The Managing Director is concerned that the sales may be less than forecast and has requested information relating to the break-even point for the period.

Required:

The break-even point of the two products in units and sales value if they are sold in the:

(i) Original sales mix.

(ii) Sales mix of 1:1

2a

Planning and decision making techniques

Zinc Ltd. is a local manufacturer ofthree products namely; Exe, Wye and Zed.

The management of the company is unhappy with the current production mix and is seeking advice on the most optimal arrangement. The current production is 10,000 units of Exe, 5,000 units of Wye and 6,000 units of Zed.

The Management Accountant has provided the following information relating to the three products:

	Product
Details	Exe Sh.	Wye Sh.	Zed Sh.
Selling price per unit	1,200	2,000	2,250
Production costs per unit:
Direct materials	300	900	600
Variable overheads	150	400	450

Additional information:

1.	Each type of product passes through three departments in which a different type of labour is used. The labour requirements in each department are given below:

Department	Rate per hour	Labour requirements per unit (hours)
	Sh.	Exe	Wye	Zed
1	20	3	4	6
2	40	1	2.5	4
3	30	5	7	9

2.	There is a shortage of labour in department 2 and it is not possible to increase labour input hours beyond the level currently utilised.
3.	Fixed overheads are budgeted at Sh.5,000,000 per annum and are expected to remain constant.
4.	A recent market survey disclosed that the maximum sales potential for the company is 12,500 units of Exe, 7,500 units of Wye and 8,000 units of Zed.
Required: Advise the management of Zinc Ltd. on the most profitable production mix and optimal profit using:
(i)	Limiting factor analysis.
(ii)	Throughput accounting.

2b

Cost estimation and interpretation

Describe three assumptions of the learning curve theory.

2c

Inventory control decisions

Explain three characteristics of the Just-in-Time (JIT) inventory system.

3a

Strategic performance measurement

Majimbo Ltd. has two Divisions; A and B whose respective performance is under review. Division A is currently earning a profit of Sh.35 million and has net assets of Sh.150 million. Division B currently earns a profit of Sh.70 million with net assets of Sh.325 million. Majimbo Ltd. has a current cost of capital of 15%.

Required:

(i) Using the information above, calculate the return on investment and residual income for each of the two divisions under review and comment on your results.

(ii) State which method of performance evaluation (Return on investment or Residual income) would be more useful when comparing divisional performance and why.

3b

Budgetary control techniques

Dominion Beverages Ltd. makes and sells two beverage products branded "Bingo" and "Boost".

The budgeted sales and profits for the year 2021 were as follows:

Product	Sales quantity (Units)	Revenue (Sh.)	Costs (Sh.)	Profit (Sh.)
Bingo	400	8,000	6,000	2,000
Boost	300	12,000	11,100	900
				2,900
Actual sales were as follows:
Bingo	280 units with a profit of Sh.5.30 per unit.
Boost	630 units with a profit of Sh.2.80 per unit.

The company management is able to control the relative sales of each product through the allocation of sales effort, advertising and sales promotion expenses.

Required:

Calculate and interpret the following variances:

(i) Sales margin price variance.

(ii) Sales margin volume variance.

(iii) Sales margin mix variance.

(iv) Sales margin quantity variance.

(v) Sales margin total variance.

4a

Strategic management accounting information

Evaluate three benefits of life cycle costing.

4b

Pricing decisions

Magunga Ltd. has two divisions, namely; division A and division B. Division A produces Product X which it sells to external market and also to Division B. Divisions in Magunga Ltd. are treated as profit centres and they are given autonomy to set transfer prices and choose their suppliers. The performance of each division is measured on the basis of the target profit given for each period.

Division A can produce 100,000 units of Product X at full capacity. Demand for Product X in the external market is 70,000 units only at a selling price of Sh.250 per unit. To produce Product X, division A incurs Sh.160 as variable cost per unit and total fixed overheads of Sh.4,000,000. Division A has employed Sh.12,000,000 as working capital which is financed by a cash credit facility provided by its lender bank at the rate of 11.5% per annum. Division A has been given a profit target of Sh.2,500,000 for the year. Division B has found two other suppliers; C Ltd. and H Ltd. who agreed to supply Product X. Division B has requested a quotation for 40,000 units of Product X from Division A.

Required:

(i) Determine the transfer price per unit of Product X that Division A should quote in order to meet the target profit for the year.

(ii) Calculate the price that Division A should quote to Division B if Magunga Ltd.'s policy was to quote transfer prices based on opportunity cost.

5a

Strategic performance measurement

Kitchen Masters Ltd. (KML) is a grocery and general merchandise retail group. KML has supermarkets located in most towns and cities in its home country. Over the last few years, profits have fallen and KML has recognised that it has paid insufficient attention to customer care.

KML has now realised the importance of the customer experience at its supermarkets. In an attempt to earn the loyalty of its customers, KML has introduced a loyalty card scheme that rewards customers with discount vouchers based on their spending and buying patterns at supermarkets. The management of KML is considering the introduction of a balanced scorecard approach to manage the performance of its stores.

Required:

Recommend an objective and suitable performance measure for each of the three non-financial perspectives of a balanced score card that KML could use to support its new strategy of improving customer experience.

Note: In your answer, you should state the three perspectives and then recommend with reasons, an objective and a performance measure for each one of the three perspectives.

5b

Budgetary control techniques

Rigid Ltd. prepared fixed and flexible budgets for the financial year 2020/2021 as provided below:

	Fixed budget for full capacity	Flexible budget for 75% level
Sales	1,350,000	1,012,500
Direct materials	425,000	318,750
Direct labour	185,000	138,750
Variable overheads	215,000	161,250
Semi variable overheads	365,000	323,750
Profit	160.000	160.000

After the closing of the financial year 2020/2021, the total actual sales stood at Sh.1,107,000 and there was a favourable sales price variance of Sh. 27,000.

Required:

Prepare a flexible budget for the actual level of sales.

April 2022

Download Complete Period

Questions

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?

Want to join the discussion?