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CPA Management accounting – April 2023 Past Paper & Answers

Unit: Management accounting

12 Questions

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Questions

Download CPA Management accounting April 2023 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

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Other Management accounting Past Papers

1a
Costing terms and concepts
​​Explain THREE benefits of maintaining a cost database.
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1b
Product costing methods
​ ​​ABC Ltd. applies joint process costing in the production process of two joint products; AX and AY. The following information was gathered for the two joint products:

Joint Products
Production
Kgs
Selling price at split-off point
(Sh. per kg)
Separation cost if sold at split-off
(Sh. per kg)
Separation costs if processed further
(Sh. per kg) 
AX
322,000
435.90
125.90
42
AY
600,000
350.90
44.90
28

ABC Ltd. incurred the following joint costs:
Sh.“000”
Conversion costs
125,000
Curing cost 
  80,000
Fermentation cost
120,000
Total joint cost
325,000

Required: 
Calculate the total profit or loss per product if joint costs are allocated to product AX and AY on the basis of: 

(i) Sales value at split-off point.

(ii) Net realisable value at split-off point.
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1c
Cost accumulation
​ ​​Digital Television Ltd. manufactures digital televisions. The main component used in making digital televisions is the fluorescent bulbs. For each digital television manufactured, 12 bulbs are required. The company manufactures 15,000 digital televisions per year. It costs Sh.200 each time the bulbs are ordered and the carrying cost are Sh.8 per bulb per year. 

Required: 
(i) Determine the economic order quantity of bulbs. 

(ii) Calculate the number of times per year the bulbs will be ordered assuming 360 days in a year
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2a
Cost accumulation
​​In the context of labour remuneration, highlight FOUR causes of labour turnover.
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2b
Cost accumulation
​ ​ ​ ​​Ezekiel Mutinda, a sole trader, prepares three types of cakes branded HBL1, HBL2 and HBL3 in two production cost centres and two service centres. The production centres are mixing cost centre and baking cost centre while the service centres are distribution department and canteen department. 

The following is the budgeted production data and production cost for the year ending 31 December 2023:

                                                            Product
HBL1
HBL2
HBL3
Production
3,300 unit
7,100 units
1,650 units
Sh. per unit 
Sh. per unit 
Sh. per unit 
Direct material cost
130
150
160
Direct labour:
    Mixing cost centre
75
60
50
    Baking cost centre 
90
50
180  
Mixing machine hours per unit 
  6
  3
  4

The budgeted overheads for the year are as follows:

Department
Mixing
Baking
Distribution
Canteen
Total
Sh.
Allocated overheads (Sh.)
376,975
243,925
166,000
266,500
1,053,400
Rent and rates
170,000
Depreciation of machine
300,000

Additional information:
1
The budgeted overheads for the year are to be allocated on the following basis:
1
Department
Mixing
Baking
Distribution
Canteen

Net book value of machine (Sh.)
1,500,000
750,000
300,000
450,000
Floor space occupied (square metre)
3,600
1,400
1,000
800
2
Secondary reapportionment is allocated using step-wise method on the following basis:
2
Service department
Mixing
Baking
Distribution
Canteen
Distribution
70%
30%
-
-
Canteen
55%
45%
-
-

Required: 
(i) An overhead analysis sheet (OAS) showing both primary and secondary apportionment.

(ii) Total machine hours for mixing cost centre. 

(iii) A machine hour overhead absorption rate (OAR) for mixing cost centre. 

(iv) A rate expressed as a percentage of direct labour cost for the baking cost centre. 

(v) Calculate the budgeted total cost per unit of product HBL1 
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3a
Cost accumulation
​ ​​Outline FOUR factors influencing stock levels in inventory management.
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3b
Introduction to cost estimation
​​Highlight FOUR purposes of cost estimation to a service company such as a hospital.
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3c
Budgetary control
​ ​ ​ ​​Relei Ltd. is currently following a centralised material storage system. The company is in the process of preparing its cash budget for the second-quarter of the year 2023 and has availed the following data:

Month
Sales

Sh.“000”
Material
Purchases
Sh.“000”
Production
overheads
Sh.“000”
Selling
overheads
Sh.“000”
Salaries and
wages
Sh.“000”
January
144,000
50,000
12,000
11,000
20,000
February
200,000
62,000
12,300
12,400
24,000
March
180,000
50,500
13,000
15,500
20,000
April
150,000
60,600
17,500
18,900
36,000
May
205,000
74,000
17,700
22,000
40,000
June
208,000
76,800
16,400
23,200
48,000

Additional information: 
  1. Cash sales are 60% of the total sales. The remaining sales are collected equally during the following two months. 
  2. Assets are to be acquired in the month of April 2023 and May 2023. Therefore, provisions should be made for payment of Sh.16,000,000 and Sh.65,000,000 for the same. 
  3. An application has been made to the bank for the grant of a loan of Sh.45,000,000 and it is hoped that the loan will be received in the month of May 2023. 
  4. Creditors for materials purchased are granted one-month credit after month of purchase. 
  5. Monthly production overheads include depreciation of Sh.5,000,000 per month. 
  6. Selling overheads are paid one month after the month in which the overhead occurred. 
  7. Salaries commission at 3% on sales is paid to the salesmen each month. 
  8. Salaries and wages are paid monthly at the end of the month.
  9. An advance tax of Sh.20,000,000 is due in April 2023. 
  10. The cash balance as at 1 April 2023 is estimated as Sh.144,500,000. 
Required: 
A cash budget for the second quarter of the year commencing 1 April 2022 to 30 June 2023.
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4a
Marginal and absorption costing
​​Discuss FOUR limitations that a firm might encounter when operating a marginal costing system. (
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4b
Marginal and absorption costing
​ ​ ​​Grate Ltd. manufactures and sells a single product branded “GL”. The cost data for the product is as follows:

Variable cost per unit:
Sh.
Direct materials 
60
Direct labour
120
Variable production overhead
40
Fixed production overhead
80
Variable selling overhead 
30
330
Fixed cost per month:
Sh.
Fixed production overhead
2,400,000
Fixed selling overhead
1,800,000
4,200,000

Additional information:
1
The product is sold for Sh.400 per unit.
2
Grate Ltd. budgeted to produce and sell 30,000 units per month.
3
Actual production and sales units for the months of January 2023 and February 2023 are as follows:
3


January
February
Production
(units)
30,000
30,000
Sales
(units)
26,000
34,000
4
There was no opening inventory or work-in-progress as at the start of January 2023.

Required: 
Prepare profit or loss statements based on: 

(i) Marginal costing technique. 

(ii) Absorption costing technique.

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5a
Cost-volume profit analysis (break-even analysis)
​ ​ ​​Quivo Ltd. manufactures and sells a single product branded “QV”. The following information relates to product “QV” for the month of March 2023:

Sh. per unit
Materials
800
Conversion costs (variable)
600
Selling price
2,000   

Additional information:
1
The dealer’s margin is equivalent to 10% of the selling price.
2
The total fixed cost during the period was Sh.25,000,000.
3
The sales department indicates that the current sales during the period amounted to 90,000 units.
4
The production capacity utilisation is at 60%.

The company has in the recent past faced an acute competition that has negatively affected the sales targets.
The Marketing Manager has presented the following two options for increasing sales:

Option A: Reducing sales price by 5%.
Option B: Increasing dealers’ margin by 25% over the existing rate. 

Required: 
Recommended the option the company should adopt if the company desires to maintain the present profit.
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5b
Standard costing and variance analysis
​ ​ ​​Dex Ltd. manufactures a single product branded “XV”. The company operates a standard marginal costing system. 

The following information for the month of March 2023 is availed to you:

1
The budgeted production and sales for the month amounted to 6,000 units.
2
The standard selling price of product “XV” per unit is Sh.13,200.
3
The variable standard manufacturing costs per unit are as follows:
3

Direct materials (2.5 kgs at Sh.1,690 per kg)
Sh.
4,225
Direct labour (1.25 hours at Sh.1,880 per hour)
4,350
Variable production overhead (1.25 direct labour hours at Sh.1,340 per hour)
1,675
4
The actual results for the month of March 2023 were as follows:
Production in units
6,380
Sh."000"
Sales (5,640 units)
81,075
Direct materials purchased and used (14,730 kgs)
27,987
Direct labour (8,535 hours)
15,363
Variable production overheads
8,974
5
The variable production overheads are absorbed on the basis of direct labour hours.
6
The opening and closing inventories of finished goods are valued at the standard variable manufacturing cost per unit.

Required: 
Compute the following variances: 

(i) Sales price. 

(ii) Sales volume contribution. 

(iii) Direct material price. 

(iv) Direct material usage. 

(v) Direct labour rate. 

(vi) Direct labour efficiency.
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