KASNEB Management accounting - Question 1a

Explain THREE benefits of maintaining a cost database. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 2a

In the context of labour remuneration, highlight FOUR causes of labour turnover. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 3a

Outline FOUR factors influencing stock levels in inventory management. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 3b

Highlight FOUR purposes of cost estimation to a service company such as a hospital. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 4a

Discuss FOUR limitations that a firm might encounter when operating a marginal costing system. ( ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 4b

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 ... [Click to view full question and step-by-step solution]

MA April 2023 Past Paper & PDF Solutions

1a

Costing terms and concepts

Explain THREE benefits of maintaining a cost database.

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.

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

2a

Cost accumulation

In the context of labour remuneration, highlight FOUR causes of labour turnover.

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

3a

Cost accumulation

Outline FOUR factors influencing stock levels in inventory management.

3b

Introduction to cost estimation

Highlight FOUR purposes of cost estimation to a service company such as a hospital.

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:

Cash sales are 60% of the total sales. The remaining sales are collected equally during the following two months.
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.
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.
Creditors for materials purchased are granted one-month credit after month of purchase.
Monthly production overheads include depreciation of Sh.5,000,000 per month.
Selling overheads are paid one month after the month in which the overhead occurred.
Salaries commission at 3% on sales is paid to the salesmen each month.
Salaries and wages are paid monthly at the end of the month.
An advance tax of Sh.20,000,000 is due in April 2023.
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.

4a

Marginal and absorption costing

Discuss FOUR limitations that a firm might encounter when operating a marginal costing system. (

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.

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.

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.

April 2023

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?