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CPA Management accounting – April 2024 Past Paper & Answers

Unit: Management accounting

13 Questions

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Download CPA Management accounting April 2024 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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1a
Costing terms and concepts
​​Cost classification is essential for easier cost ascertainment and cost control. With reference to the above statement, explain the following bases of cost classification citing one example in each case: 

(i) By time. 

(ii) By behaviour. 

(iii) By function. 

(iv) By nature.
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1b
Introduction to cost estimation
​ ​ ​​​​OJ Ltd. manufactures and sells mobile phones. The company’s budgeted statement of profit or loss for the month of May 2024 is as follows:

Sh.
Sh.
Sales (1,200 units at Sh.18,000 per unit)
21,600,000
Less: Cost of sales:
Less:.Production (1,800 units at Sh.10,000 per unit)
18,000,000
Less: Closing inventory (600 units at Sh.10,000 per unit)
(6,000,000)
(12,000,000)
Gross profit
9,600,000
Less: Variable selling expenses (10% of sales)
(2,160,000)
Less:.Fixed selling and distribution costs
(1,705,000)
Net profit
 5,735,000

Additional information: 
  • The budget was prepared using absorption costing principle. 
  • If the budgeted production in May 2024 had been 2,000 units, then the total production cost would have been Sh.18,800,000.

Required: 

Using high-low method, calculate: 

(i) The variable production cost per unit. 

(ii) The total monthly fixed production cost.


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1c
Marginal and absorption costing
​ ​​Assuming the budget of OJ Ltd. for the month of May 2024 had been prepared using marginal costing principle, calculate: 

(i) The net profit.

(ii) The break-even point (BEP) in sales value.
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2a
Introduction to cost estimation
​​Describe THREE roles of management accounting in an organisation.
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2b
Cost accumulation
​ ​ ​ ​ ​​Dynamok Ltd., manufactures bicycles. The company uses job costing to allocate costs to individual products provided to its customers. 

The company has three production departments T, Q and M. The company has commenced the preparation of its fixed production overhead cost budget for the next financial year and has identified the following costs:

Overhead cost
Sh.“million”
Basis of apportionment
Depreciation
660
Net book value of equipment
Indirect labour
900
Direct labour hours
Repairs and maintenance
110
30% to T, 50% to Q and 20% to M
Heating and lightning
90
Floor area
Consumable supplies
30
Direct labour hours
General overheads
20% of direct wages cost of each department

The costs are apportioned to the individual production departments; T, Q and M as follows:

Production department
T
Q
M
Direct labour hours
5,000
3,000
2,000
Direct wages cost (Sh. Million)
150
210
100
Number of employees
25
15
10
Floor area in square metres (​\(M^2\)​)
5,000
4,000
1,000
Net book value of equipment (Sh. Million)
80
50
90

Required:

(i)
The primary allocation of production overhead costs to the three departments.
(ii)
Calculate the overhead absorption rate (OAR) for each department based on direct labour hours. 
(iii)
A quotation for a job made as batch BQ23 has the following estimated information:
(iii)
Direct material cost
Sh.140,000,000
Direct labour hours
550 hours in department T
890 hours in department Q
160 hours in department M

(iii)
Required:
Using the OAR computed in (b) (ii) above, compute the total cost of job batch BQ23.
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3a
The context of management accounting
​​Management accounting is a discipline that communicates economic information to various parties known as “end-users”. With reference to the above statement, outline TWO user information needs of the following end-users: 

(i) Executives. 

(ii) Production managers. 

(iii) Management accountants.
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3b
Cost-volume profit analysis (break-even analysis)
​ ​ ​​Luxury Weekend County Park is an entertainment park that offers individual and family entry tickets. The tickets include a meal, three types of beverages and unlimited use of the swimming pools. Luxury Weekend County Park has the following ticket prices and variable costs for the year 2024:

Ticket class
Individual
Sh.
Family
Sh.
Total
Sh.
Selling price per ticket
2,400
3,000
Variable cost per ticket:
Cost of meal 
(740)
(800)
Direct labour
(600)
(600)
Variable cost of beverages
(240)
(250)
Swimming cost
(220)
(250)
Contribution margin
600
1,100
Apportioned annual fixed costs (Sh.)
3,375,000
4,125,000
7,500,000
Expected tickets to be sold
6,000
4,000
10,000

Additional information:
1
All the assumptions of cost volume profit (CVP) analysis are valid.
2
Total sales mix is currently generated by the two type of tickets in the following proportions:
  • Individual 60%
  • Family     40%

Required: 
(i) Compute the weighted average contribution margin at the current sales mix assumed above. 

(ii) Calculate the total number of tickets that Luxury Weekend County Park must sell to break-even. 

(iii) The margin of safety in units for Luxury Weekend County Park.

(iv) Calculate the number of individual tickets and the number of family tickets that Luxury Weekend County Park must sell to break-even.
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3c
Cost accumulation
​ ​ ​​Ufanisi Enterprises outsource one of its raw materials branded “Oxla” externally. The annual sales demand for material “Oxla” is 30,000 units. The company is planning to switch its purchasing system to a just-in-time (JIT) purchasing system to improve efficiency. 

The following information is provided:
Current system
Proposed system
Purchase cost per unit (Sh.)
400
400
Ordering cost per order (Sh.)
80,000
20,000
Inventory holding cost
12%
-

Additional information: 
1. Inventory holding cost per annum is given as a percentage of purchases cost per unit. 

2. Under the proposed JIT system, the company does not hold any inventory whatsoever. 

3. The re-order quantity under the proposed JIT system is 4,000 units per order. 

Required: 
Advise the management of Ufanisi Enterprises on whether or not to switch to the proposed system.

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4a
​​Summarise FOUR features of process costing
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4b
Cost accumulation
​ ​ ​​Vuna Ltd. are the manufacturers of chemicals for use in agricultural farms. One of their products passes through two processes; P and Q before it is completed and taken to a warehouse. 

The following data relates to process Q for the month of march 2024:

1
Opening work-in-progress 4,000 units
Degree of completion and cost: 
Sh.“000”
1
Materials 
100%
240,000
Labour
60%
144,000
Overheads
60%
72,000
2
Units received from process P were 40,000 at a cost of Sh.1,700,550,000
3
Additional cost during the period in process Q:
                    Sh.“000”
Materials      759,000
Labour       1,355,760
Overheads   640,220 
4
Closing work-in-progress was 3,000 units with the following degree of completion:
Materials                    100%
Labour.and.overheads.50%.
5
Units scrapped were 4,000 having the following degree of completion:
Materials                     100%
Labour.and.overheads.80%..
6
Normal process loss was 5% of the expected production.
7
Spoiled units realised Sh.15,000 for each unit.
8
The company uses FIFO method of valuation for the opening work-in-progress.

Required: 
(i) Determine units abnormally lost in process Q. 

(ii) Prepare a statement of equivalent units of production.

(iii) Prepare a statement of cost. 

(iv) Prepare process Q account. 

(v) Prepare abnormal loss account.

 
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5a
Standard costing and variance analysis
​ ​​Hawk Ltd. uses a standard absorption costing in its operations. 

The following information is provided by the cost accountant:

Actual
Budgeted
Selling price per unit (Sh.)
2,600
3,100
Variable cost per unit (Sh.)
1,000
1,000
Output and sales (units)
8,200
8,700
Total fixed overheads (Sh.)
4,510,000
5,220,000

Required: 
(i) Sales price variance. 

(ii) Sales volume profit variance.

(iii) Fixed overhead volume variance. 
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5b
Budgetary control
​ ​​A flexible budget is known to be more appropriate for control purposes than a fixed budget. 

Required: 
(i) By distinguishing between a “fixed budget” and a “flexible budget”, explain whether you agree or disagree with the above statement. 

(ii) Outline THREE benefits of budgetary control system in an organisation.
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5c
Budgetary control
​ ​ ​ ​​The following information relates to the projected activities of Detrix Ltd., a local manufacturing company for the year 2024:

Wages
Sh.“000”
Materials purchased
Sh.“000”
Overhead cost
Sh.“000”
Sales
Sh.“000”
January
18,000
60,000
30,000
90,000
February
24,000
90,000
36,000
120,000
March
30,000
75,000
48,000
180,000
April
27,000
105,000
42,000
150,000
May
36,000
90,000
54,000
210,000
June
30,000
75,000
48,000
180,000
July
27,000
75,000
42,000
150,000
August
27,000
90,000
42,000
150,000

Additional information: 
1. It is expected that cash balance on 30 April 2024 will be Sh.66,000,000. 

2. Wages are paid within the month they are incurred. 

3. Creditors for raw materials are paid three months after receipt. 

4. Debtors are expected to pay two months after delivery. 

5. Included in the overhead figure is Sh.6,000,000 per month which represents depreciation. 

6. There is a one-month delay in paying the overhead expenses. 

7. 20% of the monthly sales are on cash basis.

8. A commission of 5% is paid to agents on all the sales on credit, but this is not paid until the month following the sales to which it relates. This expense is not included in the overhead figure. 

9. The company intends to repay a loan of Sh.75,000,000 on 31 May 2024. 

10. A delivery is expected in the month of June 2024 of a new machine costing Sh.135,000,000 of which Sh.45,000,000 will be paid in each of the following months. 

11. The company has an overdraft facility with banks. 

Required:

A cash budget for the months of May, June and July 2024.
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