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CPA Management accounting – August 2025 Past Paper & Answers

Unit: Management accounting

11 Questions

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Download CPA Management accounting August 2025 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

Access the full paper online, download the PDF, or study offline. Each question includes step-by-step solutions to help you understand key concepts in Management accounting.

Other Management accounting Past Papers

1a
Product costing methods
​​Highlight FOUR features of a batch costing.
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1b
The context of management accounting
​​Summarise FOUR limitations of management accounting.
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1c
Product costing methods
​ ​ ​ ​ ​ ​ ​​Precious Enterprises operates seven days a week and deals in the sale of bolts and nuts. The company’s transactions during the month of July 2025 were as follows: 

 Purchase for the month of July 2025:

DateQuantityPrice per unit
(Units)(Sh.)
132,000190
202,400195
253,200200
281,000190

Sales for the month of July 2025: 

DateQuantityPrice per unit
(Units)(Sh.)
3   700230
41,000225
16   800230
241,800215
263,800220

Additional information: 
1.The closing inventory for the month of June 2025 was 5,000 units valued at Sh.900,000.
2.During the month ended 31 July 2025, the following returns were made by customers:
  • 14 July 2025; 150 units which had been sold on 3 July 2025.
  • 27 July 2025; 350 units which had been sold on 24 July 2025.
3.On 22 July 2025, the officer in charge of inventory detected a shortage of 100 units.
4.Operating expenses for the month of July 2025 amounted to Sh.44,500.
5.The company uses last in first out (LIFO) method to value its stock.

Required: 
(i) Stores ledger card for the month of July 2025.

(ii) Statement of profit or loss for the month ended 31 July 2025. 
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2a
Introduction to cost estimation
​ ​ ​ ​​Information for the month of July 2025 for Super Shine Polish factory when 10,000 units were produced as follows:

Cost elementTotal cost (Y)Cost behaviour
Sh.
Direct material420,000
Direct labour150,000
Depreciation80,000Fixed period cost
Telephone charges6,000100% fixed
Production overheads40,000Y = 8,000 + 3.2x
Supervisor’s salary200,000Y = 160,000 + 4x
Machine repairs60,000Y = 6,000 + 5.4x
Packaging cost4,000100% direct cost
Cleaning expenses60,0001/3 variable

Additional information: 
  1. All direct costs vary directly with the change in the level of output units. 
  2. The semi-variable costs are based on output level of 10,000 units. 
 Required: 
 (i) Using “account analysis method” derive a cost estimation equation in the form Y = a + bx. 

 (ii) Estimate the total cost for the month of August 2025 if 9,900 units were produced in the factory.    
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2b
Cost-volume profit analysis (break-even analysis)
​ ​ ​ ​​Ocean Resort is a holiday resort that is operated for 30 weeks each year. Each guest is charged Sh.80,000 per week. The weekly variable costs incurred by the resort per guest are as follows:

Sh.
Food and drinks20,000
Electricity cost for lighting and cooking2,400
Laundry expenses4,000
Tour guide and entertainment cost8,000
Wi-Fi costs3,250

The fixed costs incurred by Ocean Resort comprised the following costs: 

Sh.
Staff labour costs per 30 weeks108,000,000
Recreational and accommodation cost per annum95,000,000
Annual property rates on land43,000,000
Administrative expenses per year134,000,000

The following inflationary changes are expected to occur during the year ending 31 December 2025: 

  1. The expected number of guests for the year ending 31 December 2025 is 12,500 guests. 
  2. Charge out price per guest will be adjusted downwards by 5% in order to attract more guests. 
  3. Adverse material price variance of 3% is expected on food and drinks. 
  4. There will be a decline in electricity cost by 10%. 
  5. Tour guide and entertainment cost will increase by 8% due to rise in fuel levy. 
  6. Due to competition in internet services, free Wi-Fi costs will reduce by 20%. 
  7. All other factors are expected to remain constant. 

Required: 
For the year ending 31 December 2025, calculate the expected: 

(i) Number of guests to be served in order to break-even.

(ii) Number of guests to be served to earn Sh.43,700,000 target net profit. 

(iii) Profit that would result if 150,000 guests are served. 

(iv) If the expected number of 12,500 guests is achieved, determine the profit per week. 

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3a
Marginal and absorption costing
​ ​ ​ ​​Auto Parts Ltd. has an annual production of 90,000 units for a motor vehicle component. The cost structure for one component is as follows:

Sh.
Materials2,700
Labour (25% fixed)1,800
Expenses:
Variable900
Fixed1,350
6,750

The purchases manager has an offer from a supplier who is willing to supply the component at Sh.5,400 per component. 

Required: 
(i)Advise the management of Auto Parts Ltd. on whether the component should be purchased.
(ii)Assume the resources used for this component’s manufacture are to be used to produce another product for which the selling price is Sh.4,850. The material cost will be Sh.2,000 for the new component but labour and expenses remain the same as for the other component. Determine whether it is advisable to direct the resources to the manufacture of the new product on the assumption that the component presently being produced would instead be purchased from the market.
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3b
Budgetary control
​ ​ ​​Zee Ltd. produces a single product. Estimated sales for each quarter next year will be as follows:

QuarterSales (units)
I30,000
II37,500
III41,250
IV45,000

Additional information: 
  1. Opening inventory of finished goods is estimated to be 10,000 units and the company expects to maintain the closing inventory of finished goods at 16,250 units at the end of the year. 
  2. Production pattern in each quarter is based on 80% of the sales of the current quarter and 20% of the sales of the next quarter. 
  3. The opening inventory of raw materials in the beginning of the year is estimated to be 10,000 kilograms and closing inventory at the end of the year is required to be maintained at 5,000 kilograms. 
  4. Each unit of finished output requires 2 kilograms of raw materials. 
  5. The company proposes to purchase the entire annual requirement of raw materials in the first three quarters in the proportion and at the prices shown below: 

QuarterPercentage (%) purchase of raw materialPrice per kilogram (Sh.)
I302
II503
III204

Required: 
(i) Production budget in units for each quarter. 

(ii) Raw material consumption budget in quantity for each quarter. 

(iii) Raw materials purchase budget in quantity and value for each quarter. 

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4a
Product costing methods
​ ​ ​ ​​Chem Manufacturers mixes together three chemicals X, Y and Z in the ratio 3:2:1 to produce chemclean, a specialised anti-static fluid. The chemicals cost Sh.1,120, Sh.840 and Sh.546 for X, Y and Z respectively. 

 Additional information: 
  1. During the month of July 2025, 12,000 litres in total were input to the mixing process. 
  2. The normal process loss is 5% of input. 
  3. In July 2025, there was an abnormal loss of 100 litres. 
  4. The completed production was 9,500 litres. 
  5. There was no opening work-in-progress. 
  6. The closing work-in-progress was 100% complete with respect to materials and 40% complete with respect to labour and overheads. 
  7. The labour and overheads costs were Sh.5,779,200 in total for the period. 
  8. The losses had a scrap value of Sh.800 per unit. 

Required: 
(i) Determine the value of the closing work-in-progress. 

(ii) Prepare the mixing process account for the period showing clearly volumes and values. 

(iii) Prepare the abnormal loss account.
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4b
Cost accumulation
​ ​​Brace Ltd. has been purchasing an item of inventory in lots of 900 units. This equates to a three months supply. The cost per unit of this item of inventory is Sh.1,680 and the ordering cost per unit per consignment is Sh.2,240. The carrying cost per unit per annum is 25% of the purchase price. 

Required: 
Advise the management of the Brace Ltd. on the most economical quantity to be purchased, clearly showing the total savings to the company as a result of purchasing at the most economical quantity.
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5a
Standard costing and variance analysis
​ ​​Discuss the following standards as used in standard costing: 

(i) Basic standards. 

(ii) Attainable standards. 

(iii) Ideal standards.
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5b
Activity based costing
​ ​ ​ ​​Palm Tree Oil Ltd. is edible oils making and distribution company. Two of its main assorted products are “Solid Oil” and “Liquid Oil”. The company currently operates absorption costing system using conventional direct labour-hour basis. 

 The selling price per litre and direct costs are as follows:

ProductSolid OilLiquid Oil
Sh.Sh.
Retail selling price per litre650900
Direct labour rate per hour90110
Direct material cost per litre200250

Additional information:
1.The management accountant is reviewing the possibility of introducing value addition activities and has gathered the following data about activity based costing (ABC) system:
ProductSolid OilLiquid Oil
Annual production and sales units in litres25,00020,000
Number of batches5080
Direct labour hours per litre22.5
Number of oil preservatives per litre11
Number of setups per batch21
Number of sales invoices issued per year360140
2.An analysis of overhead costs for Palm Tree Oils Ltd. has provided the following information about total overhead together with their corresponding cost drivers:

Overhead cost analysisTotal overheadsCost drivers
Sh.
Set up cost270,000Number of setups
Oil preservatives handling cost900,000Number of oil preservatives
Customer invoicing cost1,012,000Number of invoices
Material handling cost975,000Number of batches
General overheads843,000Labour hours
Total overheads4,000,000

Required:
In columnar format, calculate the budgeted profit per litre of “Solid Oil” and “Liquid Oil” using:

(i)Conventional direct labour hour basis.
(ii)Activity based costing system.


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