CPA › Management accounting › August 2026

CPA Management accounting – August 2026 Past Paper & Answers

Unit: Management accounting

15 Questions

Join the community! 550+ students upgraded in the last 24 hours. Limited Discount Seats Available

Questions

Download CPA Management accounting August 2026 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.

View Free Sample PDF Preview unit questions & solutions

1a

The context of management accounting

Mandhari Logistics Ltd. has appointed a management accountant to work with operations, procurement and marketing managers during a business process redesign project. In the context of the entity, explain TWO ways in which the management accountant could promote goal congruence among the functional managers.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

1b

Cost accumulation

Jamii Pharmaceuticals Ltd. stocks a critical laboratory reagent coded RG-5 whose availability affects the continuity of diagnostic services. The stores manager wants to set control levels that reduce the risk of stock-outs without tying up excessive funds in inventory.

Data item	Minimum	Normal	Maximum
Daily usage (units)	120	160	220
Lead time (days)	5	7	10
Reorder quantity (units)	-	6,000	-

Additional information:

1. Annual demand is expected to be 48,000 units.

2. The cost of placing each order is Sh.2,500.

3. Average inventory should be calculated as minimum stock plus one-half of the reorder quantity.

Required:

(i) The reorder level.

(ii) The minimum stock level.

(iii) The maximum stock level.

(iv) The average inventory level.

(v) The number of orders expected in a year.

(vi) The annual ordering cost.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

1c

Cost-volume profit analysis (break-even analysis)

Nuru Tiles Ltd. sells floor tiles in a constant sales mix of 3 units of Economy tiles to 2 units of Premium tiles. The sales manager wants to know whether the planned September volume gives a safe margin above break-even.

Product	Selling price per unit (Sh.)	Variable cost per unit (Sh.)
Economy	1,200	800
Premium	2,000	1,100

Additional information:

1. Monthly fixed costs amount to Sh.3,150,000.

2. The company expects to sell 6,000 units in total during September 2026.

Required:

(i) The break-even sales volume in units for each product.

(ii) The margin of safety in total units for September 2026.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

2a

Costing terms and concepts

Baridi Foods Ltd. operates a cold-room facility. In relation to cost behaviour for short-term planning, classify FOUR costs as fixed, variable, step-fixed or semi-variable: monthly cold-room rent, packaging materials per carton, supervisor salary where one supervisor is required for each full shift, and power cost comprising a fixed standing charge plus units consumed.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

2b

Product costing methods

Elimu Printers Ltd. has received an order for a batch of 4,000 examination answer booklets. The production manager uses batch costing to price similar orders and wants a quotation that will recover full costs and the required margin.

Additional information:

1. Paper and board will cost Sh.420,000 for the batch.

2. Printing ink will cost Sh.96,000 for the batch.

3. Direct labour will require 1,200 hours at Sh.250 per hour.

4. Variable production overhead is absorbed at Sh.180 per direct labour hour.

5. Fixed production overhead is absorbed at 60% of direct labour cost.

6. Selling and administration overhead is charged at 12% of production cost.

7. The company prices jobs to earn a profit margin of 20% on selling price.

Required:

(i) A batch cost sheet for the order.

(ii) The quotation price per examination answer booklet.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

2c

Budgetary control

Jabali Textiles Ltd. manufactures school bags using direct labour. The human resource manager has requested a direct labour budget for the quarter ending 30 September 2026 to assess labour capacity and overtime exposure.

Product	Budgeted output (units)	Standard labour hours	Labour rate per hour
		per unit	(Sh.)
Small bag	12,000	0.75	300
Large bag	8,000	1.20	360

Additional information:

1. Skilled labour hours are paid at a premium of 20% above each product's stated basic labour rate for any hours exceeding 15,000 hours during the quarter.

2. The output mix is expected to remain unchanged during the quarter, and any overtime hours should be allocated to the products in proportion to their standard labour hours.

3. Where fractional overtime hours arise from apportionment, retain the fractions to two decimal places.

Required:

(i) The direct labour hours required for each product and in total.

(ii) The direct labour cost budget for the quarter ending 30 September 2026.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

3a

Budgetary control

Mwanzo College intends to introduce zero-based budgeting in its administrative departments after several years of incremental budgeting. In relation to this decision, explain TWO benefits that zero-based budgeting could provide to the college.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

3b

Cost-volume profit analysis (break-even analysis) Introduction to cost estimation

Kijani Laundry Services Ltd. operates industrial washing machines for hotels and hospitals. The finance manager wants to estimate monthly utility cost using the high-low method before approving a revised service plan for August 2026.

Month	Machine hours	Utility cost (Sh.)
January	3,200	548,000
February	4,100	638,000
March	3,600	590,000
April	4,800	705,000
May	5,400	765,000
June	4,600	690,000

Additional information:

1. The laundry expects to operate for 5,000 machine hours in August 2026.

2. Service revenue is expected to be Sh.980 per machine hour.

3. Other variable operating costs are Sh.410 per machine hour.

4. Other fixed operating costs are Sh.1,250,000 per month.

Required:

(i) Derive the utility cost equation using the high-low method.

(ii) The expected profit or loss for August 2026.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

3c

Marginal and absorption costing

AfriCare Supplies Ltd. reports profits using marginal costing for internal decision making and absorption costing for external reporting. The financial controller wants the September 2026 profit difference explained to non finance managers.

Additional information:

1. Opening inventory was 1,500 units and closing inventory was 2,300 units.

2. Production during the month was 12,000 units.

3. Fixed production overhead for the month was Sh.4,800,000 and was absorbed based on actual production units.

4. Profit reported under marginal costing was Sh.6,240,000.

Required:

(i) A reconciliation of marginal costing profit to absorption costing profit for September 2026.

(ii) Explain why the two profit figures differ and state which method reports the higher profit when closing inventory exceeds opening inventory.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

4a

Product costing methods

Safari Haulage Ltd. transports fertiliser for agricultural wholesalers over varying distances and load sizes. For performance reporting, the transport manager is considering using tonne-kilometres as a cost unit. In relation to this service, justify TWO reasons why tonne-kilometres would be an appropriate cost unit.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

4b

Product costing methods

Chui Dairies Ltd. processes yoghurt in Process 1. The production manager requires a process account for August 2026 to determine the cost of completed output and the value of closing work-in-progress.

Additional information:

1. Opening work-in-progress was 2,000 litres valued at Sh.410,000. It was 100% complete for materials and 60% complete for conversion.

2. During August 2026, 38,000 litres were introduced to the process.

3. Materials added during the month cost Sh.6,840,000 and conversion costs amounted to Sh.4,500,000.

4. Completed output transferred to finished goods was 34,000 litres.

5. Closing work-in-progress was 4,000 litres, 100% complete for materials and 50% complete for conversion.

6. Normal loss is 5% of total input and has a scrap value of Sh.40 per litre. Actual loss has no further disposal cost.

7. Use the weighted average method.

Required:

(i) Equivalent units for materials and conversion costs.

(ii) Cost per equivalent unit for materials and conversion costs.

(iii) The value of completed output and closing work-in-progress.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

4c

Cost-volume profit analysis (break-even analysis)

Tosha Engineering Ltd. has idle machine capacity for the month of October 2026. A customer has requested a special one-off order for 3,000 control units at Sh.2,100 per unit. Management wants to know whether accepting the order would improve short-term profit without disturbing normal sales.

Additional information:

1. Direct materials will cost Sh.850 per control unit.

2. Direct labour will cost Sh.520 per control unit.

3. Variable production overhead will cost Sh.330 per control unit.

4. Special packaging will cost Sh.180,000 in total.

5. Fixed production overheads will not change if the order is accepted.

6. Idle capacity is sufficient for the order, but the order would use inspection time that could earn contribution of Sh.300,000 from another short-term job.

Required:

(i) A relevant cost analysis for the special order.

(ii) A recommendation to management.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

5a

Standard costing and variance analysis

Fahari Digital Services Ltd. uses standard costs to monitor service teams handling different client categories. In this context, explain FOUR factors management should consider before deciding whether to investigate a reported variance.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

5b

Standard costing and variance analysis

Pendo Appliances Ltd. uses standard selling prices to analyse revenue performance for Product R. The sales director wants to separate the effect of price changes from the effect of sales volume changes.

Item	Budget	Actual
Units sold	10,000 units	11,200 units
Selling price per unit	Sh.2,400	Sh.2,320

Required:

(i) The sales price variance.

(ii) The sales volume revenue variance.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

5c

Activity based costing

Raha Telecom Ltd. serves three categories of corporate customers and wants to use Activity-Based Costing to assess customer profitability for the quarter ending 30 September 2026.

Customer category	Revenue	Direct service cost	Service calls	Contract
	(Sh.)	(Sh.)		amendments
Bronze	9,000,000	5,400,000	600	40
Silver	12,000,000	7,200,000	900	60
Gold	15,000,000	8,700,000	1,500	140

Additional information:

1. Customer support cost is Sh.3,000,000 and is driven by service calls.

2. Contract administration cost is Sh.2,400,000 and is driven by contract amendments.

Required:

(i) Customer profit or loss for each customer category using Activity-Based Costing.

(ii) Advise the management of Raha Telecom Ltd. on the customer category that is most profitable in absolute profit terms, and comment on whether the decision would change if profit margin were used.

View Similar Exam Questions

View Free Sample PDF Preview full unit sample

Unlock Solution

CPA: Management accounting — August 2026

The computation for this specific sitting involves adjusting the net profit for non-allowable expenses...

Step-by-Step Workings:

Net Profit1,800

Add: Non-Deductible13,000

Adjusted Profit14,800

Premium Access Required

PDF Materials

Step-by-Step Solution

Secure Access

Member Access

Unlock this solution by signing in

Sign in with Google

OR

Use Site Account

New User? Register here