KASNEB Management accounting - Question 3b

Summarise four assumptions of cost-volume profit (CVP) analysis. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 4a

Outline six benefits that might accrue to an organisation as a result of preparing budgets. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 5b

lighlight four purposes of standard costing. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 5c

Describe two advantages and two disadvantages of using activity based costing (ABC). ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 5d

Explain the following terms: (i) Relevant cost. (ii) Sunk cost. ... [Click to view full question and step-by-step solution]

MA December 2021 Past Paper & PDF Solutions

Q: KASNEB Management accounting - Question 3c

Britkon Ltd. makes a single product branded 'P' with a sales price of Sh.100 and a variable cost of Sh.60. Fixed costs are Sh.600,000 per annum. Required... [Click to view full question and step-by-step solution]

1a

Cost accumulation

Blade Ltd. manufacturers a range of electronic products. The supplier of component X has informed Blade Ltd. that it will offer a quantity discount of 1% if Blade Ltd. places an order of 10,000 components or more at any time. Details of component X are as follows:

Cost per component before discount	Sh.20
Annual purchases	150,000 components
Ordering costs	Sh.360 per order
Holding costs	Sh.3 per component per annum

Required:

(i) Economic order quantity (EOQ).

(ii) Annual ordering cost and holding costs of inventory of component X using the economic order quantity (EOQ) computed in (a) (i) above.

(iii) Advise the management of Blade Ltd. whether the discount should be accepted.

1b

Cost accumulation

Usenge Products L.td. manufactures and retails products A. B and C.

The company has 120 workers who work under a group bonus scheme. The workers are categorised into three grades and are paid a bonus of the excess of time allowed over time taken.

The bonus paid is 80% of the workers' base rate and is shared by the workers in the proportion of time spent on the job. The foltowing production data has been extracted from the company's records for the month of November 2021.

Product	Units produced	Time allowed per unit (Minutes)
A	640	63
B	1,280	120
C	2,400	100

Grade of worker	Number of direct workers	Basic rate per hour	Hours worked per worker
1	40	300	30
2	16	270	64
3	64	240	50

Required:

(i) Percentage of hours saved to hours taken.

(ii) Bonus due to the group.

(iii) Gross earnings due to the group.

2a

Product costing methods

(i) Using relevant examples, distinguish between a joint product" and a "by-product".

(ii) Zaidi Industries Ltd. produces two products branded A and B from the same material. The cost of material is Sh.9.50 per kg and the two products appear after Process 1.

Product A can be sold directly to the market but product B requires further processing in Process II.

The following data relate to the month of October 2021:

Process	Materials Sh.	Labour Sh.	Overheads Sh.	Total Sh.
I	1,440,000	210,000	150,000	1,800,000
II	-	100,000	180,000	280,000
	1,440,000	310,000	330,000	2,080,000

Product	Quantity sold (Kgs)	Closing stock (Kgs)	Sales (Sh.)
A	30,000	15,000	525,000
B	45,000	-	1,507,500

Additional information:

There were no materials on hand at the end of the month of October 2021.
The company uses the sales value method of apportionment for joint costs.

Required:

Determine the total cost of Products A and B.

2b

Product costing methods

The following data was provided by the cost accountant of Miradi Ltd. relating to marketing expenses and sales for a period of first eight months of the financial ycear ending 31 December 2021.

Month	1	2	3	4	5	6	7	8
Total marketing expenses (Sh."000")	265	302	222	240	362	295	404	400
Sales units (000)	20	24	16	18	26	22	32	30

Preliminary calculations have established the following analysis using the equation in the form ofy = a + bx

Σ(sales unit)	= 4,640 million
Σ(total marketing expenses)²	= Sh.809,598 million
Σ(total marketing expenses x sales units)	= Sh.61,250 million

Required:

Predict the total marketing expenses for the ninth month when planned sales are 44,000 units.

3a

Marginal and absorption costing

The Cost Accountant of ABC Ltd. has provided the following information relating to production of a single product branded "Zed":

	Period 1	Period 2	Period 3
Production (Kgs)	30,000	38,000	27.000
Sales (Kgs)	30,000	27,000	38,000
Opening stock (Kgs)	-	-	11,000
Closing stock (Kgs)	-	11,000	-

Additional information:

1	The financial details for one unit of product "Zed", based on a normal activity level of 30,000 Kgs is as follows:

1		Cost per Kg (Sh.)
	Direct material	1.50
	Direct labour	1.00
	Production overheads (300% of labour)	3.00
	Total cost	5.50

2	The selling price of product "Zed" is Sh.9 per kg
3	Administrative overheads are fixed at Sh.25,000 per period whereas one third of production overheads are fixed.

Required:

Prepare operating statement using:

(i) Variable costing.

(ii) Absorption costing.

3b

Cost-volume profit analysis (break-even analysis)

Summarise four assumptions of cost-volume profit (CVP) analysis.

3c

Cost-volume profit analysis (break-even analysis)

Britkon Ltd. makes a single product branded "P" with a sales price of Sh.100 and a variable cost of Sh.60. Fixed costs are Sh.600,000 per annum.

Required:

(i) Assuming the taxation rate is 40%, determine the number of units to be sold to make a profit after tax of Sh.200,000 per annum.

(ii) As a result of increasing costs, the variable cost is expected to rise to Sh.65 per unit and fixed costs to Sh.700,000 per annum.

Assuming the selling price cannot be increased, determine the number ofunits required to maintain a profit of Sh.200,000 per annum.

(Ignore inflation).

4a

Budgetary control

Outline six benefits that might accrue to an organisation as a result of preparing budgets.

4b

Budgetary control

You are in charge of making forecasts and preparing budgets for Kondele Ltd. You have been supplied with the following cost and revenue forecast and details of payments:

Forecast for revenue and costs for half year 2022

	January Sh."000"	February Sh."000"	March Sh."000"	April Sh."000"	May Sh."000"	June Sh."000"
Direct material purchases	112,000	100,000	135,000	90,000	67,000	79,000
Wages	90,000	80,000	100,000	72,000	54,000	63,000
Overheads
Production	34,000	32,000	40,000	45,000	36,000	40,000
Administrative	22,000	20,000	27,000	24,000	25,000	27,000
Selling and distribution	13,000	11,000	18,000	13,000	11,000	16,000
Sales	360,000	350,000	440,000	350,000	360,000	360,000

Additional information:

Cash balance on 1 April 2022 is expected to be Sh.90 million.
Period of credit allowed by suppliers averages two months.
Debentures worth Sh.125 million are expected to be issued in May 2022 and the amount will be received in the same month.
A new machine will be installed in March 2022 at a cost of Sh. 150 million and payment is expected in May 2022.
Sales commission of 3% is payable after one month of sale.
A dividend of Sh.100 million is to be paid in June 2022.
There is a delay of one month in the payment of overheads andd wages.
Twenty percent of the debtors pay cash, receiving a cash discount of 4% and seventy per cent of debtors pay within one month and receive 2.5% discount while the remaining debtors pay within two months without a discount.

Required:

A cash budget on a monthly basis for the months of April 2022 to June 2022.

5a

The context of management accounting

Describe four factors that could influence a company's demand for management accounting information.

5b

Standard costing and variance analysis

lighlight four purposes of standard costing.

5c

Activity based costing

Describe two advantages and two disadvantages of using activity based costing (ABC).

5d

Costing terms and concepts

Explain the following terms:

(i) Relevant cost.

(ii) Sunk cost.

December 2021

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