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CPA Management accounting – May 2021 Past Paper & Answers

Unit: Management accounting

11 Questions

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Questions

Download CPA Management accounting May 2021 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
Costing terms and concepts
​​Explain the following terms as used in management accounting

(i) Opportunity cost.

(ii) Notional cost

(iii) Discretionary cost

(iv) Incremental cost.
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1b
Introduction to cost estimation
​ ​​Kedren Ltd. manufactures a single product. During the period from January 2021 to March 2021, the following data was recorded:

Month
Output
(Units)
Cost
(Sh.)
January
Febraury
March
8,240
8,750
8,100
167,590
173,260
165,772

Required:
(i) Using the high-low method, derive a predictor equation in the form of Y = a + bx for the company. 

(ii) Determine the total cost that would be incurred to produce 8,500 units of the product.
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1c
Cost-volume profit analysis (break-even analysis)
​​Lengo Ltd. manufactures three products namely; A, B and C 

The following data relates to the three products:

Product
A
Sh.
B
Sh.
C
Sh.
Selling price per unit250
320
460
Production cost per unit:
Variable overheads16
20
28
Installation labour24
32
44
Manufacturing labour40
55
70
Raw materials70
110
155

Additional information: 
1. Highly skilled labour is required for installation of the three products in the customer's premises. A maximum of 25,000 hours of highly skilled labour are currently available at Sh.8 per hour during the production period. 

2. Fixed costs for the production period are Sh.450,000. 

3. The maximum demand for Products A, B and C is 2,000 units, 3,000 units and 1,800 units respectively.

Required: 
(i) The current shortfall in highly skilled labour at maximum demand. 

(ii) The optimal production mix. 

(iii) The resultant profit at the optimal production mix.
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2a
Cost accumulation
​​Mzalendo Ltd. operates a differential piece rate remuneration scheme for its casual labourers. 

The following schedule is applied to determine employees' remuneration:

Number of units
Wage rate per unit
   
1 - 250
251 - 500
501 - 1,000
Over 1.000
Sh.
500
550
600
650

Rhoda Bidii completed 1,650 units during the month of January 2021. 

Required: 
Determine the wages payable to Rhoda Bidii for the month of January 2021.
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2b
Budgetary control
​​ZigZag Ltd. prepared the following budget for the first five months of the year 2020:

Month
Sales budget (Units)
January
February
March
April
May
10,800
15,600
12,200
10,400
   9,800 

Additional information: 
1. Inventory of finished goods at the end of every month is to be equal to 25% of sales estimate for the next month. 

2. On 1 January 2020, there were 2,700 units of the product on hand. 

3. There is no work-in-progress at the end of any month. 

4. The selling price per unit was estimated to be Sh.450 per unit. 

5. Each unit of the product requires two types of materials in the following quantities: 
              Material A: 4 Kgs. 
              Material B: 5 Kgs. 

6. The closing stock of materials is equal to half of the requirements of the next month's production. 

Required: 
For the months of February, March and April 2020, prepare: 
(i).   Sales budget. 

(ii).  Production budget.

(iii). Materials usage budget in units.
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3a
Activity based costing
​​Describe the three main stages of the Activity Based Costing (ABC) system.
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3b
Cost accumulation
​​Bix Ltd. re-apportions the costs incurred in two service cost centres namely; materials handling and inspection to the three production cost centres of machining, finishing and assembly.

The following are the overhead costs which have been allocated and apportioned to the five cost centres:

Sh. "Million".
Machining
400
Finishing
200
Assembly
100
Materials handling
100
Inspection
50

Estimates of the benefits received by each cost centre are as follows:

Machining
(%)
Finishing
(%)
Assembly
(%)
Materials Handling
(%)
Inspection
(%)
Materials Handling
30
25
35
-
10
Inspection
20
30
45
5
-

Required: 
Calculate the charge for overhead to each of the three production cost centres, including the amounts reapportioned from the two service centres using: 
(i) The continuous allotment (repeated distribution) method. 

(ii) The algebraic method.
 
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4
Product costing methods
​​The following information is available for Process II of Winam Fabrications Ltd. for the month of September 2020: 

Opening stock: 4,800 units valued at Sh. 165,000

Degree of completion:
Materials    70%
Labour       60%
Overheads 60%

Additional information:
1. Transfer from Process I amounted to 30,600 units valued at Sh.306,000. 

2. Additional costs incurred in Process II include: 
                                            Sh. 
   Direct materials           134,400 
   Direct labour                394,200 
   Production overheads 525,600 

3. The units scrapped amounted to 2,400 units with the following degree of completion: 
    Materials    100% 
    Labour         70% 
    Overheads   70% 

4. The closing stock was 5,400 units with the following degree of completion: 
     Materials    60% 
     Labour       40% 
     Overheads 40% 

5. Transfer to Process III amounted to 27,600 units. 

6. There was a normal loss of 10% of production in the process. 

7. The units scrapped were realised at Sh.10 per unit. 

Required: 
(a) Statement of equivalent production. 

(b) Cost of equivalent unit for each element of cost. 

(c) Process II account using the First-in-First Out (FIFO) method. 
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5a
The context of management accounting
​​Jeremy Awuor established a fast food business one year ago and has achieved good sales but a small profit. In a recent business networking event, he was advised to consider employing a management accountant to enhance and improve his business.

Required:
(i) Explain to Jeremy Awuor six changes in the business environment that could have contributed to the growth and importance of management accounting in the recent past.

(ii) Describe four roles played by a management accountant that would enhance and improve Jeremy Awuor's business.
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5b
The context of management accounting
​​Highlight four advantages of maintaining integrated accounting systems in cost bookkeeping
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5c
Cost accumulation
​​Explain three advantages and three disadvantages of implementing a Just-in-Time (JIT) system in an organisation.
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