KASNEB Management accounting - Question 1b

Kedren Ltd. manufactures a single product. During the period from January 2021 to March 2021, the following data was recorded: MonthOutput(Units)Cost(Sh.)J... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 1c

Lengo Ltd. manufactures three products namely; A, B and C The following data relates to the three products: ProductASh.BSh.CSh.Selling price per unit25032046... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 2b

ZigZag Ltd. prepared the following budget for the first five months of the year 2020: MonthSales budget (Units)JanuaryFebruaryMarchAprilMay10,80015,60012,200... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 3a

Describe the three main stages of the Activity Based Costing (ABC) system. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 5b

Highlight four advantages of maintaining integrated accounting systems in cost bookkeeping... [Click to view full question and step-by-step solution]

MA May 2021 Past Paper & PDF Solutions

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.

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.

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 unit	250	320	460
Production cost per unit:
Variable overheads	16	20	28
Installation labour	24	32	44
Manufacturing labour	40	55	70
Raw materials	70	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.

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.

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.

3a

Activity based costing

Describe the three main stages of the Activity Based Costing (ABC) system.

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.

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.

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.

5b

The context of management accounting

Highlight four advantages of maintaining integrated accounting systems in cost bookkeeping

5c

Cost accumulation

Explain three advantages and three disadvantages of implementing a Just-in-Time (JIT) system in an organisation.

May 2021

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