KASNEB Management accounting - Question 1a

Describe three benefits of management accounting. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 1b

Highlight four purposes of performance measurements. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 2a

Describe four advantages of budgetary control in an organisation. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 3a

Explain three purposes of cost classification by behaviour. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 5a

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

November 2015

Q: KASNEB Management accounting - Question 4b

Qui Ltd. manufactures a single product branded 'Q'. The standard selling price and variable cost per unit of product 'Q' are as follows: Selling.priceM... [Click to view full question and step-by-step solution]

1a

The context of management accounting

Describe three benefits of management accounting.

1b

The context of management accounting

Highlight four purposes of performance measurements.

1c

Marginal and absorption costing

The net profit of Pine Ltd.. a manufacturing concern for the year ended 30 September 2015 as shown by the financia! accounts amounted to Sh.257,510. The cost accounts for the same period disclosed a net profit of Sh.344,800.

On examination of both sets of accounts, the following facts were discovered:

1
2
3
4
5
6
7
8
9

Production overheads under-recovered in cost accounts
Administrative overheads over-recovered in cost accounts
Depreciation charged in financial accounts
Depreciation recovered in cost accounts
Interest on investments not included in cost accounts
Obsolescence loss charged in financial accounts
Income tax provided for in financial accounts
Bank interest and dividends received in financial accounts
Loss.due.to.depreciation.in.stock.value.charged.in.financial.accounts

Sh.
6,240
3,400
22,400
25,000
16,000
11,400
80,600
2,450
13,500

Required:

A reconciliation statement between the net profit as per cost accounts and as per financial accounts.

2a

Budgetary control

Describe four advantages of budgetary control in an organisation.

2b

Cost-volume profit analysis (break-even analysis)

Tarvol Ltd. manufactures and seils a single producr. The company's contribution format income statement for the year ended 31 October 2015 is given below:

.................................

Sales.(20,000.units)
Variable expenses
Contribution.margin
Fixed expenses
Net income

Total
Sh.
1,200,000
900,000
300,000
(240,000)
60,000

Per.unit
Sh.
60
45
15

Percentage.of.sales

100%
....?...
....?...

The management of the company is anxious to increase the company's profit and has asked for analysis of a number of items.

Required:

(i) Compute the company's contribution margin ratio and variable expense ratio.

(ii) Compute the company's break-even point both in units and in shillings.

(iii) Compute the increase in net operating income of the company assuming that sales will increase by Sh.400,000 in the next financial year 'and the cost behaviour patterns will remain unchanged. Use the contribution margin ratio obtained in (b) (i) above to compute your answer.

(iv) Refer to the original data. Assume that in the next financial year, the management targets the company to earn a profit of at least Sh.90,000. Compute how many units would have to be sold to meet this target profit.

3a

Costing terms and concepts

Explain three purposes of cost classification by behaviour.

3b

Cost accumulation

Kena Stores provided the following information in respect of their operations for the month of July 2015:

Date
3 July
7 July
18.July

Receipts

600 units at Sh.60
1,000 units at Sh.70
2,400.units.at.Sh.80

Date
5 Julv
12 July
20 July
29 July
31.July

Issues

1,600.units
400 units
1,200 units
600 units
200 units

Additional information:

Materials in store as at 30 June 2015 were 2,000 units at Sh.50.
On 9 July 2015, part of the materials issued on 5 July 2015 amounting to 200 units were returned.
On 15 July 2015, 100 units were returned to Kena Stores.
On 21 July 2015, there was materials wastage of 500 units.
Returns from a June 2015 issue of 100 units at Sh.45 was received on 25 July 2015.
On 28 July 2015, there was shortage of stock of 20 units.
Kena Stores uses the first in first out (FIFO) method to value its inventory.

Required:

A stores ledger card for Kena Stores for the month of July 2015.

4a

Cost accumulation

Respor Ltd. manufactures three products namely; A, B and C. The company has four departments namely: W, X, Y and Z. The following information relates to Respor Ltd. for the year ended 30 June 2014:

Rates
Depreciation: Buildings
Depreciation: Machinery
Maintenance of buildings
Insurance. Buildings
Insurance. Machinery
Insurance. Inventory
Insurance..Workman's.compensation
Electricity: Lighting
Electricity: Power
Supervision
Personnel, time keeping and payroll
Canteen expenses

Sh."000"
25,000
45,000
20,000
15,000
5,000
4,000
12,000
4,000
20,000
24,000
60,000
40,000
12,000
286,000

Departmental information:

........................................................
Area (square metres)
Value of machines (Sh."000")
Running of machines
Average.inventory.value.(Sh."000")
Wages paid (Sh."000")
Number of employees

W
4,000
80,000
15,000
20,000
120,000
15

X
2,000
60,000
7,000
15,000
170,000
20

Y
3,000
60,000
8,000
15,000
80,000
10

Z
1,000
-
-
10,000
30,000
5

Required:

Overhead analysis sheet.

4b

Standard costing and variance analysis

Qui Ltd. manufactures a single product branded "Q". The standard selling price and variable cost per unit of product "Q" are as follows:

Selling.price
Materials
Labour

2.kilograms.at.Sh.10.per.kilogramme
3 hours at Sh.24 per hour

Sh.
136
20
72

Additional information:

1	The budgeted sales for the month of October 2015 were 38,000 units.
2	The actual results for the month of October 2015 were as follows:

Production.and.saies.................
Selling price per unit
Materials.(76,000.kilogrammes)
Labour (114,000 hours paid)

36,000 units
Sh.134
Sh.754,000
Sh.2,656,000

3	The company operates a standard costing system and a just-in time (JIT) purchasing and production system.

Required:

Showing applicable variances, prepare a statement that reconciles the budgeted contribution with the actual contribution for the month of October 2015.

5a

Cost-volume profit analysis (break-even analysis)

Highlight six assumptions of cost volume profit (CVP) analysis.

5b

Cost-volume profit analysis (break-even analysis)

Computech has two fully automated machines Mi and M2 through which metai is passed to produce stands. There are production constraints and Computech has decided to produce only one of the three stand modeis P, Q and R during the next financial year.

The forecasts for the next financial vear are as follows:

.........................................
Maximum saies (units)
Stand unit data:
Selling price (Sh.)
Machine time: M1 (hours)
Machine time: M2 (hours)

P
7,400

900
0.25
0.2

Q
10,000

800
0.15
0.225

R
12,000

1,000
0.3
0.25

Additional information:

Maximum operating hours for machine M1 is 1,700 hours while for machine M2 is 1.920 hours.
Maximum quantity of metal available amounts to 17,000 metres.
Each stand requires 2 metres of metal.
The cost of metal amounts to Sh.50 per metre.
Variable machine overheads for machine Mi and machine M2 are Sh.500 per hour and Sh.600 per hour respectively.
Production capacity is dedicated to the stands only.

Required:

Advise the management of Computech on which stand to produce and sell indicating the number of units and resulting contribution.

November 2015

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