KASNEB Management accounting - Question 1a

Describe six skills that a management accountant should possess. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 1b

Summarise four perspectives which the balanced scorecard focuses on. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 3a

Outline four causes of labour turnover in an organisation. ... [Click to view full question and step-by-step solution]

KASNEB Management accounting - Question 3b

Describe four functions of a budget committee. ... [Click to view full question and step-by-step solution]

November 2016

1a

The context of management accounting

Describe six skills that a management accountant should possess.

1b

The context of management accounting

Summarise four perspectives which the balanced scorecard focuses on.

1c

Introduction to cost estimation

The production manager of Tamuh Sugar Company is concerned about the apparent fluctuations in efficiency and work done by employees which are related to the volume. A twelve week research was undertaken and the following were the outcomes:

Week

1
2
3
4
5
6
7
8
9
10
11
12

Machine.hours

68
88
62
72
60
96
78
46
82
94
68
48

Indirect.labour.cost
Sh.
1,190
1,211
1,004
917
770
1,456
1,180
710
1,316
1,032
752
963

Required:

Using the ordinary least squares (OLS) method:

(i) Formulate the cost function for the above relationship.

(ii) Compute the indirect labour cost associated with 120 machine hours.

2a

Budgetary control

In the context of a Just-In-Time (JIT) inventory system, explain the following terms:

(i) Backflush costing.

(ii) Batch sizes of one unit.

2b

Standard costing and variance analysis

ALZ Ltd. operates a standard overhead absorption costing system. The standard fixed overhead rate per hour is Sh.25. The following data relate to the month of October 2016:

Actual hours worked	8,250
Budgeted hours	9,000
Standard hours of actual production	7,800
Actual.fixed.overheads.expenditure.(Sh.)	211,000

Required:

For the month of October 2016, compute:

(i) The fixed overheads volume variance.

(ii) The fixed overheads expenditure variance.

2c

Cost-volume profit analysis (break-even analysis)

Exam-Companion Academy (ECA) offers expert training to candidates on four subjects. The budget for the financial year ending 30 June 2017 is as follows:

		Subject area
Expected training hours Charge per hour (Sh.) Variable.cost.per.hour.(Sh.)	Accounting 2,500 400 100	Taxation 3,000 500 150	Auditing 3,500 450 90	Economics 1,000 350 100

The fixed costs for the year are expected to be Sh.1,986,000.

Required:

(i) Assuming the above mix of training hours, advise the management on total number of hours required to break-even.

(ii) The contribution from each subject and in total at break-even.

(iii) Total hours required to earn a profit of Sh.1,324,000.

3a

Cost accumulation

Outline four causes of labour turnover in an organisation.

3b

Budgetary control

Describe four functions of a budget committee.

3c

Cost-volume profit analysis (break-even analysis)

Rabuor Ltd. manufactures a range of products. The company absorbs production overheads using a rate of 200% of the direct wages. This rate was calculated from the following budgeted figures:

	Sh.
Variable.production.cost	6,400
Fixed production costs	9,600
Direct labour cost	8,000

The management is faced with the following decision making problems:

Problem 1

The normal selling price per unit of product EXEM is Sh.220 while the unit production cost is as follows:

	Sh.
Raw materials	80
Direct labour	40
Production.overheads	80
	200

There is a possibility of supplying a special order for 2,000 units of product EXEM at Sh.160 each. If the order is accepted, the normal budgeted sales would not be affected and the company has the necessary capacity to produce the additional units.

Problem 2

The cost of making component BEE, which forms part of product WYE is given below:

	Sh.
Raw materials	40
Direct labour	80
Production.overheads	160
	280

Component BEE could be bought from an outside supplier for Sh.200.

Fixed production costs will not be affected.

Required:

(i) Advise the mánagement on whether to accept the special order under Problem 1.

(ii) Evaluate whether the company should continue to make component BEE or buy it from an outside supplier under Problem 2.

4

Budgetary control

Pwani Ltd. operates a chemical process which produces four different products namely; A, B, C and D from the input of one raw material. Budget information for the forthcoming financial year is as follows:

	Sh."000"
Raw materials cost	268
Initial processing cost	464

Product

A
B
C
D

Output.in.litres

400,000
90,000
5,000
9,000

Sales
Sh."000"
768
232
32
240

Additional.processing.costs
Sh."000"
160
128
-
8

Additional information:

The company's policy is to apportion the costs prior to the split-off point on a method based on net sales value
The current intention is to sell product C without further processing but to process the other three products after the split-off.
The alternative strategy would be to sell all the four products at the split-off point without further processing. If this was to be done, the selling prices obtainable would be as follows:

Product
A
B
C
D

Price.per.litre.(Sh.)
1.28
1.60
6.40
20.00

Required:

(a) Budgeted profit statement showing the profit or loss for each product and in total if the current intention is adopted.

(b) Determine the profit or loss by product and in total ifthe alternative strategy was to be adopted.

(c) Recommend what should be done and why assuming there is no more profitable alternative use for the plant.

5

Standard costing and variance analysis

The following information has been extracted from the books of Wazi Enterprises Ltd., a company dealing with manufacture of plastic containers.

The sales budget for the first six months of the financial year ending 31 December 2016 was as follows:

Month
Sales.(units)

January
10,000

February
12,000

March
14,000

April
15,000

May
15,000

June
16,000

Additional information:

1	Finished goods inventory at the end of each month is expected to be 20% of budgeted sales quantity for the following month.
2	Finished goods inventory was 2,700 units on 1 January 2016.
3	There would be no work in progress at the end of any month.
4	Each unit of finished product requires two types of raw materials as follows: Material X: 4 kgs at Sh.10 per kg Material Y: 6 kgs at Sh.15 per kg
5	Materials on hand on 1 January 2016 was 19,000 kgs of material X and 29,000 kgs of material Y.
6	Monthly closing stock of material is budgeted to be equal to half of the requirements of next month's production.
7	Budgeted direct labour hour per unit of finished product is 3/4 hour.
8	Budgeted direct labour cost for the first quarter of the year 2016 is Sh.1,089,000.
9	Actual data for the quarter ended 31 March 2016 is as follows: Actual production quantity: 40,000 units Direct material cost (Purchase cost based on materials actually issued to production) Material X: 165,000 kgs at Sh.10.20 per kg Material Y: 238,000 kgs at Sh.15.10 per kg Actual direct labour hours worked: 32,000 hours Actual direct labour cost: Sh.1,312,000

Required:

(a)	(i)	Monthly production quantity for the quarter ended 31 March 2016.
	(ii)	Monthly raw material consumption quantity budget for the four months from January 2016 to April 2016.
	(iii)	Materials purchase quantity budget for the quarter ended 31 March 2016.
(b)	Compute the following variances:
	(i)	Material price variance.
	(ii)	Material usage variance.
	(iii)	Direct labour rate variance.
	(iv)	Direct labour efficiency variance.

November 2016

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