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CPA Management accounting – November 2017 Past Paper & Answers

Unit: Management accounting

11 Questions

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Download CPA Management accounting November 2017 past paper with detailed answers and marking scheme. This paper is based on KASNEB examination standards and is ideal for revision and exam preparation.

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Other Management accounting Past Papers

1a
The context of management accounting
​ ​​ Explain four purposes of cost accounting.
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1b
Cost accumulation
​​Mazuri Ltd., a manufacturing company, has three production departments and two service departments. Overheads for the departments fora specific period were as follows:

Sh. "000"
Production departments
X
2,500
Y
2,000
Z
1,500
Service departments
A
1,000
B
780
Total
7,780

Additional information:
1
A technical assessment for the apportionment of the service department costs were as follows:
Department
X
Y
Z
A
B
A
30%
30%
20%
-
20%
B
40%
30%
20%
10%
2
 Output for the production departments during the period are provided below:
Department
Units of outputs
X
200,000
Y
100,000
Z
50,000

Required: 
The total overheads chargeable to the production departments using: 
(i) Continuous allotment method. 
(ii) Simultaneous equation method. 
(iii) Overhead cost per unit for each department.
 
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2a
Cost-volume profit analysis (break-even analysis)
​​XYZ Ltd. manufactures a product branded "Zed". The company has a production capacity of 1,000 units of Zed per day. 

The following information relates to one unit of the product:

Sh.
Materials
120
Labour
40
Variable overheads
40
Fixed overheads
100
Selling price
400

Required:
(i) 
Calculate the Break-Even-Point (BEP) of sales at the current selling price for 1,000 units. 
(ii)
The marketing manager intends to reduce the selling price by either 10% or 20% for the 1,000 units without affecting the total profit.
Advise the marketing manager on the required sales volumes under the two options.
 
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2b
Cost accumulation
​ ​​BRK Ltd. orders a raw material graded "Exe" for its manufacturing purpose. The following information is available from the production manager:

Annual consumption of Exe (units)
200,000
Ordering cost per order (Sh.) 
18,750
Carrying cost per unit (Sh.) 
3

Required:
(i) The Economic Order Quantity (EOQ) for material "Exe". 

(ii) The number of orders to be placed per year. 

(iii) The production manager has proposed to increase the current Economic Order Quantity (EOQ) to 100,000 units. Justify how this would increase the total cost of inventory thus not profitable.
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3a
Cost accumulation
​​Mitambani Manufacturers Ltd. are in the initial process of adopting a Just-in-Time (JIT) inventory control system: 

Required: 
(i) Highlight four objectives of a JIT inventory control system. 

(ii) Describe four benefits that would accrue to the company from using JIT inventory control system.
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3b
Introduction to cost estimation
​​ Summarise three limitations of accounts analysis as a method of cost estimation.
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3c
Cost accumulation
​​
​​Jundi Ltd. maintains separate cost and financial ledgers. The Accountant has provided the following opening trial balance in the cost ledger:

                             Cost ledger opening trial balance
Sh.
Sh.
Financial ledger control account
249,520
Work-In-Progress (WIP) control account
125,210
Finished goods control account85,150
Stores ledger control account
39,160
249,520
   249,520

Additional information: 
1. During the period, total sales amounted to Sh.375,290. 

2. Total purchases, wages and overheads amounted to Sh.292,860. 

3. At the end of the period, the stores ledger and Work-In-Progress (WIP) control accounts had the same values as in the opening trial balance above. 

4. The closing balance on the financial ledger control account was Sh.212,420.

Required: 
(i) The profit for the period. 
(ii) Closing trial balance for the period.
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4a
Costing terms and concepts
​​In the context of management accounting, distinguish between "discrete costs" and "imputed costs".
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4b
The context of management accounting
​​The following information was extracted from the financial statements of ABC Ltd. and XYZ Ltd. in respect of the year ended 31 December 2016: 

Income statement extracts:

Income statement extracts:
ABC Ltd.
Sh. "000"
XYZ Ltd.
Sh. "000"
Sales
497,000
371,000
Cost of sales(357,840)
9296,800)
Gross profit
139,160
74.200
Operating expenses
(70,460)
(45,520)
Interest
(19,000)
-
Net profit
49,700
29,680
Statement of financial position extracts:
ABC Ltd.
Sh. "000"
XYZ Ltd.
Sh. "000"
Non-current assets
142,000
92,000
Current assets:
Inventory
100,000
87,000
Accounts receivable
46,000
42,000
Cash at bank
40,000
44,000
Current liabilities
98,000
108,000
Long-term loans
33,000
-
Shareholder funds
197,000
157,000

Required: 
Assuming a 365 day year, evaluate the performance of the two firms using the following financial performance measures: 

(i) Profitability. 
(ii) Liquidity. 
(iii) Activity. 
(iv) Gearing.
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5a
Budgetary control
​​Megspa Ltd. manufactures a single product branded "Wye". 

The following data relates to its operations for the month of October 2017:

Budget
Units
Actual
Units
Sales
60,000
58,000
Production
60,000
60,000
Sh.
Sh.
Sales
840,000
823,600
Direct materials
240,000
246,000
Direct labour
300,000
288,000
Fixed overheads
135,000
140,000
Net income
165,000
149,600

Required: 
A flexed budget for the month of October 2017 for the actual sales of 58,000 units.
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5b
Product costing methods
​​Tegemeo Ltd. manufactures a product which yields three joint products namely; H, N and T. The joint products are then processed further in a common process which consists of two consecutive stages. 

The data below relate to the month of August 2017:

Process 1
Sh.
Process 2
Sh.
Direct materials (30,000 units at Sh.20 per unit)
600,000
-
Conversion costs
765,000
2,262,000
Scrap value of normal loss per unit
5
20

Additional information:
1
The output in Process i is transferred to Process 2 and amounted to 26,000 units.
2
The output in Process 2 consists of three joint products as follows:
Product
H
N
T
Quantity (units)
10,000
7,000
6,000
3
The normal loss for both Process 1 and Process 2 is 10%.
4
The unit selling prices for H, N and T are Sh.180, Sh.200 and Sh.300 respectively.
5
All joint products are sold as soon as they are produced.
6
Sales value method of joint costs apportionment is used.

Required: 
(i) Process 1 account. 
(ii) Process 2 account. 
(iii) Income statement for the joint products.
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