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CPA Management accounting – Pilot September 2015 Past Paper & Answers

Unit: Management accounting

11 Questions

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Download CPA Management accounting Pilot September 2015 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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1a
Product costing methods
​ ​ ​ ​ ​ ​ ​ ​ ​ ​​New Colour Limited manufacturers two joint products Exe and Wye. A by product Zed is also produced. Output from Process One is transferred to Process Two where the joint products emerge. The following information is available for July 2015:

1


Process One cost data:
Raw material inputs (40.000 kgs)
Direct wages
Overheads
Output:
Transferred to Process Two
By product Zed
Closing work in progress (50% complete as to conversion costs)
........................................................................................................

Sh.9,620,000
Sh.7,650,000
Sh.1,105,000

30,000Kgs
2,000kgs
8,000kgs
2
By product Zed retails at Sh.75 per kg. Additional selling costs amount to Sh. 15 per kg. 500 kgs. were sold in 2 July 2015
3
Process Two cost data:
Additional direct materials
Direct wages
Overheads
Output
Finished goods (Exe and Wye)
Losses in the process
...................................................

Sh. 3,852,500
Sh.6,099,609.5
Sh 3,828,750

28,000kgs
2,000kgs
4
The output is produced in the ratio of 2:3 for products Ese and Wye respectively
5
Normal loss in the process is 2.5% Scrap value per unit is Sh.200.
6
The selling price per unit of each product is as follows:
Exe
Wye
Sh.2,000 per Kg
Sh.1,218.75.per.Kg.
7
Joint costs are allocated on the basis of sales revenue at separation point.

Required:

(i) Statement of production for Process One.

(ii) Process Two account

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1b
Product costing methods
​​ In the context of service costing, explain the main features of a service.
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2a
Budgetary control
​​ Explain six requirements of an effective budgetary control system.
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2b
Standard costing and variance analysis
​ ​​A limited company operates a system of standard costing. The following infor nation is available for ilie inonth of July 2015:

1
Actual cost data:
Direct materials purchased (36000 Kgs.)
Direct wages (6800 hours) 
Variable production overheads
Fixed production overheads
..................................................................
Sh.
1,890,000
2,210,000
620,000
1,880,000
2
 Output during the period was 3500 units of product Y.
3
The standard production units were budgeted at 4800 units.
4
The standard cost data per unit is as follows:

Direct materials purchased (Sh.500 per Kg.)
Direct wages (2 hours)
Variable production overheads
Fixed production overheads

.........................................................................
Sh.
500
600
200
400
1,700
5
Labour records show 6200 hours were worked. 600 hours were recorded as idle time due to machine breakdown.

Required: 

(i) Direct material cost, price and usage variance. 

(ii) Labour cost, rate, efficiency and idle time variance. 

(iii) Variable overheads cost variance. 

(iv) Fixed overhead expenditure variance. 
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3a
Costing terms and concepts
​​Explain four ways in which a company could achieve cost reduction.
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3b
Costing terms and concepts
​​Distinguish between "cost centre", "profit centre" and "investment centre".
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3c
The context of management accounting
​​ Explain the term "balanced scorecard".
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3d
The context of management accounting
​​Describe four perspectives of balanced scorecard giving two measures of performance that could be used.
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4a
Cost accumulation
​ ​ ​ ​ ​​Alpha Limited manufactures three products in two production departments; machining and finishing. It also has two service departments, a canteen and machine maintenance departments. The following are the budgeted cost data for the coming year:

Department

Allocated overheads (Sh.)
No. of employees 
Maintenance orders

Products
Production (units)

Direct material cost per unit (Sh.)
Direct labour hours per unit:
Machining (Sh.60 per hour)
Finishing (Sh.50 per hour) 

Machine hour per unit:
Machining
......................................................
Machining

3,502,000
15
52

Benta
3,000

120

3
4


2
Finishing

1,748,000
9
13

Centa
4,500

150

2
2


4
Canteen

800,000
2
-

Denta
2,000

170

1.5
2


3
Maintenance

400,000
6
-
   Overheads are absorbed on machine hours in machining and labour hour in finishing.

Required: 

Calculate the budgeted cost per unit for each product.
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4b
Cost accumulation
​ ​ ​​The finishing department of a factory has the following payroll data for the month of August 2015:

...................................................
Total attendance time
Normal working hours
Productive time
Non productive time
     -    Due to poor supervision
     -    Normal machine repairs
Basic hourly rate per hour 
Direct.employees
 19800 hours
18000 hours
18850 hours

400 hours
550 hours
Sh.150
Indirect.employees
7050 hours
6400 hours
-
-
-
-
Sh.150
Overtime is paid at a premium of 40% of base rate. 40% of the overtime for both categories was worked to meet specific request of a customer. A general bonus of Sh.625,000 was paid to all the employees.

Required:
Wages control account to show the wages allocation for the period.

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5
Cost-volume profit analysis (break-even analysis)
​ ​ ​ ​ ​ ​ ​ ​ ​​Omega Manufacturers Limited has just acquired new production facilities to produce product Omega. The product will be produced in two departments, crushing and filtering. 

Additional information:
1
The product will retail at a price of Sh.500 per litre.
2
Variable production costs are as follows:
.................................................
Direct materials
Direct labour
Variable production overheads
Crushing
Sh. 50
Sh. 150  
Sh. 40
Filtering
-
Sh. 40
Sh. 20
3
Fixed production overheads amount to Sh.5,000,000 for both departments.
4
The Crushing department is currently operating at full capacity with available labour hours being 10,000.
5
Each unit of Omega requires 0.25 hours in the Crushing department.

Required: 
(a)
(i)
Break-even point in units and revenue.
(ii)
Margin of safety in units. 
(iii)
Current budgeted profit.

(b)
A customer has offered to purchase 2000 units of product Alpha, another product that Omega Manufacturers Limited can produce with the new production facility: Cost data is as follows for product Alpha:

(i)
Cost per unit
..................................................
Direct materials
Direct labour
Variable production overheads

Crushing
Sh. 250
Sh. 300
  Sh. 50

Filtering
-
Sh. 80
Sh. 20
(ii)
Each unit of Alpha requires 0.5 hours in crushing department.
(iii)
The customer has offered a price of Sh.1500 per unit of Alpha.
(iv)
Incremental fixed costs associated with the offer amount to Sh.1,000,000.

Required:
Advise the company on whether to accept the offer.
 
(c)
The management is considering a proposal to establish a new market in a neighbouring country for product Omega.
This will require expansion of the production facility.

The proposal will increase costs as follows:
Advertising expenses
Travelling expenses
Fixed.production.overheads 
10% of revenue.
10%.of.prime.cost.
Sh.2,500,000
Target annual sales volume will be 10,000 units in the new market at a price of Sh.900 per unit.

Required:
Advise the company on whether it should market product Omega in the new country.

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