# HPS 2408: MANAGEMENT ACCOUNTING Past Paper

W1-2-60-1-6
JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE AND TECHNOLOGY
University Examinations 2014/2015
FOURTH YEAR SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF PURCHASING AND SUPPLIES MANAGEMENT
HPS 2408: MANAGEMENT ACCOUNTING
DATE: AUGUST 2014 TIME: 2 HOURS
INSTRUCTIONS: ANSWER QUESTION ONE (COMPULSORY) AND ANY OTHER TWO QUESTIONS

Question One (30 Marks)

As the Head of Procurement Department, you are responsible for all decisions made by your department, to enhance the decision making skills of your team, you have decided to educate them about the decision making process. With the use of diagram prepare a well detailed presentation that you will use to educate them about the decision making process. (30 Marks)

Question Two (20 Marks)

a) Mumias Sugar Ltd is trying to set the selling price for one of its products and three prices are under consideration. These are Kshs. 4, Kshs. 4.30 and Kshs. 4.40.

The following information is also provided:

Alternatives

 Conditions Kshs. 4.00 Kshs. 4.30 Kshs. 4.40 Best possible 16,000 14,000 12,500 Most likely 14,000 12,500 12,000 Worst possible 10,000 8,000 6,000 Fixed costs = Kshs. 20,000 Variable cost per unit= Kshs. 2

Required:

Advice the company on the best price to set by use of:                                 (15 Marks)

Minimax regret criterion

(ii) Maxima decision rule

(iii) Laplace criterion of rationality

b) Write brief notes to distinguish between variable cost and fixed cost. (5 Marks)

Question Three (20 Marks)

a) The Production Manager of XYZ Company, is concerned about the apparent fluctuation in efficiency and wants to determine how labour cost (in Kshs.) are related to volume. The following data presents results of the 1.2 most recent weeks:

 Week No. Units produce (x) Labour costs (y) 1 34 340 2 44 346 3 24 287 4 36 262 5 30 220 6 49 416 7 39 337 8 21 180 9 41 376 10 47 295 11 34 215 12 24 275

Required:

Estimate the cost function using regression analysis.                                     (15 Marks)

b (i)

 Finished products NIKS ARGS The Sales Director has estimated the following: (i)    Demand for the COS products 4,500 units 4,000 units (ii)  Expected S. P per unit Kshs. 32 Kshs. 44 (iii)  Closing stock @ 31st December 2015 is required to be 400 units 1,200 units (iv)  Opening stocks at 31st January 2014 900 units 200 units (v)   Unit cost of this opening stock will be Kshs. 20 Kshs. 28 (vi)   The amount of plant capacity required for each product is:  Machining Assembling 15 mins 12 mins 24 mins 18 mins (vii) The raw material content per unit is: Material A Material B 1.5 kg 2.0 kg 0.5 kg 4.0 kg (viii)  Direct labour hours required @ unit of each product is 6 hrs 9 hrs

Finished goods are valued at FIFO basis at full factory cost:

(ii)

 Raw materials Material A Material B (i)  Closing stock requirement kilos at 31st December 2015 600 1,000 (ii) Opening stock at 1st April 2014 1,100 600 (iii)  Budgeted cost of raw materials per kilo Kshs. 1.50 Kshs. 1.00

Actual cost per kilo of opening stocks are as budgeted cost for the coming year:

(iii) Direct labour

The standard wage rate of direct labour is Kshs. 1.50/hr.

Factory overhead is absorbed on the basis of machining hours with separate absorption rates for each department.

You have been provided with the following data about a particular company:

Fixed cost: Kshs. 500
Variable cost per unit: Kshs. 10
Volume production: 1,000 units

Required:

Calculate the total cost of production for the company. (5 Marks)

Question Four (20 Marks)

a) Alimak P/C produces two products Niks and Args. The budget for the next year to 31st 2015 is to be prepared expectations for the forthcoming year includes the following ALIMAR PLC.

Balance Sheet as at 1st January 2014:

 Kshs. Kshs. Kshs. Fixed Assets Land and buildings 45,000 Plant and Equipment(NBV) 112,000 Current Assets: Raw materials 7,650 Finished goods 23,615 Debtors 19,500 Cash 4,300 55,065

 Current liabilities: Creditors 6,800 Taxation 24,500 (31,300) 23,765 180,765 Financed by: 150,000 ordinary shares of Kshs. 1 each 150,000 Retained profit 30,765 180,765

The following expected overheads in the production cost centre budgets:

 Machinery Depart Kshs. Assembly Depart Kshs. Supervisors salaries 10,000 9,150 Power 2,400 2,000 Maintenance and running costs 2,100 2,000 Consumables 3,400 500 General expenses 19,600 5,000 39,500 18,650

Depreciation is taken at 5% straight – line on plant and machinery equipment. A machine costing the company Kshs. 20,000 is due to be installed on 1st October 2014 in machinery department which already has machinery installed to the value of Kshs. 100,000 at cost.

f) Selling and distribution expenses:

 Kshs. Selling commission and salaries 14,300 Travelling distribution 3,500 Office salaries 10,100 General administration expenses 2,500 30,400

There is no opening and closing work in progress and inflation should be ignored:

Required:

Prepare the following budgets for the year ended 31st December 2015 for Alimak PLC.
(15 Marks)

(i) Sales budget

(ii) Production budget (units)

(iii) Direct material utilization budget
h) What are the advantages of standard costing? (5 Marks)

Question Five (20 Marks)

a) The standard cost for the production of a saloon car model called ALLION 260 is as follows:

 Inputs Standard quality Standard price Direct materials 3kg 4.00 Direct labour 2.5 hrs 14.00

During the month, 6,500kg of raw materials were purchased at Kshs. 3.80 per kilo and all of it was used to produce 2,000 units of finished products. Also 4,500 hours of direct labour time were used at a total cost of Kshs. 64,350. (12 Marks)

Required:

Calculate:

(i) Direct material price variance

(ii) Direct material usage (efficiency) variance

(iii) Direct labour efficiency variance

(iv) And comment on the result for each

b) What are the causes of?

(i) Price variances

(ii) Labour efficiency variances

(Visited 157 times, 1 visits today)