CPA – MANAGEMENT ACCOUNTING REVISION KIT FOR KASNEB COURSE (PAST PAPERS WITH SOLUTIONS)

MANAGEMENT ACCOUNTING REVISION KIT

 

CPA

 

 

MANAGEMENT ACCOUNTING

 

PART 1

 

CPA SECTION 2

 

 

REVISION KIT

 

 

 

 

 

 

 

 

INTRODUCTION

 

Following our continued effort to provide quality study and revision materials at an affordable price for the private students who study on their own, full time and part time students, we partnered with other team of professionals to make this possible.

This Revision kit (questions and answers) contains kasneb past examination past papers and their suggested answers as provided a team of lecturers who are experts in their area of training. The book is intended to help the learner do enough practice on how to handle exam questions and this makes it easy to pass kasneb exams.

 

 

 

KASNEB SYLLABUS: MANAGEMENT ACCOUNTING

 

GENERAL OBJECTIVE

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply management accounting principles and concepts in business

 LEARNING OUTCOMES

 

A candidate who passes this paper should be able to:

 

  • Estimate the cost of goods and services
  • Analyse product costs for manufacturing and non-manufacturing activities
  • Prepare marginal and absorption cost statements
  • Analyse an organisation’s activities through budgetary control process
  • Analyse variances for decision making
  • Use computers in cost management

 

CONTENT

  1. Nature and purpose of cost and management accounting

 

  • The nature of cost accounting and costing terms
  • The role of cost accounting in management
  • The purposes of cost accounting information
  • Scope of cost accounting
  • Meaning of management accounting, scope, limitations, applications
  • Relationship between cost, financial and management accounting
  • Selection of an ideal cost accounting system

 

  1. Cost classification
  • Definition and purpose of cost classification
  • Methods of cost classification: By nature/elements of manufacturing costs; Functional classification; Behavioral classification; Controllability; Time; Financial accounting; Identification with inventory; For decision making

 

  1. Cost estimation
  • Meaning of cost estimation
  • Methods of estimating cost; non-mathematical methods like engineering method, accounts analysis method and high-Iow method; mathematical methods like scatter graph method, OLS regression method (simple linear regression only)

 

  1. Accounting for material, labour and overheads
  • Accounting for materials and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issues, inventory control procedures; economic order quantity (EOQ) and economic batch quantity(EBQ) models and back flush
  • Accounting for labour: Methods of labour remuneration, labour control procedures, maintenance of labour records
  • Accounting for overheads: Types of overheads, manufacturing, distribution and administration, service departmental cost allocation and apportionment, overheads analysis, overhead absorption rates, over or under absorption
  1. Cost bookkeeping
  • The flow of costs in a business enterprise
  • Cost bookkeeping- interlocking and integrated ledger systems
  1. Costing methods
  • Job order costing
  • Batch costing
  • Process costing (including work in progress; joint and by-products)
  • Service costing
  • Unit costing
  1. Marginal and absorption costing.
  • Distinction between marginal and absorption costing
  • Valuation of products under marginal and absorption costing
  • Preparation of marginal and absorption statements; cost of production and profit determination
  • Applications of marginal costing: Break-even analysis and charts (single product)
  • Simplified decision problems; accept or reject, special order, dropping a product, make or buy
  • Operating statements
  1. Activity Based Costing

 Meaning of ABC

  • Types of activities
  • Overhead absorption rates
  • Income statements
  1. Budgeting and budgetary control
  • Nature and purposes of budgets
  • Preparation of budgets; master budgets, functional (department budgets, cash budgets), proforma financial reports (income statements and balance sheets)
  • Purpose of budgetary control; operation of a budgetary control system, organisation and coordination of the budgeting function
  • Distinction between budgeting and budgetary control in the private and public sectors
  1. Standard costing
  • Types of standards
  • Principles of setting standards
  • Standard cost card
  • Behavioural aspects of standard costing
  • Generation of standard cost information
  • Materials, labour and overheads variances; price and efficiency variances
  1. Cost management
  • Value chain-research and development-design-production-marketing distribution and customer care
  • Just in time (JIT)
  • Use of computers in costing; job costing, inventory management, labour costing, cost entre analysis, coding, budgeting and decision making
  1. Emerging issues and trends

 

 

 CONTENT                                                                                                         PAGE

 

Past papers

 

  1. November 2019 …………8
  2. May 2019………………..14
  3. November 2018………21
  4. May 2018……………….27
  5. November 2017………34
  6. May 2017……………….40
  7. November 2016..……46
  8. May 2016……………….52
  9. November 2015………59
  10. September 2015.……64

 

 

Suggested Solution

 

  1. November 2019 …………69
  2. May 2019………………….79
  3. November 2018…………92
  4. May 2018…………………103
  5. November 2017…………116
  6. May 2017………………….130
  7. November 2016…………140
  8. May 2016………………….151
  9. November 2015…………162
  10. September 2015….……171

 

SAMPLE WORK 

 

 

 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

THURSDAY: 28 November 2019.                                          Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) Examine three challenges that young medium-sized organisations might face when introducing cost accounting system into their operations.                              (6 marks)

 

(b) Dilica Ltd. makes and sells a single product called “Delicious”. It is currently operating at 80% of full capacity, producing 112,000 units per month. The total monthly costs at the current level of operation are Sh. 611,000. At 100% capacity, total monthly costs would be Sh.695,000 while fixed costs would be the same per month at all levels of capacity between 80% and 100%.

SAMPLE WORK 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 22 May 2019.                                     Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) Financial accounting is the branch of accounting that organises accounting information for presentation to interested parties outside the business.

Management accounting on the other hand uses information provided both financial accounting and cost accounting with the purpose of providing information to managers for policy formulation, planning and decision making.

SAMPLE WORK 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 28 November 2018.                                      Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) “A budgetary control system could prove successful only when certain conditions and essentials exist”.

 

With reference to the above statement, highlight six conditions and essentials for an effective budgetary system.                                                                              (6 marks)

 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 23 May 2018.                                     Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) Describe four limitations of management accounting.                               (4 marks)

(b) XYZ Ltd. manufactures a component branded “zed” at the rate of 4,000 units per week. Demand for the component is 2,000 units per week while the production set up cost is Sh.50 per batch. The accountant has provided the holding cost per unit per annum as Sh.0.001.

Assume a 50-week year.

SAMPLE WORK 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 29 November 2017.                                      Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

a) Explain four purposes of cost accounting. (8 marks)

 

b) Mazuri Ltd., a manufacturing company, has three production departments and two service departments. Overheads for the departments for a specific period were as follows:

 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 24 May 2017.                                     Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) Explain four challenges that could be encountered when installing a cost accounting system.                                                                                                                   (4 marks)

(b) Evaluate three benefits of the balanced scorecard.                                        (6 marks)

(c) Baraka Ltd. manufactures a single product which is meant for the local market only. The monthly demand for the product varies from one month to the other.

During the month of April 2017, 500 units were produced incurring the following expenses:

SAMPLE WORK 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 23 November 2016.                                      Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

a) Describe six skills that a management accountant should possess (6 marks)

 

b) Summarise four perspectives which the balanced scorecard focuses on. (4 marks)

 

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

 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

WEDNESDAY: 25 May 2016.                                     Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) The following information has been made available from the records of Keni Automotives Ltd. a company dealing with the manufacture of spare parts:

SAMPLE WORK 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

TUESDAY: 24 November 2015.                                         Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

a) Describe three benefits of management accounting. (6 marks)

 

b) Highlight four purposes of performance measurements. (4 marks)

 

c) The net profit of Pine Ltd a manufacturing concern for the year ended 30 September 2015 as shown the financial accounts amounted to Sh.357, 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:

SAMPLE WORK 

CPA PART I SECTION 2

 

MANAGEMENT ACCOUNTING

 

September 2015.                                                                      Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Show ALL your workings.

 

QUESTION ONE

 

(a) New Colour Limited manufacturers two joint products Exe and Wye. A 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:

 

SUGGESTED ANSWERS AND SOLUTIONS

 

NOVEMBER 2019

 

 

QUESTION ONE

Challenges that medium sized organizations might face when introducing cost accounting system

  1. Lack of support from top management effective functioning system requires whole hearted support from the management otherwise the system will fail or may not provide the desired route
  2. Lack of cooperation from the staff – the tendency of the staff is to resist any new system at the beginning and may not extend your cooperation for the system no junction effectively.
  3. Changing environment – the market may change, the production process may change and the management ideas may change

SAMPLE WORK 

SUGGESTED ANSWERS AND SOLUTIONS

 

NOVEMBER 2018

 

 QUESTION ONE

a) Condition and essentials of an effective budgetary system:

  • Sound administration: Budgets cannot replace good management, budgets should be administered efficiently responsible executives
  • Reward and punishment: The concerned employees should be suitably rewarded for performance as per the budget but lazy employees should not go unpunished
  • Results take time: the budgetary control is an efficient to control performance but it requires time to show results. Those who administer budgetary control should have a high degree of knowledge and experience in the field.

SAMPLE WORK 

SUGGESTED ANSWERS AND SOLUTIONS

 

MAY 2018

 

 

QUESTION ONE

a) Limitations of managements accounting

  • Unquantifiable variables: Management accounting seeks to interpret and evaluate an objective historical event on record in terms of money. But, inpractice, the firm is facing many problems which cannot be exposed.
  • Evolutionary state: Management accounting is a recent development discipline. The utility of management accounting is dependent upon the intelligent interpretation of the data available for managerial use. Hence, it is pre mused that the management accounting stands in evolutionary stage.

 

SUGGESTED ANSWERS AND SOLUTIONS

 

NOVEMBER 2017

 

 QUESTION ONE

a) Purpose of cost accounting

  1. Performance evaluation: Cost accounting information is used to measure and evaluate actual performance so as to make a decision of the degree of optimality or efficiency of resource utilization.
  2. Resource allocation decisions: For example product pricing in determining whether to accept or rejects jobs. This is based on cost and revenue implications of the relevant decisions.

SAMPLE WORK 

SUGGESTED SOLUTIONS AND ANSWERS

 

MAY 2017

 

 QUESTION ONE

a). Challenges encountered when installing a cost accounting system.

  • Heavy expenses in installing and maintaining the system: the setting of a separate costing department with staff often poses a problem in addition to installation, the operating expenses in the form of printing and stationery, heating and lighting, depreciation and insurance, rent and rates are to be incurred.
  • Lack of support from management. Wherever costing system is installed. It is essential to seek the support of various departmental managers. very of them the managers show hostile attitude towards the costing system. They feel this system will interfere in their routine work and probably as a means if checking their efficiency. Under such scenarios it is better to convince them about the utility of costing system for the business as a whole.

 

SUGGESTED ANSWERS AND SOLUTION

 

NOVEMBER 2016

 

 

QUESTION ONE

a) Skills that management accountant should posses

  • An analytical mind which could see through implications of alternate courses.
  • Ability to get along with all levels of management. The reports prepared and submitted must be free from bias of any type.
  • Thorough knowledge about budgeting and forecasting so as to consider alternate proposals under consideration
  • Knowledge about sources of funds so that the best source could be tapped at minimum borrowing cost

 

 

SUGGESTED ANSWERS

 

NOVEMBER 2015

 

SAMPLE WORK 

QUESTION ONE

a). Benefits of Management accounting

  1. Performance evaluation: Management accounting information is used to measure and evaluate actual performance so as to make a decision of the degree of optimality or efficiency of resource utilization.
  2. Resource allocation decisions: For example product pricing in determining whether to accept or rejects jobs. This is based on cost and revenue implications of the relevant decisions.

SAMPLE WORK 



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7 thoughts on “CPA – MANAGEMENT ACCOUNTING REVISION KIT FOR KASNEB COURSE (PAST PAPERS WITH SOLUTIONS)”

  1. I recommend this management accounting revision kit Masomo Msingi. Bought it and it’s actually the best. Thank you guys

    1. Sh 500 in hard copy and it covers 2015 to November 2019. Call | Text or Whatsapp 0728 776 317 for delivery arrangements

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