(Knowledge for Development) KIBABII UNIVERSITY UNIVERSITY EXAMINATIONS 2020/2021 ACADEMIC YEAR FIRST YEAR SECOND SEMESTER: MAIN EXAMINATION FOR MASTERS IN BUSINESS ADMINISTRATION COURSE CODE: MBA807 COURSE TITLE: MANAGEMENT ACCOUNTING bate: 22"° FEBRUARY,2021 TIME: 2.00PM - 5.00PM INSTRUCTIONS TO CANDIDATE! Answer Question One in Section A and Any other THREE (3) Questions in Section B TIME: 3 Hours KIBU obser es ZERO tolerance to examination clpating This Paper Consists of 6 Prin Pages. Please Turn Over Page 1 of 6QUESTION ON‘ (@) Distinguish between the following terms as used in management accounting (i) Period costs and product costs (3 Marks) (ii) Cost object ad cost unit G Marks) (iii) Cost allocation ad cost apportionment (3 Marks) (6) Pambo Limited manufactures a single product which sells at Ksh, 2,660 per unit. The following are the costs Per unit of the product: Ksh, Direct materials 740 Direct labour 680 Variable overheads 590 ‘The Fixed over heads per annum amounted to Ksh, 8,255,000, The fim, which currently operates at 75% capacity, produces and sells 15,000 units per annum, Calculate the: (i) break-even point in units (ii) break-even point in sales (ii) profit at the current production level (iv) profit for the year at full capacity (v) margin of safety (vi) the produetion level ifthe firm targets net income(after tax at 30%) of Ksh.2,957,500 (12 Marks) (o)The diversity of the business environment coupled with globalization has put corporate ‘managers in a dilemma state. Explain the relevance of the management accountant in the management process of 2 corporation, (9 Marks)QUESTION TWO. {he Production manager of XYZ Company is concemed about the apparent fluctuation inefficiency and wants to determine how labour costs (in Sh.) are related to volume. The following data presents results of the 12 most recent weeks. Week No. Units Produced(X) Labour Costs(Y) 1 34 340 2 44 346 3 m4 287 4 36 262 3 30 220 6 49 416 7 39 337 8 21 180 9 41 376 10 47 295 "1 M4 215 12 24 275 Required: (a) Estimate the cost function using: (The high low method GS marks) (ii) Regression analysis, (6 marks) (©) Assume that the Company intends to produce 45 units; 34 units next period Estimate the labour cost to be incurred (4 marks) (6) ) Discuss the role of budgetary control in an organization (7 Marks QUESTION THREE taki Limited is considering whether to manufacture components Qx, Qn, Qe and Qo internally or buy it outside, The expected costs for each component in the coming year have been estimated as follows:Os Oe O. Qn Production (units) 2,400 3,050 2,800 2,500 Marginal cost per unit: Kshs. Kshs, , Kshs. Direct materials 3 3 8 6 Direct labour 7 6 9 5 Variable costs 6 8 4 1 Directly attributable fixed costs were estimated as follows: Component: Qu -Kshs. 6,500 Qa-Kshs. 8,000 Qe -Kshs. 7,500 Qo -Kshs. 6,000 Other committed fixed costs Kshs. 78,000 A subcontractor has offered to supply components Qa,Q a, Qc and Qo for Kshs.14, Kshs.23 Kshs.19 and Kshs.21 per unit respectively. Required: (a) Advice the company whether to buy or make the components. (b) What other factors should the management consider in making the deci (a) above? (20 Marks) QUESTION FOUR Homa Ltd. manufactures a single product called Bay-02. The following data relates to the product for the months of August and September, 2016 August September Opening stock : 3,500 Production ( units) 19,000 13,000 Closing stock (units) 3,500 - {BA 807 MANAGEMENT ACCOUNT 4The financial data for an activity level of 16,000 units per month is as follows: Ksh. Selling price per unit 120 Manufacturing costs: Direct material per unit 35 Direct labour per unit 15 Variable overheads per unit 10 Fixed costs per month 270,000, Selling and administration costs: - Variable per unit sold 8 - Fixed per month 100,000 Required: (a) Prepare, in columnar format, profit statements for each of the two months, August and September, 2016 using: (®) Absorption costing (8 Marks) (ii) Marginal costing (8 Marks) (b) Reconcile and explain the difference in your results in (a) above. (5 Marks) QUESTION FIVE (a) Explain five differences between management accounting and financial accounting, (1Omarks) (6) Poda Manufacturers produces three products R, $ ad T. The following information relates to the products for the last financial year.