UNIVERSITY EXAMINATION 2023/2024
SCHOOL OF BUSINESS AND ECONOMICS
DEPARTMENT ACCOUNTING AND FINANCE
MASTER OF BUSINESS ADMINISTRATION
VIRTUAL VARSITY
UNIT CODE: MAF5201 UNIT TITLE: MANAGEMENT ACCOUNTING I
DATE: SAT 17TH AUG, 2024 11.00AM MAIN EXAM TIME: 3 HOURS
INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO
QUESTION ONE
a) Azam Ltd a leading company in East Africa produces two products and the following
budget applies for the year 2022:
Product X Product Y
Selling Price 6 12
Variable Cost 2 4
Contribution margin 4 8
Fixed costs apportioned Sh. 100,000 Sh. 200,000
Units sold 70,000 30,000
Required:
Calculate the break-even points for each product and the Company as a whole and
comment on your findings. (10 Marks)
b) Standard costing and budgetary control are control techniques adopted in a firm with
specific objectives. Explain what could be the points of differences between the two.
(6 Marks)
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c) Relevant cost is appropriate to a specific management decisions and therefore
areaffected by the decision at hand. Discuss the main features of relevant cost
(6 Marks)
d) Differentiate between transfer pricing and transfer pricing mechanisms. (4 Marks)
e) Explain why there should be difference in profit under marginal costing and absorption
costing (4 Marks)
QUESTION TWO
a) Big man Bazuu Corporation has provided its contribution format income statement for January
2023. The company produces and sells a single product.
Sales (2,900 units) 269,700
Variable Expenses 107,300
Contribution Margin 162,400
Fixed expenses 137,100
Net operating income 25,300
Required:
If the company sells 3,100 units, what will be its total contribution margin and net operating
income? (8 Marks)
b) Explain the main assumptions made in relevant costing. (4 Marks)
c) State any three Cost Estimation Method. (3 Marks)
QUESTION THREE
A factory engaged in manufacturing plastic buckets is working at 40% capacity and
produces 10,000 buckets per annum:
Sh.
Material 10
Labour cost 3
Overheads 5 (60% fixed)
The selling price is Sh.20 per bucket.
If it is decided to work the factory at 50% capacity, the selling price falls by 3%. At 90%
capacity the selling price falls by 5%, accompanied by a similar fall in the prices of material.
Required:
a) Calculate the profit at 50% and 90% capacities (8 Marks)
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b) Calculate the break-even points for the same capacity productions. (4 Marks)
c) Explain the points to be considered while preparing production budget.
(3 Marks)
QUESTION FOUR
Isaac Ltd has a production capacity of 200,000 units per year. Normal capacity utilization
is reckoned as 90%. Standard variable production costs are Sh. 11 per unit. The fixed costs
are Sh. 360,000 per year. Variable selling costs are Sh. 3 per unit and fixed selling costs
are Sh. 270,000 per year. The unit selling price is Sh. 20. In the year just ended on 30 th
June 2018, the production was 160,000 units and sales were 150,000 units. The closing
inventory on 30th June was 20,000 units. The actual variable production costs for the year
were Sh. 35,000- higher than the standard.
Required:
Calculate the profit for the year,
a) By the absorption costing method (7 Marks)
b) By the marginal costing method (6 Marks)
c) Explain the difference in profit if found (2 Marks)
QUESTION FIVE
a) State and explain the four main environment within which decisions can be made
(8 Marks)
b) State and explain the important techniques and systems used by management
accounting (4 Marks)
c) Explain any three costs that are classified according to functions of the department
(3 Marks)
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