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Candidates should check the question paper to ascertain that all the pages are printed as indicated and that no questions are missing.

This paper consists of 32 printed pages.

Question 1 2 3 4 5 6 7 TOTAL SCORE

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For Examiner's Use Only

Write your name and index number in the spaces provided above. Sign and write the date of examination in the spaces provided above. This paper consists of SEVEN questions. Answer any FIVE questions. ALL questions carry equal marks. Show all your workings. Answers must be written in the spaces provided in this-question paper. Candidates should answer the questions in English.

INSTRUCTIONS TO CANDIDATES

3 hours

MANAGEMENT ACCOUNTING

DIPLOMA IN SUPPLY CHAIN MANAGEMENT DIPLOMA IN BUSINESS MANAGEMENT

DIPLOMA IN ROAD TRANSPORT MANAGEMENT MODULE III

BUSINESS EDUCATION SINGLE AND GROUP CERTIFICATE EXAMINATIONS STAGE III

THE KENYA NATIONAL EXAMINATIONS COUNCIL I

Candidate'

D . ate.

2903/305 2909/304 2906/305 3103 MANAGEMENT ACCOUNTING July 2015 Time: 3 hours

Name:------------------ Index No: .! _

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(10 marks)

(i) the Economic Order Quantity (EOQ). (ii) the annual stock holding costs. (iii) the annual stock ordering costs. (iv) the total annual stock costs.

Determine:

(b) Mukaso Limited uses material MD950 in its production. The company uses 15 units of the material per day and operates for 25 days per month. The ordering costs are Ksh 1,200 per order and the carrying costs are Ksh 1.20 per unit per annum.

(10 marks)

(i) the break even point in value (shillings) (ii) the sales value to yield a profit of Ksh 2,500,000. (iii) Margin of safety when the sales value is given as Ksh 8,500,000.

Determine:

The annual total fixed costs are Ksb 2,500,000.

Ksh perunit 40 30 20

Direct materials Direct labour Variable overheads

A company sells its products at Ksh 150 per unit. The costs of production are as follows:

(a) 1.

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(12 marks)

(ii) Advise the management on the project to undertake, if the two projects are mutually exclusive.

(i) Calculate the Net Present Value (NPV) of each project.

The cost of capital for all projects in the company is 12% per annum.

Project A Project B Ksh Ksh

1 1,150,000 1,125,000 2 500,000 750,000 3 650,000 675,000 4 400,000 600,000 5 750,000 400,000

(b) Tiko limited is considering investing Ksh 2,500,000 in either project A or project B. The projects have the following estimated annual net cash in flows over 5 years.

(8 marks) (ii) Estimate the sales value when the advertising expenses is Ksh 38,000.

(i) Calculate the regression line ofY on X, using the least square method.

Advertising expenses Sales (Ksh '000') (Ksh '000')

20 220 22 300 24 350 27 270 30 420 32 300 35 I 290 40 370

Bartek limited has presented the table of sales and advertising expenditure in thousands of shillings during the year ended 31 March, 2013 as follows:

(a) 2.

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(iii) Calculate the total cost given that there is a fixed cost of Ksh 1,500 per week. (12 marks)

(ii) Calculate the project's expected duration and identify the critical path;

(i) Draw a network diagram for the project;

Activity Precceding Activity Duration Normal costs per activity Activity (weeks) Ksh '000'

A 6 15 B 8 18 c 10 22 D A 11 30 E A 12 25 F B,D 6 8 G F 9 12 H F 5 16 I c 4 20 J E 15 10 K E,G,H,I 19 18 L I 18 15 M J,K,L 3 35

(b) HB Limited is considering investing in a project which has the following activities, duration and costs.

(i) Planning; (ii) Staffing; (iii) Controlling; (iv) Directing.

Explain the role of Management Accounting in the following functions of an organisation.

(a) 3.

(8 marks)

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(ii)

Prepare the marginal cost statement to determine the contribution per unit. Advise the management on whether to accept or reject the special order.

(12 marks)

(i)

To meet this special order, employees will work overtime at I + of the normal rate of payment per hour.

Ksh 400,000 Ksh 80,000

500 hours

Sales Direct materials Direct labour

Variable production overheads are absorbed on direct labour hour basis. Currently, there is no extra labour hour available. However, a customer has approached the company with a request for a special order. Information about the special order is as follows.

Ksh 450 600 150

Direct materials Direct Jabour (3 hours) Variable production overheads

(b) Umoja Limited manufactures a single product which sells at Ksh 2,100 per unit. The marginal cost of production per unit is as follows:

(ii) Determine the minimum cost of transport, according to the allocations in (i) above. (8 marks)

(i) Advise the management on the best warehouse for each customer.

The company would like to minimise transport costs:

WAREHOUSES CUSTOMERS A B c D

I 5 12 10 15 II 8 15 9 12 Ill 10 6 8 20

I IV 3 14 11 17 v 8 15 4 11

Four customers situated in different towns make orders for goods. The transport costs (in Ksh '000') from the warehouse to the customers is given in the table below:

A transport company has five warehouses situated in five different cities in which the company stores goods for distribution to customers.

(a) 4.

..,

1

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(12 marks)

(i) the average rate of service; (ii) the traffic intensity; (iii) the average number of calls in the queue; (iv) the average time a caller spends in the queue; (v) the total amount paid to the operator in a 10 hour day, if each call is paid at

Ksh4.

Determine:

(b) A lone telephone operator in a company answers all incoming calls. Calls arrive at the switchboard at the rate of one call in every 3 minutes. The operator takes 2 minutes to serve every customer who calls.

(8 marks) Find the initial solution using the North-West Comer rule.

PLANTS CITIES

I II m IV

A 6 8 10 6

B 7 11 11 8

c 4 ~o 9 10

D 11 5 12 4

Motokaa Limited is an auto company that has four plants. A, B, C and D. The capacities of the four plants are 1,800, 1,500, 2,300 and 1,400, respectively. The plants are used to distribute cars to four cities: I, II, Ill and IV. The demand of the four cities are: 2,300, 1,400, 1,500 and 1,800, respectively. The transportation costs (in Ksh '000') between the plants and the cities are as follows:

(a) 5.

r

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(12 marks)

(ii) Explain whether Vesu's statement is correct or incorrect, based on calculations in (i) above.

(i) Calculate:

(I) Direct material price variance; (II) Direct material usage variance; (Ill) Direct material cost variance; (IV) Direct labour rate variance; (V) Direct labour efficiency variance.

Vesu, one of the directors of the company, has stated that the actual performance is better than the expected performance.

- Materials purchased, 30,000 Kgs for Ksh 135,000 - Materials used, 25,700 Kgs - Direct labour hours utilized, 15,150 hours at a total cost of Ksh 48,480

The production schedule for the month of April 2013 required 5,000 units. The actual data for the month of April 2013 is as follows:

- Materials - 5 Kgs@ Ksb 4.20 per kg - Labour - 2 hours @ Ksh 3 per hour

(b) Vesu industries manufacture a product whose standard costs per unit are as follows:

(8 marks) Explain four advantages of using internet in business transactions. (a) 6.

26 2903/305, 2906/305, 2909/304, 3103

(12 marks) (II) optimal sales value.

(I) optimal number of cabinets of each model the company should produce and sell inorder to optimize the sales, using the graphical method.

(ii) Determine the:

(i) Formulate a linear programming model from the information above.

12,000 4,500 1,050

AVAILABILITY MODEL MODEL ZDl ZD2

Selling Price (Ksh) 5,000 4,500

Material 1 (units) 120 150 Material 2 (units) 60 50

Labour (Hours) 17.50 10

(b) Zeka Limited produces two models of filing cabinets; Model ZD 1, and Model ZD2. The following information relates to one unit of each of the two models.

(8 marks) (II) there is an external market for the transfer product.

(I) there is no external market for the transfer product. (Give three ways)

(ii) How is transfer price determined if:

Explain the concept of transfer pricing using an example. (i) (a) 7.

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