Free Management Accounting Revision

1. Highlight five (5) reasons why cost and financial accounting profits/losses differ.

2. (a)________- costs refers to costs that a company incurs irrespective of the operational decisions it makes, whereas (b)______ costs refers to costs that can be excluded due to stoppage of conducting a business activity.

3. The______cost calculates the direct costs of raw materials and labor that are involved in the production of a good.

4. The following information relates to the output levels and corresponding overhead costs for Clover limited for the last four months:

Required
Using the high-low method
a. Formulate the cost function for the above relationship
b. Estimate the total overhead costs associated with 225,000 units of output.

5. A model that figures out the relationship between one independent variable and one dependent variable using a straight line is referred to as_______.

Dhalia, an automobile mechanic, has been operating a welding garage in Kitui for the past one year, making and selling metal doors and windows.
The costs of the welding job assignment are as follows:

6.

Required
Formulate an equation to estimate the total cost of the welding shop and compute the cost of undertaking 1,507 job assignment using:
a. High-low method.
b. Simple linear regression method.

7. The following information relates to the activities of a production departments of Kutoka td for the month of September 2020:

The total overheads incurred by the production department during the period amounted to kshs 1.320,000.
Job number X210 was produced in the department during the same period. The following relevant data is available:

Required
Calculate the total cost of job number X210 using the following methods of overhead absorption:
a. Direct labor hours
b. Direct machine hours
c. Percentage of direct material cost
d. Percentage of direct labor cost
e. Percentage of prime cost

8. Highlight  four (4) reasons for the differences in profit or loss between cost accounts and financial accounts in an integrated system of accounts.

9. Nahumi  enterprises operates an integrated cost and financial accounting system. The following information has been extracted from the company’s cost and financial accounts as at 30 September 2020:

Required
A statement reconciling Malaika ltd cost and financial net profits as at 30 September 2020

10. Product costing methods are used to assign a cost to a manufactured product. _________costing is used when large quantities of the same product are manufactured, usually in a long production runs

11. TRUE OR FALSE: Abnormal loss has no impact on value of stock, whereas stock is inflated to cover the normal loss.

12. _________costing refers to a costing system whereby all manufacturing costs, including variable and fixed costs, are classified as part of product costs.

13. Dongo ltd manufactures and sells a single product. The following information relates to the company for the year ended 31 December 2021:

The following changes are expected to occur during the year ending 31 December 2021.
i. Variable selling and distribution expenses will reduce by 7.5% due to increased efficiency of salespersons
ii. Variable overheads will increase by 4%
iii. Labor costs will reduce by 5%
iv. Material cost will increase by 3% due to inflation
v. Selling price will be reduced by 4.5 % in order to attract customers.
vi. No closing stock is expected at the end of the period.

Required
a. Expected break-even sales revenue for the year ending 31 December 2021
b. Expected margin of safety in sales for the year ending 31 December 2021.
c. Expected sales values at which profit of kshs 4 million will be achieved.
d. A summary of the operating statement showing the expected net profit in ( c )  above.

14. TRUE OR FALSE: The production budget forecasts the production of the business and gives the targets to employees of the company for achieving the desired output efficiently and incurring minimum expense.

15. ________budgets refers to day-to-day operational budgets which focus on specific functions or aspects of the process or service.