CATHOLIC UNIVERSITY IN ZIMBABWE

FACULTY OF COMMERCE
BACHELOR OF BUSINESS MANAGEMENT AND INFORMATION TECHNOLOGY
(HONOURS) DEGREE
BACHELOR OF BUSINESS MANAGEMENT (HONOURS) DEGREE
YEAR TWO: FIRST SEMESTER EXAMINATIONS
MANAGEMENT ACCOUNTING FOR BUSINESS: BM203
DATE: DECEMBER 2018 TIME: 3 HOURS

INSTRUCTIONS
1. This paper carries six questions.
2. Answer any four questions.
3. Each question carries 25 marks.
4. Use of non-programmable calculators only is allowed.

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QUESTION 1

The following information regarding Machaina Ltd, which manufactures only one product, is
available:

Fixed cost per annum $8000

Variable cost per unit $ 0,75
Selling price per unit $ 2,00
Required:
a) Calculate the break-even volume and value; [3]
b) Construct a break-even chart; [4]
c) Construct a profit-volume chart; [4]
d) Calculate the margin of safety in units; [4]
e) Calculate the profit if the sales volume is 10% more than the break-even volume; [4]
f) Accept the sales volume and profit as calculated in (e) and calculate the additional
number of units that must be sold to realise this profit if the variable costs were to
increase by 16⅔ %.
[6]
Total marks [25]
QUESTION 2

Chirata Ltd produces two products A and B. The enterprise produces both products with the
same equipment. Product B is a high-volume product while product A is produced in low
volumes. Details of cost activities, inputs and output is as follows:

Overhead cost analysis $

Material handling 150000
Material procurement 50000
Set-up 150000
Quality control 250000
Production 600000
TOTAL 1 200000

Cost driver analysis

Overhead Cost Driver Prod A Prod B Total
Material handling Material movements 100 50 150
Material procurement Number of orders 200 100 300
Set-up Number of inspections 60 40 100
Production Direct labour hours 40000 10000 50000
Annual output Product A: 80000
Product B: 20000
Required:
a) Calculate the overhead cost per unit using:
i. A traditional absorption costing system; [10]
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 ii. An ABC system; and [10]
b) Explain the differences in the costing systems in (i) and (ii). [5]
Total marks [25]

QUESTION 3
Bambo Ltd uses a job costing system. The following information is available regarding June, the
first month of trading:
$
1. Material Purchases 42 600
2. Material was requested as follows:
Direct material
Job 1 16 950
Job 2 17 360
Indirect material 4 360
3. The following is a summary of the pay sheet:
Direct labour
Job 1 (249 hours) 12 450
Job 2 (273 hours) 13 650
Indirect labour 2 800
4. Overheads are allocated based on direct labour hours. The budgeted manufacturing
overheads amount to $27 000 per month and the estimated normal capacity is 600 labour
hours per month.
5. Job 1 (300 units) was completed during the month and 200 units were sold at 30 June for
$130.00 per unit
6. The following additional expenses were debited to the overheads control account:
Electricity and water $3 130
Depreciation – equipment $8 200
Factory rental $8 000
Required:
a. i Calculate the total cost of Job 1 and the cost of work in process (incomplete work) on
Job 2 at 30 June. [10]
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 ii Calculate the profit / (loss) on the sale of 200 units of Job 1. [5]
b. A company has been asked to quote for a job. The company aims to make a net profit
of 30 %. The estimated cost for the job is as follows:

Direct materials 10 kg @ $10 per kg

Direct labour 20 hours @ $5 per hour

Variable production overheads are recovered at the rate of $2 per labour hour.Fixed
production overheads for the company are budgeted to be $100 each year and are recovered
on the basis of labour hours. There are 10 budgeted for labour hours each year.
Other costs in relation to selling, distribution and administration are recovered at the rate of
$50 per job.

Required:
Calculate the cost of the job. [10]
Total marks [25]

QUESTION 4

The following information relates to the budgeted figures for Sunshine Manufacturing Ltd
for eight months:
Month Sales revenue Wages Material Overheads
purchases
$ $ $ $

February 120 000 24 000 80 000 40 000

March 160 000 32 000 120 000 48 000
April 240 000 40 000 100 000 64 000
May 200 000 36 000 140 000 56 000
June 280 000 48 000 120 000 72 000
July 240 000 40 000 100 000 64 000
August 200 000 36 000 100 000 56 000
September 200 000 36 000 120 000 56 000

Additional information
1. It is expected that the cash balance on May 31st will be $98 000.
2. Wages may be assumed to be paid within the month they are incurred.
3. Creditors for materials are paid three months after receipt.

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4. Debtors pay two months after delivery.
5. Overheads include $7 000 which is depreciation on non-current assets.
6. Overheads expenses are paid within the month they are incurred.
7. 15% of the monthly sales are for cash and the remainder are on credit.
8. A commission of 5% is paid to agents on all credit sales but it is not paid until the month
following the sales to which it relates.
9. It is intended to get a mortgage loan for $100 000 in June.
10. The company is expecting to get a delivery of a new van costing $180 000 in June of
which $60 000 will be paid on delivery and $60 000 in each of the following two months.
Required:
a. Prepare a cash budget for each of the three months June, July and August and the
total.
[15]
b. State any five advantages of preparing a cash budget. [5]
c. State and explain the four types of standards in standard costing. [5]
Total marks [25]

QUESTION 5

Takarinda Limited manufactures two products A and B using the same type of raw material.
Data for the next period is as follows:
Product A Product B
Demand in units 27 000 18 000
Selling price per unit $20 $25
Variable costs per unit:
Direct material $6 $10
Direct labour $5 $4
Production overhead $3 $2
Allocated fixed costs $50 000 $35 000
Raw material required /unit 5kg 4kg
Direct labour hours required per unit 10 hours 8 hours
The company can obtain 180 000 kg of raw materials for the period, while its maximum
production capacity is 420 000 labour hours.
Required
a. Determine if raw material and or direct labour is a limiting factor. [10]
b. Work out the optimal production plan for the company. [10]
c. Calculate the total contribution and profit under the optimal production plan. [5]
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 Total marks [25]

QUESTION 6

Zed Limited manufactures and markets a drink which they sell for 20c/can. Current output is
400 000 cans per month which represents 80% of capacity. They now can utilise their surplus
capacity by selling their product at 13c/can to a supermarket who will sell it as an own label
product. Total costs for the last month were $56 000 of which $15 000 were fixed costs.

Required:
a. i Explain if, based on the above data, Zed Limited should accept the supermarket’s offer. [10]
ii State and explain any five qualitative reasons that Zed Ltd should consider before accepting
or rejecting the special order. [5]
b. Give any other two uses of Marginal Costing in decision making. [5]
c. Explain the key differences between Marginal Costing and Absorption Costing. [5]
Total marks [25]

…..………………END OF EXAMINATION…………………….

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