Question 2

(a) Explain any four users of management accounting information and explain

their needs.

(b) Distinguish between:

(4 marks)

1. (i)labour cost accounting and payroll accounting.(2 marks)
2. (ii)preventive costs and replacement costs of labour turnover.
3. (2 marks)

(c) Katandise Super Duuka (KSD) is a leading producer of pancakes in the Kawempe division of Kampala city. KSD uses 20 litres of cooking oil per week, at a cost of Shs. 5,000 per litre and incurs Shs 15,000 for receiving the cooking oil from the supplier. KSD's re-order period is 2 to 4 weeks, minimum and maximum usage are 30 litres and 35 litres per week respectively. The cost of holding the cooking oil is 8% of the cost per litre.

Note: KSD's year has 42 weeks.

Required:

(a)(i)Compute KSD's: economic order quantity that will minimise annual costs. (2 marks)

(ii)number of orders to be placed in order to minimise the cost of inventory.

total cost of managing the inventory. minimum and maximum stock levels. average stock level.

(d) Explain any four assumptions of economic order quantity.

Question 3

1. (a)Distinguish the following terms:
2. (i)cost object and cost centre.(2 marks)
3. (ii)integrated accounting system and interlocking accounting system.
4. (2 marks)
5. (b)Kamuli Animal Feeds (KAF) produces cattle feeds known for boosting milk production. KAF planned to produce 200 bags of the feeds during the month of December, 2018 from its three production plants located in western, northern and central Uganda. The following information relates to the three production plants:

Details

Labour hours (per bag) Planned production (bags) Contribution per bag (Shs)

Western Northern Central

20 100 12,000

15 16

30 70 18,000 36,000

KAF anticipates to experience labour shortage since December is a month with a long period of festivities and 3,370 labour hours are expected to be available.

Fixed costs Shs 5,000,000 and variable cost per bag Shs 75,000 are expected to be incurred during the month of December 2018. KAF sells a bag of cattle feeds at Shs 125,000.

Required:

1. (i)Determine KAF's production plan for the month.(7 marks)
2. (ii)Prepare KAF's profit statement for the month.(3 marks)

(c) Rwaki and Associates (R&A), is a firm of certified public accountants. The firm was contracted in November 2018 by Forever Uganda Limited (FUL) to audit their financial statements of the past five years starting from 1

July, 2013 to 30 June, 2018.

R&A has decided to employ 10 part-time auditors each at Shs 30,000 per hour for this contract.

The following additional information relates to the contract.

1. Total budgeted overheads were Shs 5,000,000 and there were 200 total budgeted labour hours relating to these overheads.
2. Actual labour hours taken were 80 to produce five audit reports.
3. Stationery expenses incurred for the contract were Shs 2,000,000
4. per audit report.
5. FUL agreed to pay R&A, Shs 12,000,000 for each audit report
6. produced.

Question 4

(a) (i) Explain briefly how by-products are classified.

1. Hire of a printer for the contract was 2% of contract revenue.
2. Fixed overheads relating to contract were Shs 2,000,000.
3. Finance costs relating to contract were 5% of the prime cost.

Required:

Prepare R&A's cost statement relating to the contract.

(6 marks) (Total 20 marks)

(2 marks)

(ii) Distinguish between marginal costing and absorption costing.

(3 marks)

1. (b)Forward Engineering Limited (FEL) has a contract with Katakwi District Local Government on which it has so far spent Shs 90 million up to 30 June, 2018. The contract price was agreed at Shs 500 million. The value of the work certified is Shs 300 million and Shs 120 million was received in cash. The contract is nearing completion and it is anticipated that additional expenses Shs 100 million will be incurred.
2. Required:
3. Determine the profit or loss to be credited to the profit and loss account.
4. (5 marks)
5. (c)Kandge Manufacturers Limited (KML) produces and packs paint in 20 litre tins. The following costs relate to production of weather guard paint for the year ending 30 September, 2018:

Variable costs

Fixed overheads

Fixed production overheads

Shs 2,500 per litre

Shs 1.75 billion

60% of fixed overheads

KML has normal annual capacity of producing 100,000 tins of weather guard paint. During the year, 100,000 tins were produced of which 20% remained unsold. The factory has a normal capacity set at 100,000 units. There was no work-in-progress inventory during the year. KML sells each tin of weather guard paint at Shs 75,000.

Required:

Prepare n income statement for the year ended 30 September, 2018 using the following methods:

1. (i)Marginal costing.
2. (ii)Absorption costing.

(4 marks)

Question 5

1. (a)Distinguish between capacity and activity ratios as used in budgetary control.
2. (2 marks)
3. (b)Mr. Kwagalakwe Herrera is a sole proprietor trading as Kwagalakwe Business Enterprises (KBE) and deals in making craft shoes and handbags. KBE takes 2 hours and 4 hours to make a pair of sandals and one handbag respectively. During the month of October 2018, KBE used 220 hours to make 48 pairs of sandals and 36 handbags as compared to what had been budgeted of 40 pairs of sandals and 25 handbags.

Required:

Compute the following control ratios:

1. (i)Activity.
2. (ii)Capacity.
3. (iii)Efficiency.

(c) Hade Confectionaries Limited (HCL) makes cakes and uses a standard costing system. The following information relates to production and sales for the month of October 2018:

Details

Sales/ output (cakes)

Selling price per cake (Shs) Direct materials per cake (kg) Material prices per kg (Shs) Direct labour hours per cake Labour hour rate (Shs) Variable overheads (Shs '000') Fixed overheads (Shs '000')

Budget 15,000 87,000

3 7,500 2 20,000 26,400 3,500

Actual 13,500 85,500

3.35 7,800 2 20,000 27,200 3,620

HCL does not maintain inventories of cakes.

Required:

(a)Prepare HCL's budgeted and actual variance profit statement for the month of October, 2018.

Question 6

(a) Explain any three differences between traditional costing and activity-

based costing (ABC) systems.

(b) Describe how overheads can be classified.

(c) The following are semi-variable maintenance costs and the corresponding

machine hours incurred in a Bwaise welding workshop for a period of six months for the year ending 30 September, 2018.

Month Maintenance costs Shs '000'

April 4,800 May 4,200 June 4,400 July 6,000 August 4,500 September 5,000

Required:

Machine hours

2,000 1,800 2,000 2,400 1,500 1,400

(b)Using the least squares method, determine maintenance costs that will be incurred during the month of December, 2018 when 3,500 machine hours are expected to be available.