INFORMATION AND COMMUNICATIONS UNIVERSITY
SCHOOL OF HUMANITIES AND BUSINESS MANAGEMENT
DEPARTMENT OF ECONOMICS AND BUSINESS
MANAGERIAL ACCOUNTING (BA & MA)
COURSE CODE – ICB0004
Semester Assignments (JAN - JUNE 2022)
QUESTION ONE
a). An audit senior at your place has requested you to undertake a review of the
client’s inventory system by determining the critical inventory levels, economic
order quantity, cost of issues and valuation of closing inventory. The client file
contains the following schedules in relation to inventory:
Minimum Usage
-
500 units per working week
Maximum Usage
-
3000 units per working week
Average usage
-
2500 units per week
Lead time
-
10 – 20 days
Ordering costs
-
K260 per order
Purchase cost
-
K5 per unit
Holding cost
-
Required
Calculate the following:
(i)
Inventory re-order level
(ii)
Minimum inventory level
(iii)
Economic order quantity
8% of purchase costs per year
(iv)
Maximum inventory levels
(b). For six months ended 31st October, 2013, Luanshya Limited (LL), an importer
and distributor of one type of printer’s machine has the following transactions in
his records. There was an opening balance of 100 units which had a value of
K3,900.
Date
Bought Quantity in Units Cost per Unit K
May
100
41
June
200
50
August
400
51.875
The price of K51 875 each for the August receipt was K6.125 per unit less than
the normal price because of the large quantity ordered.
Date
Sold Quantity in Units
Unit Price Each K
July
250
64
September
350
70
October
100
74
Required:
(a)
Prepare the stores ledger records using weighted average, FIFO and LIFO
methods, showing clearly inventory balance.
(b)
Prepare the trading account for the period to show the gross profit using
each of the three methods above.
(c)
Based on the calculations in (b) comment on the method which can be
regarded as the best measure of profit.
QUESTION TWO
(a) The following was extracted from the standard cost card of Kafue Cement
Plc.
Selling price 100kg pocket of cement
K360
Direct material cost per 100kg pocket of cement
K50
Direct labour cost per 100kg pocket of cement
K50
Variable production overhead per 100kg pocket of cement
K29
Other relevant cost information extracted from the budgets:
Fixed production costs
K9,750,000
Fixed selling and distribution costs
K3,456,000
Sales commission 5% of selling price
Sales 90,000 100kg pockets of cement
Required:
i.
ii.
Calculate the breakeven point both in sales volumes (number of pockets)
and sales value. (2 marks)
Calculate the margin of safety both in percentage and in volume.
(2marks)
b. Suppose the selling price per pocket of cement was to be increased to K375
and the sales commission increased to 8% and a further K150,000 on advertising.
Required
Calculate the revised breakeven point sales volume based on suggestion in (3)
above and comment accordingly.
(c).The following information applies to a company operating in Chilanga. It is
the operational results for the year just ended, 2019.
The company, which manufactures a single product coded ‘zeron’, achieved a
sales value of K8, 000, 000 for the period under consideration. A unit of ‘zeron’
was being sold at K20. During the period under review, the company operated
at 80% capacity.
Suggestions are being made to increase the operating capacity. Details of the
cost structure are hereby given:
Direct material
K4
Direct labour
K4
Variable production overhead
K80,000
Variable selling overhead
K160,000
Variable distribution overhead
K120,000
Fixed production overhead
K320,000
Fixed selling overhead
K180,000
Fixed distribution overhead
K80,000
Fixed administration overhead
K1,440,000
Further, sales agents are paid a commission of 5% on sales value for selling
'zeron'.
Required
(i)
Compute the company's breakeven point in sales value (2 marks)
(ii)
Prepare income statements, given three scenarios depicted hereunder:
Scenario 1
At the present level of sales
Scenario 2
If the unit selling price is reduced by 5% which should increase sales volume by
12.5%
Scenario 3
If the unit selling price is reduced by 10% which should increase sales volume by
25%,
Comment on scenario three above which will stretch the capacity limit (10
marks)
INSTRUCTIONS:
DUE DATE: 15TH MAY, 2022
FONT: ARIAL, FONT SIZE -12
REFERENCES = 5 REFERENCES OR MORE
For any querries call 0977411087 or email kaputulayowane@yahoo.com
ASSIGNMENT 2
Question One
Costing and Budgeting are key components in the control of business
operations.
a)
Explain standard costing and state the any 3 types of standards.
State the importance of standards.
b)
Explain what a budget is and identify and 5 types of budgets
c)
Outline the procedure followed in the preparations of the Master
Budget
d)
State the importance of using budgets in the control of operational
costs.
Question two
SIMUKOKO Ltd manufactures one product and the entire product is sold as it is
produced. There are no opening and closing stocks, work in progress is
negligible. The company operates a standard costing system and analysis of
variances is made every month.
The standard cost card for the product - a Boomerang is as follows:
Per unit
Direct materials
0.5kg @ K4/kg
2.00
Direct Wages
2 hours @ K2 /hr
4.00
Variable Overheads
2 hours @ K0.30 /hr
0.60
Fixed Overhead per unit2 hours @ K3.70
7.40
Standard Cost
14.00
Profit per unit
6.00
Standard Selling price
20.00
The selling and administration expenses are not included in the standard cost,
and are deducted from profit as a period charge.
Budgeted output for the month of June 2017 was 5,100 units.
Actual results for June 2017 were as follows:
Production of 4,850 units was sold for K95, 600
Materials consumed in production amounted to 2,300 kg at a cost of K9, 800.
Labour hours paid for amounted to 8,500 hours at a cost of K16, 800
Actual operating hours amounted to 8,000 hours
Variable overhead amounted to K2, 600
Fixed overheads amounted to K42, 300
Selling and administration expenses amounted to K18, 000.
REQUIRED
Calculate all variances and prepare an operating statement for the month end
of June, 30, 2017
a.
Material Price Variance, Material Usage and Material Total Variances
b.
Labour Rate Variance, Labour Efficiency and Labour Total Variance
c.
Variable Overhead Expenditure and Variable overhead efficiency
variances
d.
Fixed overhead expenditure and fixed overhead volume variances
e.
Sales price and sales volume variances
INSTRUCTIONS:
DUE DATE: 25TH MAY, 2022
FONT: ARIAL, FONT SIZE -12
REFERENCES = 5 REFERENCES OR MORE
For any querries call 0977411087 or email kaputulayowane@yahoo.com