AC 200: MANAGERIAL ACCOUNTING, I 2023/2024
REVIEW QUESTIONS SET TWO
UNIVERSITY OF DAR ES SALAAM
BUSINESS SCHOOL
ACCOUNTING DEPARTMENT
PART A: COST ANALYSIS AND ITS USE IN BUSINESS MANAGEMENT
1. What does it mean by cost analysis?
2. How does the knowledge of cost analysis can be useful in supporting business management?
3. Supported with relevant examples and graphs, explain major categories of costs you may
observe while managing your business by focusing on one important criteria known as “cost
behaviour”.
4. Identify and explain well the major categories of cost classifications by level of importance
or “purpose”, which managers intend to achieve in managing business firms.
5. What effect does a decrease in volume have on the following?
i. Unit fixed costs?
ii. Unit variable costs?
iii. Total fixed costs?
iv. Total variable costs?
6. Define the following terms: (a) cost behaviour and (b) relevant range.
7. What are curvilinear costs? What are some examples of costs that might behave in a
curvilinear fashion?
8. Define a step-variable cost and give an example.
9. Managers often assume a strictly linear relationship between cost and volume. How can
thispractice be defended in light of the fact that many costs are curvilinear?
10. Is advertising a discretionary fixed cost or a committed fixed cost? Explain.
11. Classify the following fixed costs as normally being, either committed or discretionary:
i. Insurance on buildings.
ii. Advertising.
iii. Travel.
iv. Long-term equipment leases.
v. Pension payments to a company’s retirees.
vi. Training.
12. Does the concept of the relevant range apply to fixed costs? Explain!
PART B: ESTIMATION TECHNIQUES/METHODS IN COST ACCOUNTING AND MANAGERIAL
IMPLICATIONS
13. Identify and explain at FIVE important methods that are commonly used in estimating costs
in the context of managerial accounting. [Hint: provide the basic definition, the basic
approach to cost analysis and estimation applied in a particular method, and major
advantages/merits and disadvantages (demerits) associated with the use of each method of
identified cost estimation technique].
Prepared By: WILLIAM, Athumani M.: MBA(IP), B.Com Accounting (Hons), CPA (T) |Phone: +255 753 174125| Email:
williamathuman731@gmail.com
pg. 1
AC 200: MANAGERIAL ACCOUNTING, I 2023/2024
REVIEW QUESTIONS SET TWO
14. The data given in the following table have been taken from the cost records of the Halifax
General Hospital. The data relate to the costs of admitting patients at various levels of
patient activity:
Month
May
June
July
August
September
October
November
December
No. of Patients
Admitted
3,600
3,800
2,900
3,200
3,300
2,600
2,200
3,500
Admitting
Department Costs
TZS “000”
29,400
30,400
27,400
28,000
28,600
26,200
25,600
29,200
Required
(a) Use Microsoft Excel to prepare a scattergraph using the above data. Plot admitting
department costs on the vertical axis and the number of patients admitted on the
horizontal.
(b) Does it appear that, admitting department costs are related to the number of patients
admitted? Explain.
(c) Using the high – low method, now estimate the fixed cost of admitting patients per
months and the variable cost of admissions per patient.
(d) What factors other than the number of patients admitted are also more likely to affect
changes in admitting department costs from month to month?
15. The number of blood tests performed and the related costs over the last nine months in
Brentline Hospital are given below:
Month
January
February
March
April
May
June
July
August
September
Blood Tests Performed
3,125
3,500
2,500
2,125
2,250
1,500
1,550
2,750
2,875
Blood Test Costs
TZS “000”
14,000
14,500
11,500
10,000
11,000
8,500
8,400
12,000
13,000
Prepared By: WILLIAM, Athumani M.: MBA(IP), B.Com Accounting (Hons), CPA (T) |Phone: +255 753 174125| Email:
williamathuman731@gmail.com
pg. 2
AC 200: MANAGERIAL ACCOUNTING, I 2023/2024
REVIEW QUESTIONS SET TWO
Required
(a) Using the high–low method, estimate the cost formula for blood tests.
(b) Using the cost formula, you derived above, what blood test costs would you expect to be
incurred during a month in which 2,300 blood tests are performed?
16. Davidson Engine Repairs provides maintenance and repair services for small engines such
as those found in lawn mowers, power saws, and snow throwers. The repair shop costs
include the salaries for the mechanics, insurance and depreciation on the repair equipment,
materials and parts used for the jobs, and utilities. The repair shop manager would like to
develop a model for predicting repair costs and over the past 10 months has carefully
recorded the total repair costs incurred, along with the number of maintenance and repair
jobs completed each month. The data are shown in the following page.
Month
January
February
March
April
May
June
July
August
September
October
Jobs
220
180
160
200
260
240
140
120
100
80
Repair Costs
TZS “000”
22,000
18,000
17,600
20,000
24,000
22,400
16,000
12,800
13,600
9,600
Required
(a) Using Microsoft Excel, prepare a scattergram by plotting jobs performed and repair costs
on a graph. Fit a straight line to the plotted points using the “add trendline” feature in
Microsoft Excel. Do repair costs appear to be related to the number of jobs completed
ina month? Explain.
(b) Using the high–low method, estimate a cost formula for repair costs. Express the formula
in the form Y = a + bX
(c) Now assume the manager wants to predict costs for a month where 600 jobs will be
completed. Should you use the formula developed above to predict costs for a 600-job
month? Why or why not?
(d) Using the same data set, develop the cost function using alternative cost estimation
method namely the least squares regression analysis and provide its version answers for
part (c) above.
(e) Explain, why the answers using the two methods appear to be different and which ones
do you consider to be more accurate. Explain well your answer to this part.
Prepared By: WILLIAM, Athumani M.: MBA(IP), B.Com Accounting (Hons), CPA (T) |Phone: +255 753 174125| Email:
williamathuman731@gmail.com
pg. 3
AC 200: MANAGERIAL ACCOUNTING, I 2023/2024
REVIEW QUESTIONS SET TWO
17. Spentz Company offers rental cars in several off-airport locations. Management would like
to better understand the behaviour of the company’s costs. One of these is the cost of
cleaning cars. The company operates its own car wash and cleaning facilities in which each
rental car that is returned is thoroughly cleaned before being released for rental to another
customer. Management believes that the costs of operating the cleaning facilities should
berelated to the number of rental returns. Accordingly, the following data have been
compiled:
Month
January
February
March
April
May
June
July
August
September
October
November
Rental
Returns
4,620
4,906
5,282
5,748
7,080
9,722
10,864
10,536
9,256
4,212
4,990
Cleaning Costs
TZS “000”
15,170
19,036
16,358
19,423
23,001
32,182
31,905
29,895
32,790
27,574
16,621
Required
(a) Using least-squares regression, estimate the fixed cost and variable cost elements
ofmonthly car wash costs.
(b) From your answer in part (a) above, construct the cost function in the form of Y = a +bX.
(c) Suppose for the month of December the company expects rental returns of 5,200;
whatwould be this company total cleaning costs?
End of Review Questions
Prepared By: WILLIAM, Athumani M.: MBA(IP), B.Com Accounting (Hons), CPA (T) |Phone: +255 753 174125| Email:
williamathuman731@gmail.com
pg. 4