Subject: INTRODUCTION TO MANAGEMENT ACCOUNTING

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

a) BB Importers Ltd has been importing electrical gadgets through the port of Takoradi over the past ten years. Management is aware that the business has been facing seasonal fluctuations but there is no scientific basis for the determination of such variations that can be used to predict future revenue. As a newly recruited Cost Accountant, you have been provided with some past daily sales performance over a three-week period. Details of the sales performance are shown below:

Sales Monday Tuesday Wednesday Thursday Friday
Week 1 780 830 890 850 850
Week 2 880 930 990 950 950
Week 3 980 1030 1090 1050 1050

Required:
Using daily moving averages, calculate the daily variation for the company. (15 marks)

b) The reasons for variances might be connected, and two or more variances may arise from the same cause. For example, a favorable variance and an adverse variance might have the same cause.

Required:
Explain the interrelationships between:
i) Material price and usage variances (2.5 marks)
ii) Labor rate and efficiency variances (2.5 marks)

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q3 – Job Costing

Explain decision-making levels within an organization, sources of management accounting information, and factors for an effective job costing system.

a) Management accounting is the provision of financial and non-financial decision-making information to managers.

Required:
i) Explain the decision-making levels within an organization and state an example each of the kind of decision taken at the various levels. (9 marks)
ii) Explain TWO (2) sources of management accounting information and state an example each of the information to be obtained. (6 marks)

b) One form of specific order costing methods that seeks to attribute costs to jobs is known as job costing.

Required:
Enumerate THREE (3) factors that are necessary to ensure an effective and workable job costing system. (5 marks)

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q2 – Budgeting

Explain the steps in the annual budgeting process, conditions for successful budget implementation, and identify short-term investment options available to Komba Ltd.

Komba Ltd is a manufacturing company that wants to allocate some funds for short and long-term investments. To support this purpose, Komba Ltd is organizing its annual budget preparation for the coming year. Some senior management of the company are wondering what the budgeting process is about and would be interested in having a better understanding of the annual budgeting process.

Required:
As the cost accountant of Komba Ltd:
a) Explain FIVE (5) steps to be involved in the annual budgeting process. (10 marks)
b) State FIVE (5) conditions for a successful implementation of a budgeting process. (5 marks)
c) Explain TWO (2) short-term investments available to Komba Ltd. (5 marks)

 

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

a) Atimbila Ltd manufactures a product that goes through various workshops. The following budgeted overheads for the year 2023, based on normal activity levels, have been provided:

Workshop Budgeted Overheads (GH¢) Overhead Absorption Base
Forming 360,000 30,000 labour hours
Machining 860,000 50,000 machine hours
Welding 400,000 36,000 labour hours
Assembly 300,000 20,000 labour hours

Selling and administrative overheads are 25% of factory cost.

An order for 5,000 units of the product (Batch 3391) incurred the following costs on 31 August 2023:

  • Materials: GH¢62,140
  • Labour:
    • 1,280 hours forming shop at GH¢10.50 per hour
    • 4,520 hours machining shop at GH¢11 per hour
    • 900 hours welding shop at GH¢10.50 per hour
    • 1,750 hours assembly shop at GH¢9.60 per hour
  • An amount of GH¢1,050 was paid for the hire of a special X-ray equipment for testing the welds. The time booking in the machine shop was 6,430 machine hours. Selling price was GH¢150 per product.

Required:
i) Compute the total cost of the batch. (10 marks)
ii) Calculate the unit cost per product. (1 mark)
iii) Determine the profit per product. (1 mark)

b) The following cost and production data relates to the operations of Mawuga Ltd over a two-year period:

Year Production (units) Total Costs (GH¢)
2022 50,000 1,700,000
2023 54,000 1,835,400

Between 2022 and 2023, there has been a 5% cost inflation.

Required:
i) Calculate the real fixed and variable costs. (6 marks)
ii) Estimate what the total costs will be in 2024 if it is expected that there will be 4% cost inflation and output will be 56,000 units. (2 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Determine the trend and seasonal variation in sales using moving averages and calculate factors for estimating direct material costs.

a) A company operates from Monday to Friday. Sales data for the most recent three weeks as well as the moving total are as follows:

Day Sales Moving Total
Day 1 78
Day 2 83
Day 3 89 420
Day 4 85 430
Day 5 85 440
Day 6 88 450
Day 7 93 460
Day 8 99 470
Day 9 95 480
Day 10 95 490
Day 11 98 500
Day 12 103 510
Day 13 109 520
Day 14 105
Day 15 105

Required:
i) State the length of the cycle. (2 marks)
ii) Using the moving averages, establish the trend of the historical data above. (6 marks)
iii) Calculate the seasonal variation for each day of the week. (7 marks)

b) The value of variances as a control technique for management depends on the reliability and accuracy of the standard costs. If the standard costs are inaccurate, comparisons between actual cost and standard cost will have no meaning.

Required:
Explain TWO (2) factors to be considered by the purchasing department in estimating the direct material costs per unit of raw material. (5 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis

Calculate closing inventory using FIFO and compute direct material price and usage variances for Prekese and Kakaduro.

a) The following data has been extracted from the books of ABC Ltd for the month of October 2023.

Date Description
2/10/2023 Bought 200 units @ GH₵100 per unit
5/10/2023 Bought 150 units @ GH₵120 per unit
8/10/2023 Issued 120 units
12/10/2023 Bought 100 units @ GH₵90 per unit
20/10/2023 Issued 140 units
24/10/2023 Bought 300 units @ GH₵150 per unit
28/10/2023 Issued 210 units

Required:
Using the FIFO method, calculate the value of the closing inventory. (10 marks)

b) Identify FOUR (4) pieces of information that can be seen on an invoice. (5 marks)

c) Preka body lotion is a product produced from the combination of two materials: prekese and kakaduro. Preka body lotion has a standard direct material cost as follows:

Material Quantity (kg) Cost per kg (GH₵) Total Cost (GH₵)
Prekese 6 15 90
Kakaduro 10 10 100

During period one, 1,000 units of Preka body lotion were manufactured, using 11,700 kilograms of prekese and 10,000 kilograms of kakaduro, costing GH₵98,600 and GH₵78,000 respectively.

Required:
Calculate the following variances for prekese and kakaduro:
i) The direct material price variance (2.5 marks)
ii) The direct material usage variance (2.5 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

a) Management accounting can be described as the process of supplying the managers and employees in an organization with relevant information, both financial and non-financial, for making decisions, allocating resources, monitoring, evaluating, and rewarding performance.

Required:
In relation to the description of management accounting provided above:
State THREE (3) important changes that have taken place in the business environment that have influenced management accounting practice. (3 marks)

b) Financial Accounting and Management Accounting share important similarities since both are based on financial information and other quantitative information about business operations.

Required:
Identify FOUR (4) differences between financial accounting and management accounting. (4 marks)

c) Mr. Osei Nyarko, an engineer by training, established Kotmat Ltd three years ago with five employees. His only source of information concerning the performance of Kotmat Ltd has been the half-yearly financial statements, which he receives ten weeks after the end of each half-year. A proposal has been submitted to Mr. Osei Nyarko to install a cost and management accounting system.

Required:
i) Identify FOUR (4) benefits Mr. Nyarko will derive from installing a cost and management accounting system. (4 marks)
ii) Enumerate FOUR (4) types of information which could be obtained from the cost and management accounting system that cannot be obtained from the current system. (4 marks)

**d) State and explain TWO (2) useful pieces of information generated by marginal and absorption costing systems. (5 marks)

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  • 20 Marks

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

a) As organisations become larger and more complex, it is no longer possible for just one person to prepare a budget. Instead, budgeting across the organisation must be carefully coordinated among various actors. As a result, there is the need for a budget manual irrespective of the type of or approach to budgeting.

Required:
i) State FIVE (5) contents of a budget manual. (5 marks)
ii) Write short notes on the following:

  • Incremental budget. (2.5 marks)
  • Zero-Based Budget. (2.5 marks)

b) Chico Ltd, a newly established manufacturing company with branches across Africa is preparing its first annual budget. The following information is relevant:

Sales forecast for each month:

Month Sales Forecast (GH₵)
January to June 20,000
July to December (and thereafter) 22,000
  • Gross profit margin: 20%
  • Credit given to customers: 2 months
  • Credit taken from suppliers: 2 months
  • Closing inventory: 3 months of demand
  • Monthly operating expenses: GH₵1,222

At the start of the budget period, a non-current asset with a cost of GH₵120,000 and a useful life of 6 years was purchased and transferred to one of its branches. In addition, a cash amount of GH₵80,000 was provided for the operations of Chico Ltd.

Required:
Prepare the budgeted statement of profit or loss and budgeted statement of financial position for Chico Ltd. (10 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit statements for January and February 2023 using marginal costing and absorption costing methods.

Alokome Plc is a company that produces and sells one product “Iga”. Information relating to the operations of Alokome Plc for the first two months of 2023 is as follows:

i) Iga sells for GH₵500 per unit.
ii) There were no inventories of Iga at the end of December 2022.
iii) Other relevant information is as follows:

Cost Element GH₵
Direct material and wages 220
Variable production overhead 30

Budgeted and actual costs per month:

Cost Element GH₵
Fixed production overhead 990,000
Fixed selling and administrative expenses 400,000
Variable selling expenses 12.5% of sales

Normal capacity: 110,000 units per month

Number of units produced and sold:

Month Sales (units) Production (units)
January 128,000 140,000
February 110,000 102,000

Required:
Using the information above, prepare in a columnar form profit statements for January and February 2023 using:
a) Marginal costing (10 marks)
b) Absorption costing (10 marks)

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Calculate daily variations using moving averages and explain interrelationships between material price and usage variances, and labor rate and efficiency variances.

a) BB Importers Ltd has been importing electrical gadgets through the port of Takoradi over the past ten years. Management is aware that the business has been facing seasonal fluctuations but there is no scientific basis for the determination of such variations that can be used to predict future revenue. As a newly recruited Cost Accountant, you have been provided with some past daily sales performance over a three-week period. Details of the sales performance are shown below:

Sales Monday Tuesday Wednesday Thursday Friday
Week 1 780 830 890 850 850
Week 2 880 930 990 950 950
Week 3 980 1030 1090 1050 1050

Required:
Using daily moving averages, calculate the daily variation for the company. (15 marks)

b) The reasons for variances might be connected, and two or more variances may arise from the same cause. For example, a favorable variance and an adverse variance might have the same cause.

Required:
Explain the interrelationships between:
i) Material price and usage variances (2.5 marks)
ii) Labor rate and efficiency variances (2.5 marks)

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q3 – Job Costing

Explain decision-making levels within an organization, sources of management accounting information, and factors for an effective job costing system.

a) Management accounting is the provision of financial and non-financial decision-making information to managers.

Required:
i) Explain the decision-making levels within an organization and state an example each of the kind of decision taken at the various levels. (9 marks)
ii) Explain TWO (2) sources of management accounting information and state an example each of the information to be obtained. (6 marks)

b) One form of specific order costing methods that seeks to attribute costs to jobs is known as job costing.

Required:
Enumerate THREE (3) factors that are necessary to ensure an effective and workable job costing system. (5 marks)

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q2 – Budgeting

Explain the steps in the annual budgeting process, conditions for successful budget implementation, and identify short-term investment options available to Komba Ltd.

Komba Ltd is a manufacturing company that wants to allocate some funds for short and long-term investments. To support this purpose, Komba Ltd is organizing its annual budget preparation for the coming year. Some senior management of the company are wondering what the budgeting process is about and would be interested in having a better understanding of the annual budgeting process.

Required:
As the cost accountant of Komba Ltd:
a) Explain FIVE (5) steps to be involved in the annual budgeting process. (10 marks)
b) State FIVE (5) conditions for a successful implementation of a budgeting process. (5 marks)
c) Explain TWO (2) short-term investments available to Komba Ltd. (5 marks)

 

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  • 20 Marks

IMAC – MAR 2024 – L1 – Q1 – Cost and Cost Behaviour

Calculate total cost, unit cost, and profit per unit for a batch of 5,000 units and determine real fixed and variable costs after adjusting for inflation.

a) Atimbila Ltd manufactures a product that goes through various workshops. The following budgeted overheads for the year 2023, based on normal activity levels, have been provided:

Workshop Budgeted Overheads (GH¢) Overhead Absorption Base
Forming 360,000 30,000 labour hours
Machining 860,000 50,000 machine hours
Welding 400,000 36,000 labour hours
Assembly 300,000 20,000 labour hours

Selling and administrative overheads are 25% of factory cost.

An order for 5,000 units of the product (Batch 3391) incurred the following costs on 31 August 2023:

  • Materials: GH¢62,140
  • Labour:
    • 1,280 hours forming shop at GH¢10.50 per hour
    • 4,520 hours machining shop at GH¢11 per hour
    • 900 hours welding shop at GH¢10.50 per hour
    • 1,750 hours assembly shop at GH¢9.60 per hour
  • An amount of GH¢1,050 was paid for the hire of a special X-ray equipment for testing the welds. The time booking in the machine shop was 6,430 machine hours. Selling price was GH¢150 per product.

Required:
i) Compute the total cost of the batch. (10 marks)
ii) Calculate the unit cost per product. (1 mark)
iii) Determine the profit per product. (1 mark)

b) The following cost and production data relates to the operations of Mawuga Ltd over a two-year period:

Year Production (units) Total Costs (GH¢)
2022 50,000 1,700,000
2023 54,000 1,835,400

Between 2022 and 2023, there has been a 5% cost inflation.

Required:
i) Calculate the real fixed and variable costs. (6 marks)
ii) Estimate what the total costs will be in 2024 if it is expected that there will be 4% cost inflation and output will be 56,000 units. (2 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q5 – Forecasting | Standard Costing and Variance Analysis

Determine the trend and seasonal variation in sales using moving averages and calculate factors for estimating direct material costs.

a) A company operates from Monday to Friday. Sales data for the most recent three weeks as well as the moving total are as follows:

Day Sales Moving Total
Day 1 78
Day 2 83
Day 3 89 420
Day 4 85 430
Day 5 85 440
Day 6 88 450
Day 7 93 460
Day 8 99 470
Day 9 95 480
Day 10 95 490
Day 11 98 500
Day 12 103 510
Day 13 109 520
Day 14 105
Day 15 105

Required:
i) State the length of the cycle. (2 marks)
ii) Using the moving averages, establish the trend of the historical data above. (6 marks)
iii) Calculate the seasonal variation for each day of the week. (7 marks)

b) The value of variances as a control technique for management depends on the reliability and accuracy of the standard costs. If the standard costs are inaccurate, comparisons between actual cost and standard cost will have no meaning.

Required:
Explain TWO (2) factors to be considered by the purchasing department in estimating the direct material costs per unit of raw material. (5 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis

Calculate closing inventory using FIFO and compute direct material price and usage variances for Prekese and Kakaduro.

a) The following data has been extracted from the books of ABC Ltd for the month of October 2023.

Date Description
2/10/2023 Bought 200 units @ GH₵100 per unit
5/10/2023 Bought 150 units @ GH₵120 per unit
8/10/2023 Issued 120 units
12/10/2023 Bought 100 units @ GH₵90 per unit
20/10/2023 Issued 140 units
24/10/2023 Bought 300 units @ GH₵150 per unit
28/10/2023 Issued 210 units

Required:
Using the FIFO method, calculate the value of the closing inventory. (10 marks)

b) Identify FOUR (4) pieces of information that can be seen on an invoice. (5 marks)

c) Preka body lotion is a product produced from the combination of two materials: prekese and kakaduro. Preka body lotion has a standard direct material cost as follows:

Material Quantity (kg) Cost per kg (GH₵) Total Cost (GH₵)
Prekese 6 15 90
Kakaduro 10 10 100

During period one, 1,000 units of Preka body lotion were manufactured, using 11,700 kilograms of prekese and 10,000 kilograms of kakaduro, costing GH₵98,600 and GH₵78,000 respectively.

Required:
Calculate the following variances for prekese and kakaduro:
i) The direct material price variance (2.5 marks)
ii) The direct material usage variance (2.5 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q3 – Scope of Management Accounting

Discuss changes in the business environment affecting management accounting, differences between financial and management accounting, and the benefits of a cost and management accounting system.

a) Management accounting can be described as the process of supplying the managers and employees in an organization with relevant information, both financial and non-financial, for making decisions, allocating resources, monitoring, evaluating, and rewarding performance.

Required:
In relation to the description of management accounting provided above:
State THREE (3) important changes that have taken place in the business environment that have influenced management accounting practice. (3 marks)

b) Financial Accounting and Management Accounting share important similarities since both are based on financial information and other quantitative information about business operations.

Required:
Identify FOUR (4) differences between financial accounting and management accounting. (4 marks)

c) Mr. Osei Nyarko, an engineer by training, established Kotmat Ltd three years ago with five employees. His only source of information concerning the performance of Kotmat Ltd has been the half-yearly financial statements, which he receives ten weeks after the end of each half-year. A proposal has been submitted to Mr. Osei Nyarko to install a cost and management accounting system.

Required:
i) Identify FOUR (4) benefits Mr. Nyarko will derive from installing a cost and management accounting system. (4 marks)
ii) Enumerate FOUR (4) types of information which could be obtained from the cost and management accounting system that cannot be obtained from the current system. (4 marks)

**d) State and explain TWO (2) useful pieces of information generated by marginal and absorption costing systems. (5 marks)

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  • 20 Marks

IMAC – NOV 2023 – L2 – Q2 – Budgeting

Discuss the contents of a budget manual, explain incremental and zero-based budgeting, and prepare budgeted profit and loss statement and financial position for Chico Ltd.

a) As organisations become larger and more complex, it is no longer possible for just one person to prepare a budget. Instead, budgeting across the organisation must be carefully coordinated among various actors. As a result, there is the need for a budget manual irrespective of the type of or approach to budgeting.

Required:
i) State FIVE (5) contents of a budget manual. (5 marks)
ii) Write short notes on the following:

  • Incremental budget. (2.5 marks)
  • Zero-Based Budget. (2.5 marks)

b) Chico Ltd, a newly established manufacturing company with branches across Africa is preparing its first annual budget. The following information is relevant:

Sales forecast for each month:

Month Sales Forecast (GH₵)
January to June 20,000
July to December (and thereafter) 22,000
  • Gross profit margin: 20%
  • Credit given to customers: 2 months
  • Credit taken from suppliers: 2 months
  • Closing inventory: 3 months of demand
  • Monthly operating expenses: GH₵1,222

At the start of the budget period, a non-current asset with a cost of GH₵120,000 and a useful life of 6 years was purchased and transferred to one of its branches. In addition, a cash amount of GH₵80,000 was provided for the operations of Chico Ltd.

Required:
Prepare the budgeted statement of profit or loss and budgeted statement of financial position for Chico Ltd. (10 marks)

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  • 20 Marks

IMAC – NOV 2023 – L1 – Q1 – Marginal Costing and Absorption Costing

Prepare profit statements for January and February 2023 using marginal costing and absorption costing methods.

Alokome Plc is a company that produces and sells one product “Iga”. Information relating to the operations of Alokome Plc for the first two months of 2023 is as follows:

i) Iga sells for GH₵500 per unit.
ii) There were no inventories of Iga at the end of December 2022.
iii) Other relevant information is as follows:

Cost Element GH₵
Direct material and wages 220
Variable production overhead 30

Budgeted and actual costs per month:

Cost Element GH₵
Fixed production overhead 990,000
Fixed selling and administrative expenses 400,000
Variable selling expenses 12.5% of sales

Normal capacity: 110,000 units per month

Number of units produced and sold:

Month Sales (units) Production (units)
January 128,000 140,000
February 110,000 102,000

Required:
Using the information above, prepare in a columnar form profit statements for January and February 2023 using:
a) Marginal costing (10 marks)
b) Absorption costing (10 marks)

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