Fundamentals Of Management Accounting ATD Revision Kit

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TOPIC 1

IDENTIFY CONCEPTS USED IN MANAGEMENT ACCOUNTING

 

QUESTION 1

December 2024 Question 1 and 2

  1. Which one of the following is NOT an objective of management accounting?
    1. To formulate financial plans and policies
    2. To assist in decision making process
    3. To help in cost ascertainment and control
    4. To prepare summarised periodical reports       (2 marks)

 

  1. James Mwaniki has been employed as the assistant management accountant in Wetu Limited. The chief management accountant of the company has tasked him to classify the following costs:
  • Period costs
  • Product costs
  • Direct labour
  • Depreciation of machinery
  • Factory rent
  • Salesman salary

 

Which of the following combination of expenses should he classify as fixed costs only?

  1. (i), (iv) and (v)
  2. (ii), (iv) and (vi)
  3. (iv), (v) and (vi)
  4. (i), (iii) and (v)             (2 marks)

 

QUESTION 2

December 2024 Question 4 and 5

  1. A good management accountant should avoid conflict of interest while carrying out his duties. The code of ethics that prohibits unethical behaviour is called .
  2. Confidentiality
  3. Credibility
  4. Integrity
  5. Competency            (2 marks)

 

  1. Which one of the following is a major problem when installing a management accounting system? Lack of .
    1. communication among managers
    2. enough funds to install machines
    3. customers to buy the goods
    4. support from top management and resistance from existing employees(2 marks)

 

QUESTION 3

December 2024 Question 7

Which one of the following users of management accounting information is concerned with firm’s credit worthiness before accepting the transaction?

  1. Sales managers
  2. Creditors
  3. Debtors
  4. Production managers                 (2 marks)

 

QUESTION 4

December 2024 Question 31

Indirect materials are           .

  1. Prime cost
  2. Fixed cost
  3. Irrelevant cost
  4. Factory overhead cost            (2 marks)

 

QUESTION 5

December 2024 Question 49

Which one of the following statements defines an “investment center” in the context of responsibility accounting?

  1. Part of business that utilises equipment and machinery
  2. Part of business where management are responsible for decisions regarding the purchase of non-current assets
  3. Part of a business that is involved in financial services
  4. Part of the business where management are responsible both for revenues and operating costs    (2 marks)

 

QUESTION 6

August 2024 Question 2

Which one of the following statements BEST describes a controllable cost?

  1. A specific cost of an activity or business which would be avoided if the activity or business did not exist
  2. A cost which arises from the decision already taken, which cannot, in the short run, be changed
  3. A cost which the behavior pattern can be easily analysed to facilitate valid budgetary control system
  4. A cost which can be influenced by its budget holder            (2 marks)

 

QUESTION 7

August 2024 Question 15

Which one of the following differences between management accounting and financial accounting is FALSE?

  1. Management accounting is for internal reporting while financial accounting is for external reporting
  2. Management accounting is future oriented while financial accounting is historical
  3. Management accounting is more detailed while financial accounting generates summarised reports
  4. Management accounting reports are periodical while financial accounting reports are perpetual                (2 marks)

 

QUESTION 8

August 2024 Question 16

Which one of the following classifications of cost is meant for distinction between direct cost and indirect costs?

  1. By function
  2. By nature of elements
  3. By cost behavior
  4. By controllability              (2 marks)

 

QUESTION 9

August 2024 Question 17

Minimax Ltd. sells smart phones. The selling and distribution department of Minimax Ltd. is its

  1. Profit centre
  2. Cost centre
  3. Revenue centre
  4. Investment centre           (2 marks)

 

QUESTION 10

August 2024 Question 20

Use the following information to answer questions 20 to question 22.

Spiro Ltd. makes superior vehicle leather seats. The management accountant of Spiro Ltd. intends to prepare a budgeted cost statement. The following budgeted data is provided:

  1. Budgeted output for the year is 24,500 units
  2. Standard details for one unit of productions is as follows:

Direct materials        100 square metres at Sh.450 per square metre

 

Direct wages:

Fitting department    120 hours at Sh.150 per hour

Finishing department 80 hours at Sh.220 per hour

  1. Budgeted overhead costs and hours per annum were as follows:

 

Variable overhead: Sh. Hours
Fitting department

Finishing department

 2,000,000

1,440,000

 25,000

12,000

 

Fixed overheads: Sh.
Production overhead

Selling and distribution overhead Administration overhead

 196,000,000

122,500,000

61,250,000

 

  1. Fixed overheads are absorbed based on budgeted output units.

 

Calculate the following:

 

Prime cost per unit.

  1. Sh.82,000
  2. Sh.80,600
  3. Sh.45,000
  4. Sh.35,600     (2 marks)

 

QUESTION 11

August 2024 Question 21

Variable production cost per unit.

  1. Sh.1,020
  2. Sh.19,200
  3. Sh.99,800
  4. Sh.80,600   (2 marks)

 

QUESTION 12

August 2024 Question 22

Total cost per unit.

  1. Sh.99,800
  2. Sh.15,500
  3. Sh.80,600
  4. Sh.115,300             (2 marks)

 

QUESTION 13

August 2024 Question 38

One of the fundamental principles of ethical behavior that should be observed by a management accountant is ‘integrity’. Which one of the following statements BEST describes integrity in the context of management accounting?

  1. Maintaining the skills required to ensure a competent professional service
  2. Compliance with relevant laws and regulations
  3. Being straightforward and honest when dealing with clients or employing organisation
  4. Not being biased or prejudiced          (2 marks)

SAMPLE WORK

Complete copy of Entrepreneurship and Innovation CISSE Notes  is available in SOFT ( Reading using our MASOMO MSINGI PUBLISHERS APP) 

Phone: 0728 776 317 to order

Email: info@masomomsingi.com

QUESTION 14

August 2024 Question 47

Which one of the following cost categories is NOT a functional cost classification?

  1. Administrative cost
  2. Production cost
  3. Direct cost
  4. Selling cost        (2 marks)

 

QUESTION 15

April 2024 Question 7

Which one of the following statements define cost classification?

  1. The use by several companies of the same costing method
  2. The sum of all cost incurred
  3. The allotment of items of cost to cost centers
  4. The grouping of costs according to their common characteristics       (2 marks)

 

QUESTION 16

April 2024 Question 9

An organisation has four types of cost identified as W, X, Y and Z. The total cost for each type of two different production levels have been analysed by the cost accountant as follows:

Cost type Total cost for 250,000 units        (Sh.) Total cost for 360,000 units (Sh.)
W 12,500,000 18,000,000
X 18,750,000 24,800,000
Y 11,250,000 16,200,000
Z 14,250,000 20,520,000

 

Which cost type would be classified as semi-variable?

  1. X
  2. Z
  3. W
  4. Y             (2 marks)

 

QUESTION 17

April 2024 Question 19

Which one of the following is NOT an inventory cost?

  1. Carrying cost
  2. Out of pocket cost
  3. Set-up costs
  4. Sunk cost              (2 marks)

 

QUESTION 18

April 2024 Question 27

Which of the following managers is responsible for revenues and expenses?

  1. Investment centre manager
  2. Profit centre manager
  3. Cost centre manager
  4. Revenue centre manager      (2 marks)

 

QUESTION 19

April 2024 Question 29

Which of the following costs is NOT CORRECTLY classified to its type of cost?

Type of cost  Example of cost

  1. Cost behaviour    Direct material
  2. Nature classification    Historical cost
  3. Decision making    Opportunity cost
  4. Inventory cost    Holding cost             (2 marks)

 

QUESTION 20

April 2024 Question 39

Which of the following statements about management accounts is/are true?

  • The format of management accounts is largely determined by law
  • Management accounting serves as a future planning tool and are not used as a historical record
  • There is a legal requirement to prepare management accounts
  • Management accounts are used internally by the managers in planning, control and decision making
  1. (i) and (iii)
  2. (ii) and (iii)
  3. (iv) only
  4. (ii) and (iv)

 

QUESTION 21

April 2024 Question 40

Which one of the following costs could NOT be classified as a production overhead cost in a food processing company?

  1. The salary of the factory manager
  2. The cost of factory rent
  3. Depreciation of cooking equipment
  4. The cost of ingredients            (2 marks)

 

QUESTION 22

April 2024 Question 41

Which one of the following statements is FALSE?

  1. Management accounting cannot substitute financial accounting
  2. Financial accounting information can be used for internal reporting purpose
  3. Cost accounting can only be used to provide inventory valuations for internal reporting
  4. Management accounting provides information relevant to decision making, planning, control and evaluation of performance     (2 marks)

 

QUESTION 23

April 2024 Question 44

The branch of accounting that is concerned with providing special purpose reports within the organisation for the top management to make informed decision is called   .

  1. Management accounting
  2. Cost accounting
  3. Financial accounting
  4. Forensic accounting           (2 marks)

 

QUESTION 24

April 2024 Question 45

Fixed costs are conventionally deemed to be     .

  1. Irrelevant costs
  2. Variable in the short-run
  3. Constant per unit of output
  4. Outside the control of management          (2 marks)

 

QUESTION 25

April 2024 Question 50

Which one of the following statements CORRECTLY describe a direct cost?

  1. A cost that cannot be clearly associated with specific activities or products
  2. A cost that can be clearly associated with specific activities or products
  3. A cost that is past and should not be considered for future decisions
  4. A cost that will change as a result of a decision under consideration     (2 marks)

  

QUESTION 26

December 2023 Question 1(a)

Highlight FOUR arguments against introduction of a management accounting system in a business organisation.        (4 marks)

 

QUESTION 27

December 2023 Question 4(a)

Identify SIX types of costs classified by function.      (6 marks)

 

QUESTION 28

August 2023 Question 1 (a)

List FOUR examples of costs that are relevant for decision making process.          (4 marks)

 

QUESTION 29

August 2023 Question 3 (a)

Describe FOUR distinguishing features between “financial accounting” and “management accounting”.        (4 marks)

 

QUESTION 30

April 2023 Question 5 (b)

Explain TWO costs that could be classified under the time bases of cost classification.  (2 marks)

 

QUESTION 31

April 2023 Question 5 (c)

Highlight FOUR benefits that a firm would derive from establishing a good cost accounting system.        (4 marks)

 

QUESTION 32

December 2022 Question 3 (a)

Explain FOUR functions of management accounting in decision making.        (8 marks)

 

QUESTION 33

December 2022 Question 5 (a)

By citing ONE example for each, define the following types of costs:

(i)        Avoidable costs.                (2 marks)

(ii)       Prime costs.                   (2 marks)

(iii)     Marginal costs                  (2 marks)

 

QUESTION 34

August 2022 Question 1 (a)

Explain three users of management accounting information.          (6 marks)

 

QUESTION 35

August 2022 Question 3 (a)

(a)       Explain the following types of costs:

(i)        Product costs.         (2 marks)

(ii)       Opportunity cost.             (2 marks)

(iii)     Conversion costs.           (2 marks)

 

QUESTION 36

August 2022 Question 5 (a)

(a)       Distinguish between the following terms as used in management accounting:

(i)        “Avoidable costs” and “unavoidable costs”.             (4 marks)

(ii)       “Cost control” and “cost reduction”.            (4 marks)

 

QUESTION 37

April 2022 Question 1 (a)

Using a suitable example in each case, explain the meaning of the following types of cost:

(i)        Differential costs.             (2 marks)

(ii)       Out of pocket costs.           (2 marks)

(iii)     Sunk costs.                 (2 marks)

 

QUESTION 38

April 2022 Question 2 (a)

Management accounting system acts as a “decision support system” for providing the right information to the right people at the right time.

With reference to the above statement, discuss five characteristics of management accounting that makes it a key tool for decision making.      (10 marks)

 

QUESTION 39

December 2021 Question 5 (a)

Explain five characteristics of a good cost accounting system.                (10 marks)

 

QUESTION 40

August 2021 Question 1 (a)

Outline six methods used in cost classification.         (6 marks)

 

QUESTION 41

August 2021 Question 2 (a)

Describe five conditions that must be satisfied for an effective costing system to operate in an organisation.         (10 marks)

 

QUESTION 42

May 2021 Question 2 (a)

Cost classification is the grouping of related costs for the purposes of cost control to facilitate cost prediction and to aid decision making. With regard to this statement, identify and explain the following bases of cost classification:

(i) Relevance.                (2 marks)

(ii) Traceability.             (2 marks)

(iii) Controllability.                 (2 marks)

(iv) Discretion.              (2 marks)

 

QUESTION 43

May 2021 Question 3 (a)

Explain two differences between “interlocking cost book keeping system” and “integrated. cost book keeping system”.        (4 marks)

SAMPLE WORK

Complete copy of Entrepreneurship and Innovation CISSE Notes  is available in SOFT ( Reading using our MASOMO MSINGI PUBLISHERS APP) 

Phone: 0728 776 317 to order

Email: info@masomomsingi.com

 

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