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SAMPLE WORK
Complete copy of CPA ADVANCED MANAGEMENT ACCOUNTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy
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INTRODUCTION
Following our continued effort to provide quality study and revision materials at an affordable price for the private students who study on their own, full time and part time students, we partnered with other team of professionals to make this possible.
This Revision kit (Questions and Answers) contains kasneb past examination past papers and their suggested answers as provided by a team of lecturers who are experts in their area of training. The book is intended to help the learner do enough practice on how to handle exam questions and this makes it easy to pass kasneb exams.
PAPER NO. 16 (S3) ADVANCED MANAGEMENT ACCOUNTING
UNIT DESCRIPTION
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply advanced management accounting tools and techniques for decision making in the context of organisational strategy.
LEARNING OUTCOMES
A candidate who passes this paper should be able to:
- Use cost estimation data in decision making
- Apply advanced management accounting techniques to aid in organisational strategic decision making
- Use financial and non-financial indicators to measure organisational performance
- Apply environmental management accounting concepts in practice.
CONTENT
- Strategic management accounting information
- Sources of strategic management accounting information
- Role of strategic management accounting in strategic planning and control
- Governance and control of strategic management accounting information
- Scope and limitations of management accounting
- Ethical standards for management accountants
- Cost estimation and interpretation
- Ordinary least square (OLS) method. Single and multiple predictors; tests of significance (goodness of fit, ANOVA/P-Value, economic plausibility tests, significance of independent variable/t-test)
- Specifications/assumptions of OLS (implications of serial correlation, multi- colinearity)
- Computer output and technical versus managerial interpretation of OLS results
- Learning curve models and their application
- Planning and decision making techniques
- Cost volume profit analysis (CVP) for single and multiple products under conditions of uncertainty
- Decision making under environments of uncertainty and risk, using conditional payoff tables and decision trees.
- Expected value of perfect information
- Relevant cost analysis
- Application of marginal costing (Non-routine decisions): Limiting factor analysis,
- Throughput accounting, make or buy decision, continue or discontinue/drop decisions, special order decisions and other short term decisions.
- Pricing decisions
- External pricing methods
- Transfer pricing in divisionalised companies: Domestic and international transfer pricing
- Product life cycle costing, Target costing and Kaizen costing
- Strategic performance measurement
- Functional and divisionalised organisational structures
- Responsibility accounting, responsibility centers and segmental reporting
- Divisional performance measures such as profit margin, asset turnover, return on investment(ROI), return on capital employed(ROCE), residual income(RI), accounting rate of return(ARR) and economic value added(EVA)
- Non-financial performance indicators
- Alternative performance measures such as balanced scorecard, performance pyramid, Fitzgerald and Moon’s building block model.
- Inventory control decisions
- Applications of certainty inventory models (EOQ and EBQ) in decision making
- Stochastic inventory models with and without stock out cost
- Marginal analysis for perishable stock items
- Application of simulation models in inventory control (with and without backorders)
- Application of strategic management decisions in inventory control: Just-in-time purchasing (JIT), ABC analysis and material requirement planning (MRP)
- Budgetary control techniques
- Applications of budgetary control systems: Top-down, bottom-up, rolling, zero- based(ZBB), activity-based (ABB), incremental, feedback and feed-forward controls.
- Use of operational variances in reconciling original budget with actual performance
- Advanced variance analysis, planning and operational analysis (Ex-post)
- Application of learning curve model and ABC in variance analysis
- Investigation models for variances.
- Environmental management accounting
- Role of accountants in managing and accounting for environmental cost
- Use of management accounting techniques in identification and allocation of environmental costs (Inflow/Outflow analysis, Flow cost accounting, Environmental lifecycle costing and Environmental Activity Based Costing).
SAMPLE WORK
Complete copy of CPA ADVANCED MANAGEMENT ACCOUNTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy
Phone: 0728 776 317
Email: info@masomomsingi.com
PART A
PAST EXAMINATION QUESTIONS
SAMPLE WORK
Complete copy of CPA ADVANCED MANAGEMENT ACCOUNTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy
Phone: 0728 776 317
Email: info@masomomsingi.com
TOPIC 1
STRATEGIC MANAGEMENT ACCOUNTING INFORMATION
QUESTION 1
November 2019 Question One A
Examine three benefits that might accrue to a business organisation as a result of good ethical behaviour by management accountants. (6 marks)
QUESTION 2
May 2019 Question Four A
Highlight four ethical standards of management accountants. (4 marks)
QUESTION 3
May 2016 Question One A
Management accountants are required to conduct themselves ethically. A commitment to ethical professional practice requires Observation of principles that express values and standards that guide conduct such as honesty, fairness, objectivity and responsibility.
Required:
With reference to the above statement, summarise six benefits of ethical behaviour by management accountants in business. (6 marks)
QUESTION 4
May 2015 Question Three A
Evaluate four ethical standards to be adhered to by management accountants.
(8 marks)
QUESTION 5
May 2015 Question Four A
Examine three desirable factors that need to be considered in order to ensure that management accounting information is used effectively (6 marks)
TOPIC 2
COST ESTIMATION AND INTERPRETATION
QUESTION 1
December 2021 Question three A
Summarise the components of time series. (4 marks)
QUESTION 2
December 2021 Question three B
BZK Ltd. is a manufacturing company based in Africa.
The company has presented the following data relating to its production in the last two years for each quarter:
| Year | Quarter | Quarter number | Units produced |
| 2019 | 1 | 1 | 2,000 |
| 2 | 2 | 2,500 | |
| 3 | 3 | 3,000 | |
| 4 | 4 | 6,000 | |
| 2020 | 1 | 5 | 5,000 |
| 2 | 6 | 4,000 | |
| 3 | 7 | 6,000 | |
| 4 | 8 | 10,000 |
The trend equation for the number of units produced has been estimated as follows:
Where; X represents units produced per quarter.
Q represents the quarter number
The company’s Management Accountant has established the following relationships between the quarterly costs and output based on the data collected in the last two years.
| Cost item | Relationship |
| Office rent | TC = 500,000 |
| Office salaries | TC = 200,000 + 2x |
| Fuel cost | TC = 45,000 + 6x |
| Transport wages | TC = 62,000 + 8x |
| Sundry costs | TC = 29,965 + x |
Where; TC represents the total cost per quarter
x represents the number of units produced per quarter
Required:
- Using multiplicative time series model and least squares method for the trend, forecast the number of units to be produced in each of the quarters of the year 2021.
(10 marks)
- Using your answer in (b) (i) above and the cost relationship equations, determine the expected cost for each item of cost and the total cost to be incurred in the fourth quarter of the year 2021. (3 marks)
- Establish the 95% confidence interval for the total cost obtained in (b) (ii) above given that the standard error of estimate is Sh.122,599 and t – value is 2.447.(3 marks)
QUESTION 3
September 2021 Question two A
Highlight four limitations of the learning curve theory as a tool for cost estimation and forecasting. (4 marks)
QUESTION 4
May 2021 Question two A
Actross Ltd., a packaging company is preparing its budget for the year to 30 June 2021. In respect of fuel oil consumption, it is desired to estimate an equation in the form Y = a + bx, where Y is the total expense at an activity level x, a is the fixed expense and b is the variable cost per unit.
PART B
SUGGESTED
ANSWERS AND SOLUTIONS
TOPIC 1
STRATEGIC MANAGEMENT ACCOUNTING INFORMATION
QUESTION 1
November 2019 Question One A
Benefits that might accrue to a business organization as a result of good ethical behavior by management accountants are:
- It promotes a higher standard of self regulation
- It regulates the behaviour of professional leading to best practice
- It helps in minimizing the conflicts of interest between professionals and clients
- It helps in boosting public confidence in the word of professionals
- It improves credibility and trust
QUESTION 2
May 2019 Question Four A
Ethical standards of Management Accountants
- Competence. Enhance knowledge and skills, perform professional duties in accordance with relevant laws and regulations, make recommendations that are accurate and timely, and recognize and help manage risk.
- Confidentiality. Information should be confidential unless disclosure is legally required or authorized, let relevant people know the importance of confidential information, and refrain from using confidential information in illegal or unethical ways.
- Integrity. Mitigate conflicts of interest or warn of possible conflicts of interest, refrain from engaging in any conduct that would prevent the ethical performance of duties, avoid activities that would discredit the profession, and place ethics and integrity of the profession above personal interests.
- Credibility. Communicate fairly and objectively, provide all relevant information that could influence a user’s interpretation and understanding of the reports or analyses, report any delays or deficiencies in information according to law or the organization’s policies, and communicate professional limitations or other constraints that would affect responsible judgment or successful performance.
QUESTION 3
May 2016 Question One A
Benefits of ethical behavior by management accountant in business
- It reduces cases of legal litigation
- It regulates the behavior’s of professional leading to the best practice
- It promotes a higher standard of self regulation
- It helps in minimizing the conflicts of interest between professionals and clients
- It helps in boosting public confidence in the world of professionals
- It improves credibility and trust
QUESTION 4
May 2015 Question Three A
Ethical standards to be adhered to by management accountants
- Integrity – Management accountants are expected to be honest and straight forward in all their dealings
- Confidentiality – management accountants are not expected to behave in a way that may put the profession into disrepute
- Objectively – management accountant should avoid conflict of interest while discharging their duties.
- Competence – Accountant should maintain higher level of professionalism
QUESTION 5
May 2015 Question Four A
Factors to consider in order ensuring management accounting information is used effectively
- Timing – The information should be produced in time for it to be used effectively
- Accuracy – The information should be sufficiently accurate for the intended purpose
- Relevance – The information must be relevant for the intended purpose.
- Feasible – the information should be currently reflect the underlying economic realities.
SAMPLE WORK
Complete copy of CPA ADVANCED MANAGEMENT ACCOUNTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy
Phone: 0728 776 317
Email: info@masomomsingi.com
TOPIC 2
COST ESTIMATION AND INTERPRETATION
QUESTION 1
December 2021 Question three A
Components of time series
- Secular trend- This is a constant changes in set of data
- Seasonal variation – they are short term changes in a set of data that tends to repeat at least once in year.
- Erratic/Residual variation – This is a random or inconsistence changes in set of data which is highly unpredictable.
- Cyclical variation- they are long term changes which tends to repeat at least after 14 years e.g. El nino
QUESTION 2
December 2021 Question three B
- Time series
| Year | Quarter | Units
A |
Four
Moving Averages |
Centered
Average (T) |
Estimated
Variation A÷T |
Adjusted
Variation (5) |
Deseasonalised | |
| Data
y=A÷5 |
x | |||||||
| 2019 | 1 | 2,000 | – | – | 1.05 | 1,905 | 1 | |
| 2 | 2,500 | – | – | 0.72 | 3,472 | 2 | ||
| 3,375 | ||||||||
| 3 | 3,000 | 3,750 | 0.8 | 0.82 | 3,659 | 3 | ||
| 4,125 | ||||||||
| 4 | 6,000 | 4,312.5 | 1.39 | 1.41 | 4,255 | 4 | ||
| 4,500 | ||||||||
| 2020 | 1 | 5,000 | 4,875 | 1.03 | 1.05 | 4,762 | 5 | |
| 5,250 | ||||||||
| 2 | 4,000 | 5,750 | 0.70 | 0.72 | 5,556 | 6 | ||
| 6,250 | ||||||||
| 3 | 6,000 | 0.82 | 7,317 | 7 | ||||
| – | ||||||||
| 4 | 10,000 | – | – | 1.41 | 7,092 | 8 | ||
Adjusted variation
| Quarter Year
|
1 | 2 | 3 | 4 | Total |
| 2019 | – | – | 0.8 | 1.39 | |
| 2020 | 1.03 | 0.70 | – | – | |
| Average | 1.03 | 0.70 | 0.8 | 1.39 | 3.92 |
| Adjusted value | 0.02 | 0.02 | 0.02 | 0.2 | 0.08 |
| Adjusted average | 1.05 | 0.72 | 0.82 | 1.41 | 4 |
SAMPLE WORK
Complete copy of CPA ADVANCED MANAGEMENT ACCOUNTING Revision Kit is available in SOFT copy (Reading using our MASOMO MSINGI PUBLISHERS APP) and in HARD copy
Phone: 0728 776 317
Email: info@masomomsingi.com
