Question

UNIT CODE: BAF2202          UNIT TITLE: MANAGEMENT ACCOUNTING I                                                                                           

1. Assume that a certain process has an 95% learning curve effect and the first unit took 4000hrs to produce.

Required:

1. Compute the number of hours required to produce the first 34 units
2. Compute the number of hours required to produce 34th unit.

iii) Assume that the wage rate is Kshs.100 per hour, compute the Labor cost of producing the last 16 units

2. Differentiate between management accounting and financial accounting
3. Highlight the assumptions of cost volume profit analysis
4. Describe any five cost estimation methods applied in management accounting

Answer 1

Time taken to produce est unit (a) = 4000 houry learning rate = 95%. . Learning cofficient (6) = logo = – 0.074 logo.05 (1) hours orearuised produce 34 units to yrab y = average time per unit xe Number of units produced b= learning coefficient a ² time to produce ist unit de -0.074 y=4000 x 34 logy = 109 4000 - 0.074 10g 34 = 3.602 -0.074 (10531) - 3.602 -0.113 = 3.489 y= antilog 3.489 3083 hours per unit es Total hours reauired to produce 34 units = 34 units X 3083 hours perunit F3y = 104 822 houry 7

in hours required to produce 34th unit step: hours reanived 33 unit 9. Ob -0.074 4000x33 y = logy: 1094000 -0.074 (tog33) - 3,6020- 0.074 (1-5185) 53.6020- 0.1124 y = anti log 339 3.4896 = 3089 hours per unit Total time (33 units) = 33 units x 3089.. 733 = 101937 hours = Time searuired to produce 34th unit - T 34 - T33 = 104822 - 101937. = 2885 hours

laste producing 16 unik. of (1) Labour cost last 16unit to produce Total time reauired reanived ime Total time - Total time for 34 unila - for sunits Total time reanived for sunits y. Ob y= 0.074 uooo CIB) 10g 4000 - 0.077 4 (10918) logy = 3-6020 - 0.Day (1.2553) 2 3.6090 - 0.0929 = 3+5091 (718) y= antilog 3.509) 3229 hours per omil .:: Total time for Igunit = 1643229 - 51604 hours time rearuired for last 16 unit = T3y - T18 = 104822 - 51664 hours - house = 53158 hous Labour Cost = 5315 8 house x Kshs 100 per hour - 5315800/—

purpose/objective. financial accounting The primaay objective of financial accounting is to make periodic e periodic reports to share holders creditoris, & other external parties management accounting management accounting is to provide information to the management for planning Ee controlling de decision making Time focus It emphasis on past activities riped It emphasis decisions affecting the future It need not follow the senters &e principles GPAPP It must follow the scules de principles of GAAP of GAAP focus on segments Subject matter to It focus on the whole of organisation nisation - or organisation Home shost not mandatory mandatory audit o s los o bolno Emphasis on emphasis on timelinen precision vs Timeliness peed sion

(A c) Assumptions of cup analysis " Selling poice &e market conditions are constant. Sales mix is also assumed to be constant 2) volume is the only factor which affects variable cost 3) It is assumed that all units produced are Sold during the period; hence there is no change in beginning & ending inventay wo levels 4) Cost & slevenue srelationships are linear within a relevant range of activity &e over a specified period of time 5) All costs are presumed to be classified as either variable , fixed and d) cost estimation methods in management accounting (i) account analysis This is used in calculation of an estimate of variable, fixed & mixed costs (21) High low method; variable cost per unit is calculated as follows & highest activity cost a lowest activity cost fighest units - lowent units Ci scatter Graph model; It is the popular me that of estimating the fixed & variable costs because it is fast & easy method. It involves drawing agraph of number of units produced against the total costs incurred.

(AV) Regression analysis Regression analysis uses a series of mathemetical eacuations to find the best possible bit of the line to the data points de thans tends to provide more accurate results, microsoft excel can be used to calculate variable &e fixed costs.