THE INSTITUTE OF FINANCE MANAGEMENT

FACULTY OF ACCOUNTING, BANKING AND FINANCE

DEPARTMENT OF ACCOUNTING AND FINANCE

BACHELOR OF ACCOUNTANCY AND TAXATION III

AFU 08503: MANAGEMENT ACCOUNTING

SEMESTER I- TEST

ACADEMIC YEAR 2020/2021

DATE: SATURDAY, 23rd January, 2021 TIME ALLOWED: 2 HRS

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GENERAL INSTRUCTIONS:
1. There are two (2) questions in this paper, attempt ALL questions.
2. Marks are allocated for each question, plan wisely.
3. Your answer should be relevant and to the point.
4. You are reminded to adhere to ALL Institute’s Examination Regulations.
QUESTION ONE (50 marks)
A company manufactures a single product. Budget and standard cost details for next year
include:
Selling price per unit TZS 4,800
Variable production cost per unit TZS 1,720
Fixed production costs TZS 90,000,000
Fixed selling and distribution costs TZS 31,520,000
Sales commission 5% of selling price

Required
(i) Calculate the break-even point in units. (10 marks)
(ii) Calculate the percentage by which the budgeted sales of 90,000units can fall before the
company begins to make a loss (margin of safety). (10 marks)
(iii) How many units must be sold to earn TZS3,920,000 target profit? (10 marks)
(iv) What profit would result if 80,000 units were sold? (10 marks)
(v) Calculate the revised break-even point assuming that the selling price per unit is increased
to TZS5,000 and sales commission is increased to 8 per cent of selling price and a further
TZS 880,000 is spent on advertising. (10 marks)
(Total 50 marks)

QUESTION TWO (50 marks)

Solo makes and sells a single product. The following data relate to periods 1 to 4.
TZS
Variable cost per unit 30
Selling price per unit 55
Fixed costs per period 6,000

Normal activity is 500 units and production and sales for the four periods are as follows:

Period 1 Period 2 Period 3 Period 4

units units units units
Sales 500 400 550 450
Production 500 500 450 500

There were no opening inventories at the start of period 1.

The marginal costing operating statement for periods 1 to 4 is shown below.

1
Marginal costing operating statement
Period 1 Period 2 Period 3 Period 4
TZS ‘000 TZS ‘000 TZS ‘000 TZS ‘000
Sales 27,500 22,000 30,250 24,750

Variable production 15,00 15,000 13,50 15,000

costs 0 0
Add: Opening 3,000
inventory

Less: Closing -------- (3,000 ------- (1,500

inventory ) )

Variable production 15,000 12,000 16,500 13,500

cost of sales

Contribution 12,500 10,000 13,750 11,250

Fixed costs 6,000 6,000 6,000 6,000
Profit for period 6,500 4,000 7,750 5,250

Required
(a) Prepare the operating statements for each of the periods 1 to 4, based on absorption
costing principles. (25 marks)
(b) Calculate the profit differences and comment briefly on the results obtained in each
period and in total by the two systems. (25 marks)
(Total = 50 marks)