Mzumbe University

Department of Accounting and Finance

ACC 211 Cost and Management Accounting I
Tutorial question Topics I & II
DISCUSION QUESTION
1. Should a managerial accounting system provide both financial and
nonfinancial information? Explain.
2. What are the three major elements of product costs in a manufacturing
company?
3. Define the following: (a) direct materials, (b) indirect materials, (c) direct labor,
(d) indirect labor, and (e) manufacturing overhead
4. Management accounting deals only with costs.” Do you agree? Explain.
5. With a relevant example, describe the five-step decision-making process.
6. A Resident Building company’s in Morogoro has asked your employer
(Kittau& Company) a CPA firm Located at Dar essalaam to prepare briefing
documents suitable for small and medium sized businesses. You have been
asked by the managing partner to develop the first briefing note as outlined in
the following requirement.
Requirement: Prepare a briefing note that:
i) Presents the key differences between management accounting and financial
accounting;
ii) Describes the role of the management accountant; and
iii) Outlines FOUR factors that influence a company’s demand for management
accounting information.
TUTORIAL QUESTIONS
QUESTION ONE
Kahawa Express operates a number of espresso coffee stands in busy suburban
malls. The fixed weekly expense of a coffee stand is Tzs. 1,100,000 and the
variable cost per cup of coffee served is Tzs. 260.
Required:
Fill in the following table with your estimates of total costs and average cost per
cup of coffee at the indicated levels of activity for a coffee stand and effect does
an increase in volume have on cost.
Cups served in week
1800 1900 2000
Fixed Cost ? ? ?
Variable cost ? ? ?
Total Cost ? ? ?
Average cost per cup served ? ? ?
Unit variable cost ? ? ?
Unit fixed cost ? ? ?

ACC 211 Cost and Management Accounting I 1

QUESTION TWO
Marambau Company manufactures furniture, including tables. The following are
the cost attributed to the company in December 2019,
i) The tables are made of wood that costs TZS. 100,000 per table.
ii) The tables are assembled by workers, at a wage cost of TZS. 40,000 per
table.
iii) Workers assembling the tables are supervised by a factory supervisor who is
paid TZS. 38,000,00 per year.
iv) Electrical costs are TZS. 2,000 per machine-hour. Four machine-hours are
required to produce a table.
v) The depreciation on the machines used to make the tables totals TZS.
10,000,000 per year. The machines have no resale value and do not wear
out through use.
vi) The salary of the president of the company is TZS. 100,000,000 per year.
vii) The company spends TZS. 250,000,000 per year to advertise its products.
viii) Salespersons are paid a commission of TZS. 30,000 for each table sold.
ix) Instead of producing the tables, the company could rent its factory space for
TZS. 50,000,000 per year.
Required:
Classify these costs according to the various cost terms used in Cost and
Managerial accounting as in example of (i) below

Varia Fixe Period Product Cost Su Opport

ble d (Selling Direct Dire Overh nk unity
cost cost &admn) materi ct ead cos cost
cost al Labo t
r
Wood used √ √
in table

QUESTION THREE
i) KCMC hospital has initiated a research project which is intended to develop
a new Medicine. Expenditures to date on this particular research total
TZS500,000,000 but it is now estimated that a further TZS200,000,000 will
need to be spent before the Medicine can be allowed by TFDA for Human use.
Over the estimated life of the product the profit potential has a net present
value of TZS350,000,000.
Required

ACC 211 Cost and Management Accounting I 2

 Advise management whether they should continue or abandon the project.
Support your conclusion with a numerate statement and state what kind of
cost is the TZS 500,000,000.
ii) Opportunity costs is not recognized by financial accounting systems but
need to be considered in many decisions taken by management.
Required
Explain briefly the meaning of opportunity costs; give two examples of
each to illustrate the meanings you have attached to them.

QUESTION FOUR
Morasa travels every day to work by Mwendokasi to his 5-days a week job. Instead
of buying daily tickets she finds it cheaper to buy a quarterly season ticket which
costs TZS. 188,000 for 13 weeks.
Delphine, an acquaintance, who also makes the same journey, suggests that they
both travel in Morasa’s car and offers to give him TZS. 120,000 each quarter
towards his car expenses. Except for weekend travelling and using it for local
college attendance near his home on three evenings each week to study for her CPA
Foundation Stage, the car remains in Morasa’s garage.
Morasa estimates that using her car for work would involve him, each quarter, in
the following expenses: (TZS)
Depreciation (proportion of annual figure) 200,000
Petrol and oil 128,000
Tires and miscellaneous 52,000
Required:
State whether Morasa should accept Delphine’s offer and draft a statement to show
clearly the monetary effect of your conclusion.

QUESTION FIVE
ALEX Company which its financial Year starts from 1 December to 31November
prepared a sales budget which resulted in the following cost structure:
% of sales
Direct materials 32
Direct wages 18
Production overhead: Variable 6
Fixed 24
Administrative and selling costs: Variable 3
Fixed 7
Profit 10
After ten weeks, however, it became obvious that the sales budget was too
optimistic and it has now been estimated that because of a reduction in sales

ACC 211 Cost and Management Accounting I 3

volume, for the full year, sales will total £2,560,000,000 which is only 80% of the
previously budgeted figure.
Required
Present a statement for management showing the amended sales and cost structure
in TZS. . and percentages, in a marginal costing format.

QUESTION SIX
Output (units) Total cost (TZS )
200 7,000
300 8,000
400 9,000

Required:
(a) Calculate the variable cost per unit.
(b) Calculate the total fixed cost.
(c) Estimate the total cost if output is 350 units.
(d) Estimate the total cost if output is 600 units.

QUESTION SEVEN
Output (units) Total cost (TZS. )
200 7,000
300 8,000
400 9,000
For output volumes above 350 units the variable cost per unit falls by 10%. (Note:
this fall applies to all units – not just the excess above 350).

Required:
Estimate the cost of producing 450 units of Product LL

QUESTION EIGHT
An organisation has the following total costs at three activity levels
Activity level 4,000 6,000 7,500
(units)
Total cost TZS. 40,800 TZS. 50,000 TZS. 54,800
Variable cost per unit is constant within this activity range and there is a step up of
10% in the total fixed costs when the activity level exceeds 5,500 units.

Required:
What is the total cost at an activity level of 5,000 units?

ACC 211 Cost and Management Accounting I 4

QUESTION NINE
MLThe first unit of a new product is expected to take 100 hours. An 80% learning
curve is known to apply.

Calculate:
(a) The average time per unit for the first 16 units
(b) The average time per unit for the first 25 units
(c) The time it takes to make the 20th unit.

QUESTION TEN
The first batch of a new product took 20 hours to produce. The learning rate is
90%. (Cessation of the learning curve effect)

Required:
If the learning effect ceases after 72 batches (i.e. all subsequent batches take the
same time as the 72nd), how long will it take to make a grand total of 100 batches?

QUESTION ELEVEN
Average unit times for product X have been tabulated as follows
Unit number Cumulative average time per unit
Yx
1 20 minutes
2 17.2 minutes
4 14.792 minutes
8 12.72 minutes

Required:
What is the Learning Curve rate?

ACC 211 Cost and Management Accounting I 5