BAC 402 – ADVANCED MANAGEMENT ACCOUNTING

CAT 2
QUESTION 1 (TOPIC: COST VOLUME PROFIT ANALYSIS)
A company manufactures and sells two products, X and Y. Forecast data for a year are:

Product X Product Y

Sales (units) 80 000 20 000

Sales price (per unit) Ksh 12 8

Variable cost (per unit) Ksh 8 3

Annual fixed costs are estimated at Ksh 273 000

What is the breakeven point in sales revenue with the current sales mix?

QUESTION 2 (TOPIC: COST VOLUME PROFIT ANALYSIS)

A company produces and sells two products with the following costs

Product X Product Y

Variable costs (per £ of £0.45 £0.6

sales)
£1 212 000 per period £1 212 000
Fixed costs

Total sales revenue is currently generated by the two products in the following proportions:

Product X 70%

Product Y 30%

Required:

a. Calculate the breakeven sales revenue per period, based on the sales mix assumed
above
b. Of the fixed costs Ksh 455 000 are attributable to product X. Calculate the sales
revenue required on product X inorder to recover the attributable fixed costs and
provide a net contribution of Ksh 700 000 towards general fixed costs and profit
 QUESTION 3 (MEASURING RELEVANT COSTS AND REVENUES)
A market gardener is planning his production for next season, and he has asked you as a
management accountant, to recommend the optimal mix of vegetable production for the coming
year. He has given you the following data relating to the current year.

potatoes turnips parsnips carrots

Area occupied (acres) 25 20 30 25
Yield per acre ( tones) 10 8 9 12
Selling price per tonne(Kshs) 1000 1250 1500 1350
Variable cost per acre (Ksh):
Fertilizers 300 250 450 400
Seeds 150 200 300 250
Pesticides 250 150 200 250
Direct wages 4000 4500 5000 5700
Fixed overhead p.a. Ksh 540 000
The land that is being used for production of carrots and parsnips can be used for either crop, but
not for potatoes or turnips. The land being used for potatoes and turnips can be used for either
crop, but not for carrots or parsnips. In order to provide an adequate market service, the gardener
must produce each year at least 40 tonnes each of potatoes and turnips and 36 tonnes each of
parsnips and carrots.

You are required to present a statement to show:

a. The profit for the current year;
b. The profit for the production mix that you recommend

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