TANZANIA INSTITUTE OF ACCOUNTANCY

NTA LEVEL 7
BACHELOR OF BUSINESS ADMINISTRATION
ACU 07402: MANAGEMENT ACCOUNTING

GROUP ASSIGNMENT
GROUPS
1. The following information was taken from the records of Castle Manufacturing
Company: (Figures in Kshs. ‘000’) – Assignment Question

Accounts Balances 31/12/2009 31/12/2010

Direct materials 20,000 25,000
WIP 30,000 40,000
Finished goods 50,000 40,000

During the year 2010, the following transactions were recorded:

(Figures in Kshs. ‘000’)

Direct materials purchased 85,000

Direct labour cost incurred 90,000
Factory indirect labour 10,000
Factory supplies 5,000
Factory utilities 15,000
Depreciation – factory 30,000
Factory maintenance 10,000
Total selling and administrative expenses 60,000
Sales 340,000

Required:
(a) Prepare a Cost of Goods Manufactured and Sold Statement for the year ended
31/12/2010.
(b) Prepare an Income Statement for the year ended 31/12/2010.

2. The following information has been taken from the records of Nyali Company for the
month of August 2010: Assignment Question

(Figures in Kshs. ‘000’)

Raw materials inventory, August 1 20,000
Raw materials inventory, August 31 10,000
WIP inventory, August 1 30,000
WIP inventory, August 31 40,000

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 Finished goods inventory, August 1 56,000
Finished goods inventory, August 31 41,000
Insurance, factory equipment 500
Insurance, office equipment 300
Direct labour cost 90,000
Purchases of raw materials
130,000
Indirect labour cost 29,000
Indirect material cost 4,000
Hire of special production equipment 1,000
Depreciation, office equipment 2,000
Factory rent 17,000
Maintenance – factory equipment 3,000
Depreciation – factory equipment 6,500
Advertising expense 10,000
General selling and administrative expenses 60,000
Sales 350,000

Required:
a) Prepare a schedule of cost of goods manufactured for August 2010.
b) Prepare income statement for the month ended 31/8/2010.

3. The following information is available for two companies at the end of 2010:
Assignment Question

Company A:
Finished goods 1/1/2010 600,000/=
Cost of goods manufactured 3,800,000/=
Sales 4,000,000/=
Gross profit on sales 20%
Finished goods inventory, 31/12/2010 ?

Company B:
Gross profit 96,000/=
Cost of goods manufactured 340,000/=
Finished goods, 1/1/2010 45,000/=
Finished goods, 31/12/2010 52,000/=
WIP, 1/1/2010 28,000/=
WIP, 31/12/2010 38,000/=
Sales ?

Required: Determine the amounts indicated by the question marks for each company.

Submission: questions 1 – 3 is on or before 5th April 2024.

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4. Lima Limited produces and sells a single product. The company’s costing system is based on
full absorption costing. The following results were reported for the years 2007 and 2008.

2007 2008
Sales – units 25,000 30,000
Opening stocks – units 10,000 15,000
Closing stocks – units 15,000 5,000
Selling price per unit 20/= 20/=
Variable manufacturing cost per unit 8/= 8/=
Fixed manufacturing costs 150,000/= 150,000/=
Selling and administrative costs (fixed) 20,000/= 20,000/=
Normal volume – units 25,000 25,000

All variances are written off against profits in the year in which they arise.

Required:
(i) For each year compute the profit for the company under
a) absorption costing
b) variable costing
(ii) Explain the differences (if any) between the profits under the two methods in each year.

5. The following information relates to Salama Ltd:

2004 2005
Production – units 23,000 19,000
Sales – units 18,000 24,000
Normal production (units) 20,000 20,000
Selling price per unit 15/= 15/=
Variable manufacturing costs per unit 5/= 5/=
Fixed manufacturing overheads 60,000/= 60,000/=
Variable selling costs per unit 3/= 3/=
Fixed selling costs 40,000/= 40,000/=

Required: prepare for the company’s Profit and Loss Accounts for each year under:
a) standard absorption costing;
b) direct costing

6. The following information relates to Kakamega Industries for 2008:

Units produced 24,000

Units sold 18,000
Normal volume (units) 20,000
Selling price per unit 20/=
Variable manufacturing cost per unit 12/=
Fixed manufacturing costs 120,000/=

Required:

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 a) Calculate the profit or loss earned in 2008 under absorption costing.
b) Calculate the profit or loss earned in 2008 under variable/direct costing.
c) Reconcile the profits or losses earned under each method.

Note:

Submission: questions 4 – 6 is on or before 11th April 2024.

7. The following data relates to Bato Shoe Co. Ltd:

Variable data per pair:

Selling price 3,000/=
Cost of shoes 1,950/=
Salesmen’s commissions 150/=
Total variable expenses 2,100/=

Annual fixed expenses:

Rent 600,000/=
Salaries 2,000,000/=
Advertising 800,000/=
Other fixed expenses 200,000/=
3,600,000/=

Required:
(i) What is the annual breakeven point in unit sales and shillings?
(ii) If 3,500 pairs of shoes are sold, what would the net profit (loss) be?

8. Chui Plastics Ltd. make pipes of one type only. The budgets for November 2016 are as follows:

Sales 27,500 units 550,000/=

Costs Variable Fixed

Shs. Shs.
Direct materials 110,000 -
Direct labour 82,500 140,000
Overhead: Production 55,000 -
Admin. - 102,000
247,500 242,000

Required: Calculate:
i) The contribution per unit,
ii) The contribution margin ratio
iii) The break-even point in both units and sales
iv) The margin of safety ratio.

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Assume further that the company is considering the acquisition of a new machine. This will add
48,000/= to fixed production overhead but will halve labour costs. All other factors remain the same.

i) What will be the new breakeven point in both units and sales?
ii) What level of sales will be required to make the acquisition of the machine worthwhile?

Identify the dangers that the company should be aware of in using the information derived from the
cost-volume-profit analysis.

9. Midundo Kabambe, a manufacturer of electronic equipment, decided to analyze the

profitability of its new portable Compact Disc (CD) players. On the CD player line, the
company incurred TZS.2,520,000,000 of fixed costs per month while obtaining total
revenue of TZS.6,000,000,000 from selling 20,000 units. The variable cost was
TZS.120,000 per unit.

Recently, a new machine used in production of CD players has become available. It is

more efficient than the machine currently being used. The new machine would reduce
the company’s variable cost by 20%, but leasing it would increase the fixed costs by
TZS.96,000,000 per month.

Required:
(a) Compute the Break-even point in units assuming the use of the old machine.
(b) Compute the Break-even point in units assuming the use of the new machine.
(c) Assuming the total sales remain at 20,000 units and the new machine is leased,
compute the expected operating profit and compare it with the old machine.
(d) Advise the company on whether the new machine should be leased, stating the
conditions (including projected demand) on which your advice is based.
(e) Advise the company on any four different decisions that can potentially benefit
from employing CVP analysis. Give relevant examples in your answer.

10. The MAISHA is a medium sized theatre, with a maximum capacity of 500 seats,
offering a variety of music events to its patrons. In the past, the event offered were of
low budget, featuring local and regional singers and musicians. This year, the theatre
engaged the services to music director who negotiated and booked two well-known
artists for event in May. The MAISHA receives some funding to promote its activities
from the Department of Culture and this fund is sufficient to pay basic operating
expenses such as insurance, light and heat, and staff costs. When a concert or event is
staged, additional costs arise and the Board of Management of the theatre must ensure
that all such costs are covered by ticket sales. While the artists that have been booked
for May are nationally known, they charge higher fees to perform and the Board of
Management are particularly concerned to ensure that the ticket price charged for the
event is sufficient.

The following details have been provided by the Board of Management:

Ticket prices

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 Tickets for events are usually priced at TZS.15,000 each, but the Board has stated that
a higher price of TZS.25,000 would be more suitable for the well-known artists if costs
are to be covered.
The MAISHA employs a ticket booking facility that customers may use online or by
telephone. The company providing the service charges the theatre 10% of the ticket
price for each ticket sold.

Additional staff
For every event that is held the theatre employs ten part-time staff members. One staff
member is required for box office used for ticket collection, four staff members are
required to usher customers to their appointed seats, and after the event has finished
five workers are required to clean and arrange the theatre in preparation for the next
event. Each staff member is paid TZS.80,000 for working at the event.

Well-known artists
• One group, the Mondi, agreed to perform one concert for a fixed fee of
TZS.8,155,000.
• Another singer/songwriter, Kiba also agreed to perform one concert. He negotiated
an arrangement with the music director whereby he would be paid TZS.5,780,000
plus 20% of the ticket price for every ticket sold.

Required:
(f) For each of the events featuring well known artists:
(i) Calculate the number of tickets that must be sold to breakeven
(ii) Assume that the maximum number of tickets are sold. What ticket price
should be charged if the Board of Management would like to earn a profit
of TZS.5,000,000 on the event?
(g) Assume that a ticket price is TZS.25,000, determine the level of ticket sales at which
the profit earned from the Mondi will be equal the profit earned from Kiba.
(h) Identify any six main assumptions on which the Cost-Volume-Profit model is
based.

11. Kifwe Ltd manufactures and sells three products W, X and Y and has supplied you
with the following details for the year ended 30th September 2021:

Price Unit Variable Cost % of Total Sales

TZS/Units TZS Value
W 20,000 10,000 40
X 25,000 15,000 35
Y 20,000 12,000 25

Total fixed costs per year amounted to TZS.110,000,000 and the sales for the year
ended 30th September 2021 summed up to TZS.500,000,000.

Required:

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 i. Calculate the Break-Even Point (BEP) in TZS for each product and profit or loss
generated for the year ended 30th September 2021 product wise.
ii. Suppose the management of Kifwe Ltd in part (a) has approved substitution of
product Y with product Z in the coming year. The later product has a selling price of
TZS.25,000 and a unit variable cost of TZS.12,500. The new sales mix of W, X and
Z is expected to be 50: 30:20 in terms of sales value. The fixed costs are expected to
increase by TZS.31,000,000 for next year and total sales are expected to remain the
same.

Required:
(i) Calculate the new Break-Even Points in TZS revenue and units of each
product and profits/losses with and without the substitution of product Y and
the new sales mix.
(ii) Comment on the management decision regarding changing the product mix
and substituting product Y.

12. Beauty Company sold 200,000 units of its only beauty cream at TZS40,000 per unit.
Variable costs are TZS28,000 per unit (out of which manufacturing costs are
TZS22,000 and selling costs are TZS6,000). Fixed costs are TZS1,584 million
(manufacturing fixed costs of TZS1,000 million and selling costs of TZS584 million).
There is no opening or closing inventory.

Required:
(a) What is the break-even point for this product?
(b) What is the number of units the company must sell to earn a net income before
taxes of TZS120 million?
(c) If the income tax rate is 40%, what is the number of units that must be sold to earn
an income after tax of TZS180 million?

13. Sigma Ltd manufactures and sells Walkmans at TZS15,000 per unit. In a period, if it
produces and sells 8000 Walkmans, it incurs a loss of TZS5,000 per Walkman. If the
volume is raised to 20,000 Walkmans, it earns a profit of TZS4,000 per Walkman.

Required:
(a) Calculate the amount of margin of safety for both the situations.
(b) What will be the sale volume of Walkmans for Glory Ltd to achieve the target
profit of TZS7,000 per Walkman in the next financial year, i.e. 20Y1?

Submission: questions 7 – 13 is on or before 2nd May 2024.

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