Sie sind auf Seite 1von 6


A Committee of the Council of ICPAU






1. Time allowed: 3 hours 15 minutes.

The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. This examination contains Sections A and B.
3. Section A is bound separately from Section B.
4. Attempt all the 20 multiple-choice questions in Section A. Each question
carries 1 mark.
5. Attempt four of the five questions in Section B. Each question carries 20
6. Write your answer to each question on a fresh page in your answer
7. Please, read further instructions on the answer booklet, before attempting
any question.

 2018 Public Accountants Examinations Board

Cost and Management Accounting – Paper 7

Attempt four of the five questions in this section
Question 2
(a) Explain any four users of management accounting information and explain
their needs.
(4 marks)
(b) Distinguish between:
(i) labour cost accounting and payroll accounting. (2 marks)
(ii) preventive costs and replacement costs of labour turnover.
(2 marks)
(c) Katandise Super Duuka (KSD) is a leading producer of pancakes in the
Kawempe division of Kampala city. KSD uses 20 litres of cooking oil per
week, at a cost of Shs. 5,000 per litre and incurs Shs 15,000 for receiving
the cooking oil from the supplier. KSD’s re-order period is 2 to 4 weeks,
minimum and maximum usage are 30 litres and 35 litres per week
respectively. The cost of holding the cooking oil is 8% of the cost per litre.
Note: KSD’s year has 42 weeks.
Compute KSD’s:
(i) economic order quantity that will minimise annual costs. (2 marks)
(ii) number of orders to be placed in order to minimise the cost of
(1 mark)
(iii) total cost of managing the inventory. (2 marks)
(iv) minimum and maximum stock levels. (2 marks)
(v) average stock level. (1 mark)
(d) Explain any four assumptions of economic order quantity.
(4 marks)
(Total 20 marks)

30 November, 2018 Page 2 of 6

Cost and Management Accounting – Paper 7

Question 3
(a) Distinguish the following terms:
(i) cost object and cost centre. (2 marks)
(ii) integrated accounting system and interlocking accounting system.
(2 marks)
(b) Kamuli Animal Feeds (KAF) produces cattle feeds known for boosting milk
production. KAF planned to produce 200 bags of the feeds during the
month of December, 2018 from its three production plants located in
western, northern and central Uganda. The following information relates
to the three production plants:
Details Western Northern Central
Labour hours (per bag) 20 15 16
Planned production (bags) 100 30 70
Contribution per bag (Shs) 12,000 18,000 36,000
KAF anticipates to experience labour shortage since December is a month
with a long period of festivities and 3,370 labour hours are expected to be
Fixed costs Shs 5,000,000 and variable cost per bag Shs 75,000 are
expected to be incurred during the month of December 2018. KAF sells a
bag of cattle feeds at Shs 125,000.
(i) Determine KAF’s production plan for the month. (7 marks)
(ii) Prepare KAF’s profit statement for the month. (3 marks)
(c) Rwaki and Associates (R&A), is a firm of certified public accountants. The
firm was contracted in November 2018 by Forever Uganda Limited (FUL)
to audit their financial statements of the past five years starting from 1
July, 2013 to 30 June, 2018.
R&A has decided to employ 10 part-time auditors each at Shs 30,000 per
hour for this contract.
The following additional information relates to the contract.
1. Total budgeted overheads were Shs 5,000,000 and there were 200
total budgeted labour hours relating to these overheads.
2. Actual labour hours taken were 80 to produce five audit reports.
3. Stationery expenses incurred for the contract were Shs 2,000,000
per audit report.
4. FUL agreed to pay R&A, Shs 12,000,000 for each audit report

30 November, 2018 Page 3 of 6

Cost and Management Accounting – Paper 7

5. Hire of a printer for the contract was 2% of contract revenue.

6. Fixed overheads relating to contract were Shs 2,000,000.
7. Finance costs relating to contract were 5% of the prime cost.
Prepare R&A’s cost statement relating to the contract. (6 marks)
(Total 20 marks)
Question 4
(a) (i) Explain briefly how by-products are classified.
(2 marks)
(ii) Distinguish between marginal costing and absorption costing.
(3 marks)
(b) Forward Engineering Limited (FEL) has a contract with Katakwi District
Local Government on which it has so far spent Shs 90 million up to 30
June, 2018. The contract price was agreed at Shs 500 million. The value
of the work certified is Shs 300 million and Shs 120 million was received in
cash. The contract is nearing completion and it is anticipated that
additional expenses Shs 100 million will be incurred.
Determine the profit or loss to be credited to the profit and loss account.
(5 marks)
(c) Kandge Manufacturers Limited (KML) produces and packs paint in 20 litre
tins. The following costs relate to production of weather guard paint for
the year ending 30 September, 2018:
Variable costs Shs 2,500 per litre
Fixed overheads Shs 1.75 billion
Fixed production overheads 60% of fixed overheads
KML has normal annual capacity of producing 100,000 tins of weather
guard paint. During the year, 100,000 tins were produced of which 20%
remained unsold. The factory has a normal capacity set at 100,000 units.
There was no work-in-progress inventory during the year. KML sells each
tin of weather guard paint at Shs 75,000.
Prepare an income statement for the year ended 30 September, 2018
using the following methods:
(i) Marginal costing. (4 marks)
(ii) Absorption costing. (6 marks)
(Total 20 marks)

30 November, 2018 Page 4 of 6

Cost and Management Accounting – Paper 7

Question 5
(a) Distinguish between capacity and activity ratios as used in budgetary
(2 marks)
(b) Mr. Kwagalakwe Herrera is a sole proprietor trading as Kwagalakwe
Business Enterprises (KBE) and deals in making craft shoes and handbags.
KBE takes 2 hours and 4 hours to make a pair of sandals and one handbag
respectively. During the month of October 2018, KBE used 220 hours to
make 48 pairs of sandals and 36 handbags as compared to what had been
budgeted of 40 pairs of sandals and 25 handbags.
Compute the following control ratios:
(i) Activity. (3 marks)
(ii) Capacity. (3 marks)
(iii) Efficiency. (2 marks)
(c) Hade Confectionaries Limited (HCL) makes cakes and uses a standard
costing system. The following information relates to production and sales
for the month of October 2018:
Details Budget Actual
Sales/ output (cakes) 15,000 13,500
Selling price per cake (Shs) 87,000 85,500
Direct materials per cake (kg) 3 3.35
Material prices per kg (Shs) 7,500 7,800
Direct labour hours per cake 2 2
Labour hour rate (Shs) 20,000 20,000
Variable overheads (Shs ‘000’) 26,400 27,200
Fixed overheads (Shs ‘000’) 3,500 3,620
HCL does not maintain inventories of cakes.
Prepare HCL’s budgeted and actual variance profit statement for the
month of October, 2018.
(10 marks)
(Total 20 marks)

30 November, 2018 Page 5 of 6

Cost and Management Accounting – Paper 7

Question 6
(a) Explain any three differences between traditional costing and activity-
based costing (ABC) systems.
(6 marks)
(b) Describe how overheads can be classified.
(4 marks)
(c) The following are semi-variable maintenance costs and the corresponding
machine hours incurred in a Bwaise welding workshop for a period of six
months for the year ending 30 September, 2018.
Month Maintenance costs Machine hours
Shs ‘000’
April 4,800 2,000
May 4,200 1,800
June 4,400 2,000
July 6,000 2,400
August 4,500 1,500
September 5,000 1,400
Using the least squares method, determine maintenance costs that will be
incurred during the month of December, 2018 when 3,500 machine hours
are expected to be available.
(10 marks)
(Total 20 marks)

30 November, 2018 Page 6 of 6