Cost and management accounting Dec 2024

Description

Cost & Management Accounting

December 2024 Examination

 

 

Q1.

ABC Ltd., has given the following budgeted and actual sales figures:
	Budgeted			Actual
	Quantity	Sale Price	Value	Quantity	Sales Price	Value
		Rs.	Rs.		Rs.	Rs.
Product A	500	60	30,000	600	65	39,000
Product B	700	40	28,000	650	38	24,700

 

The cost per unit of product A and B was Rs. 55 and Rs. 32 respectively. Compute variances to explain difference between budgeted and actual profit.  (10 Marks)

Ans 1.

Introduction

Variance analysis is a critical tool in cost and management accounting that helps organizations understand the differences between budgeted and actual financial performance. It enables managers to identify areas where the business is performing differently than expected, allowing for timely corrective actions. By analyzing variances, companies can pinpoint the reasons behind deviations in profits, costs, and revenues. In the context of ABC Ltd., conducting a variance analysis will elucidate the factors contributing to the difference between the budgeted and actual profits for Products A and B. This analysis is essential for strategic decision-making and enhancing

 

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Q2. Discuss the role of management accounting in shaping strategic decisions within an organization. Provide examples of how management accounting practices can influence long-term planning and sustainability. (10 Marks)

Ans 2.

Introduction

Management accounting plays a crucial role in the decision-making process of organizations by providing financial and non-financial information that helps shape strategies. Unlike financial accounting, which focuses on historical data for external reporting, management accounting is forward-looking and assists internal management in planning, controlling, and making informed decisions. By leveraging management accounting tools and techniques such as budgeting, variance analysis, and cost-benefit analysis, businesses can develop strategic plans that enhance long-term growth and sustainability. Management accounting aids in identifying trends, controlling costs,

 

 

 

Q3. (a) Analyze the differences between standard costing and budgetary control. How do these tools help in managing operational performance within an organization?  (5 Marks)

Ans 3a.

Introduction

Standard costing and budgetary control are two essential tools used in management accounting to monitor and manage operational performance within an organization. While both aim to control costs and improve efficiency, they differ in approach and focus. Standard costing focuses on setting predetermined costs for products or services, while budgetary control emphasizes the overall financial performance of the organization through a comprehensive plan. Understanding the differences between these tools and how they contribute to operational performance management is

 

 

Q3 (b) Evaluate the importance of understanding cost behaviours in decision-making. How can misinterpretation of cost behaviours impact a company’s financial decisions?  (5 Marks)

Ans 3b.

Introduction

Understanding cost behavior is essential in decision-making because it helps managers predict how costs will change in response to variations in production levels or other business activities. Costs generally fall into three categories: fixed, variable, and mixed, and knowing how each behaves allows companies to make more accurate forecasts, pricing decisions, and cost management strategies. Misinterpreting cost behaviors can lead to poor financial decisions, such as setting incorrect price points