Subject: MANAGEMENT ACCOUNTING

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  • 20 Marks

MA – Mar 2025 – L2 – Q5 – Decision making techniques

Determine whether Moree Engineers LTD should make or buy extra seating assemblies for scooters, considering costs and opportunity costs.

a) i)
Moree Engineers LTD (MEL) makes electrically-driven disability scooters aimed at elderly and/or disabled customers. At present, wheels and tyres are bought from external suppliers but all other parts are manufactured in-house. The scooters have a strong reputation due mainly to innovative designs, special power units that can be recharged at home and seats that enable easy access for a wide range of disabilities. MEL also sells power units to other firms.
Current monthly costs are as follows:

Seating Department Power Unit Department
Costs GH¢ GH¢
Direct Materials 9,300 4,140
Direct Labour 12,600 9,450
Apportioned overheads 26,700 17,200
48,600 30,790
Production level 60 units 90 units

The power unit department currently produces 90 units a month, 60 units are used in MEL’s own scooters while 30 units are sold externally at GH¢376 each.
A contract has been won to supply an additional 10 scooters per month. However, the directors are considering how best to meet the additional demand.
Sufficient capacity exists for the company to increase its monthly production to 70 scooters, except that making an extra 10 seating assemblies would require reallocation of labour and other resources from the power unit to the seating department. This would cut power unit output by 20 units per month.
The alternative course would be to buy 10 seating assemblies from an outside supplier and fit the 10 power units from the present production of 90 units. The cheapest quote for seating assemblies is GH¢610 per assembly.

Required:
Based on the figures given, show whether Moree Engineers LTD should make or buy the extra seats.

a) ii) Discuss FOUR other factors that should be considered before a final decision is taken to make or to buy the extra seats.

b) i). Bambo LTD produces three medical products namely, gloves, bandages and syringes. The budgeted sales in the coming year for the three products is GH¢4,530,000. The company accordingly projected GH¢750,000 post-tax profit on the three products for the period.
Detailed budgeted Cost and sales data for the coming year are as follows:

Gloves Bandages Syringes
Sales Volume (%) 40% 25% 35%
Variable cost to Sales ratio 60% 67.5% 54.5%

The fixed cost for Bambo LTD amounted to GH¢1,330,000.
Other information:
Corporate tax rate is 25%

Required:
Calculate margin of safety in percentage (%) terms.

b) ii) Calculate post-tax revenue to achieve the projected profit.

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  • 20 Marks

MA – Mar 2025 – L2 – Q4 – Capital Budgeting

Evaluate two projects using benefit-cost ratio for GKIA with given financial data and 20% required rate of return.

a). GKIA, an Early Childhood Development Centre (ECDC) under Ghana’s Ministry of Health (MOH) has obtained funding from the Global Fund (GF) to implement targeted programmes in line with the vision of the GF. In GF’s recent grant releases, GKIA received an amount of GH¢2 million and has the option of spending the amount on any project provided it falls within any of the thematic areas specified by the GF.
Accordingly, GKIA is considering spending the funds on either of two projects. The first option involves the construction, equipping and full furnishing of a 30-bed paediatric unit for the Centre. The second option involves the refurbishment of all existing leisure and recreational facilities that the Centre currently operates. Both options qualify for funding under the thematic areas of the GF.
The information in the table below presents financial details of both options that GKIA is considering.

Option A: Paediatric Unit Option B: Leisure and recreational facilities
Initial capital outlay GH¢2 million GH¢2 million
Year Costs (GH¢) Benefits (GH¢) Costs (GH¢) Benefits (GH¢)
1 175,000 150,000 150,000 1,000,000
2 218,750 225,000 187,500 1,050,000
3 262,500 562,500 225,000 997,500
4 301,875 1,687,500 258,750 847,875
5 332,062.50 5,906,250 271,687.50 975,056.25

The required rate of return on any investment project undertaken by GKIA is 20%.

Required:
As the Management Accountant of GKIA, you are required to evaluate the acceptability of each project on the basis of benefit-cost ratio.

b). The term Value for Money (VFM) is synonymous with spending in the public sector, where it is expected that little resources should be used to generate the best possible output/outcome for the public good.

Required:
Explain the ‘three Es’ that public sector management accountants will need to take into consideration when making public spending decisions.

c). In the application of the controllability principle, identify the cost centre manager who is responsible for any adverse impact of labour on production. (provide three reasons to justify your answer).

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  • 20 Marks

MA – Mar 2025 – L2 – Q3 – Standard costing and variance analysis

Calculate sales volume variance for four distribution areas using a contribution income statement for Azumah Enterprise.

a) The data below relates to Azumah Enterprise for the month of August. The data relates to activities for his four areas of distribution in Accra.

Distribution Area Selling Price Per Unit (GHc) Standard Variable Cost Price Per Unit (GHc)
Awoshie (A) 120 80
Banana-Inn (B) 100 60
Cantonments (C) 80 45
Dansoman (D) 45 25

Sales Units Budgeted Actuals
Awoshie (A) 65,000 48,000
Banana-Inn (B) 45,000 55,000
Cantonments (C) 35,000 28,000
Dansoman (D) 25,000 28,000

Required:
Estimate the sales volume variance for each distribution area and in total for the month using a contribution income statement.

b) There are many models of evaluation available to a Management Accountant. Benchmarking is one of such models.

Required:

Under what circumstances would benchmarking be an effective model of evaluating performance?

c) IFAC describes Environmental Management Accounting as “The management of environmental and economic performance via management accounting systems and practices that focus on both physical information on the flow of energy, water, materials, and wastes, as well as monetary information on related costs, earnings and savings.” The above quotation shows the increasing relevance of Environmental Management Accounting.

Required:

Discuss with examples FOUR categories of environmental costs.

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  • 20 Marks

MA – Mar 2025 – L2 – Q2 – Budgetary control

Explain eight stages in the budgeting process for a manufacturing organization.

a) The preparation of budgets is a lengthy process which requires great care if the ultimate master budget is to be useful for the purposes of management control within an organisation. Required: Explain EIGHT stages involved in the budgeting process in a manufacturing organisation

b) Budgeting serves a number of useful purposes. They include planning annual operations, coordinating the activities of the various parts of the organisation, communicating plans to various responsibility centre managers among others. Notwithstanding these useful purposes, budgeting has been criticised for several reasons. Required: Identify FIVE criticisms of budgeting.

c) Despite the benefits of minimised inventory cost, waste elimination and quick turnaround time for customers, a lean production model is beset with inherent limitations. Required: Explain FOUR limitations to the efficient implementation of a lean production model in an organization.

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  • 20 Marks

MA – Mar 2025 – L2 – Q1 – Performance analysis

Analyze VAL's 2024 performance in financial, internal efficiency, and external effectiveness using provided data.

========== Question Title: MA – Mar 2025 – L2 – Q1 – Performance analysis
Level: LEVEL 2
Professional Bodies: ICAG
Programs: PROFESSIONAL PROGRAM
Subjects: Management Accounting
Topics: Performance analysis, Financial performance, Internal efficiency, External effectiveness
Series: MARCH 2025
Total Marks: 20
Question Tags: Performance analysis, Financial performance, Internal efficiency, External effectiveness, Revenue calculation, Profitability, Customer satisfaction, Operational efficiency
Question Short Summary: Analyze VAL’s 2024 performance in financial, internal efficiency, and external effectiveness using provided data.

——————————————————————— Question:
QUESTION ONE
Vovome Advisory Limited (VAL) began trading three years ago, on 1 January 2022. It specialises in the provision of expert advice to clients in accountancy, taxation and regulatory compliance. It has a team of professional advisers, each specialising in one of these three areas of advice.
VAL has a target for delivering its services to clients promptly. From the time the client asks for advice, VAL undertakes to provide a formal report to the client within 10 working days.
The following information relates to the financial year ended 31 December 2024:
i) The professional advisers are budgeted to work 220 days each year. They charge GH₵1,400 per day to new clients and GH₵1,200 to established clients.
ii) As a marketing measure intended to win new business, the advisers also give consultations to potential clients on a ‘no fee’ basis. These consultations, which are budgeted to take one day each, are accounted for as business development costs in the marketing budget.
iii) The professional advisers are also required to attend some ‘workshops’ with new clients who are having difficulties with implementing the advice that they have been given by VAL. These workshops, which are also given on a ‘no fee’ basis, are budgeted to last two days.
iv) VAL also has a help desk to provide client support. It responds to telephone and e-mail enquiries from all new and established clients.
v) The team of professional advisers is exactly 50. It is a policy of VAL to limit the team to 50, regardless of the volume of demand for its services.
vi) All professional advisers are paid a salary of GH₵100,000 per year. In addition, they are entitled to share equally in an annual bonus. The bonus is 50% of the amount by which fee income generated exceeds budget minus the revenue forgone as a result of having to give workshops for clients. This revenue forgone is assessed at a notional daily rate of GH₵1,200 per adviser/day.
vii) Operating expenses of the business, excluding salaries of the advisers, were GH₵3,100,000 in 2024. The budget for these expenses was GH₵2,800,000.

Other information:

Budget 2024 Actual 2024
Professional advisers, by category
Accounting 15 10
Tax 20 20
Compliance 15 20
Enquiries about seeking new advice
New clients 2,600 2,200
Established clients 4,000 3,700
Number of chargeable client days
New clients 2,600 2,750
Established clients 5,100 5,500
Average client days per job 4 4
Mix of chargeable client days
Accounting 1,155 1,650
Tax 1,540 3,300
Compliance 1,155 3,300

The following are actual results for each of the three years 2022-2024

2022 2023 2024
Number of clients 160 248 347
Number of complaints from clients 50 75 95
Number of accounts in dispute 10 7 5
Support desk: Percentage of calls resolved 86% 94% 97%
Percentage of jobs completed within 10 days 90% 95% 98%
Average time to complete a job (days) 12.6 10.7 9.5
Chargeable client days 7,200 7,750 8,250
Number of consultations (business development) 50 100 150
Number of workshops given 110 135 165
Revenue (GH₵000) 8,920 9,740 ?
Net profit (GH₵000) 1,740 1,940 ?

Required:
Using the information provided, analyse and discuss the performance of VAL for the year ended 31 December 2024, under the following headings:
a) Financial performance and competitiveness;
b) Internal efficiency; and
c) External effectiveness.

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  • 4 Marks

MA – Nov 2024 – L2 – Q5b – Profit Maximization and Batch Selection

Determination of the optimal number of printer batches to import and sell to maximize profit.

Awuah deals in online business, importing and selling printers. The cost of each set of printers varies depending on the number purchased, although printers can only be purchased in batches of 1,000 units. Awuah also has to pay import taxes which vary according to the quantity purchased. Awuah has already carried out some market research and identified that sales quantities are expected to vary depending on the price charged.

The following data has been established for the first month:

Number of Batches Imported and Sold Average Cost per Unit (Including Import Taxes) (GH¢) Total Fixed Costs per Month (GH¢) Expected Selling Price per Unit (GH¢)
1 10.00 10,000 20
2 8.80 10,000 18
3 7.80 12,000 16
4 6.40 12,000 13

Required:

Determine the number of batches of printers Awuah should import and sell to maximize profit.

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  • 16 Marks

MA – Nov 2024 – L2 – Q5a – Limiting Factor Decision and Profit Maximization

Determination of the optimum production plan considering scarce resources.

Manche produces two products from different quantities of the same resources using a just-in-time (JIT) production system. The selling price and resource requirements of each of the products are shown below:

Product C L
Unit Selling Price (GH¢) 130 160
Resources per Unit:
Direct Labour (GH¢8 per hour) 3 hours 5 hours
Material A (GH¢3 per kg) 5 kg 4 kg
Material B (GH¢7 per litre) 2 litres 1 litre
Machine Hours (GH¢10 per hour) 3 hours 4 hours
Fixed Overhead (GH¢8 per hour) 1 hour 1 hour

Market research shows that the maximum demand for products C and L during August 2024 is 500 units and 800 units respectively. This does not include an order that Manche has agreed with a commercial customer for the supply of 250 units of C and 350 units of L at selling prices of GH¢100 and GH¢135 per unit, respectively. Failure by Manche to deliver the order in full by the end of August will cause Manche to incur a GH¢5,000 financial penalty.

At a recent meeting between the Purchasing Manager and Production Manager to discuss the production plans of C and L for August, the following resource restrictions for the year were identified:

  • Direct Labour Hours: 90,000 hours
  • Machine Hours: 90,000 hours

The resource restrictions were evenly distributed throughout the year.

Required:

i) Prepare the optimum production plan for August 2024 using relevant computations. 
ii) Determine the contribution from adopting this plan. 
iii) Using relevant computations, show whether Manche should complete the order from the commercial customer assuming any excess labour hours for not making the contract can be used to produce 300 units of product ‘F’ with a contribution of GH¢55 per unit.

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  • 5 Marks

MA – Nov 2024 – L2 – Q4b – Standard Costing and Variance Investigation

Explanation of the use of standard costing in decision-making and key factors to consider before investigating variances.

Standard costing has been employed by organizations as a control technique to analyze the deviation of results from those that are expected.

Required:

i) Explain TWO ways managers have effectively deployed standard costing as a tool in decision-making analysis.

ii) Explain THREE key factors a manager should consider before deciding to institute an investigation into reported variances.

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  • 15 Marks

MA – Nov 2024 – L2 – Q4a – Cost-Benefit Analysis (CBA) for Public Sector Investment

Evaluation of a healthcare capital investment project using cost-benefit analysis.

The Faith Specialist Hospital (FSH) is a special government health facility under the Ghana Health Service (GHS) that provides specialized medical scans for complex health conditions. Management of FSH is planning to install an ultra-modern imaging machine that will improve the quality and accuracy of scans. The new installation will require an additional capital investment of GH¢420,000. The GHS policy on capital projects is that all new projects should achieve an internal rate of return of at least 30%.

Forecast demand for the services of this new machine over its five-year useful life are as follows:

Year Number of Scans
1 1,250
2 2,700
3 3,500
4 1,400
5 675

Projected charge per scan: GH¢650
Variable costs per scan:

  • Consumables: GH¢330
  • Labour and overheads: GH¢176

Operating fixed costs per year: GH¢264,000 (includes depreciation on a straight-line basis)

Apart from the financial forecasts above, it is also envisaged that the project will produce non-financial benefits in several forms. Although it is hard to place a precise value on this, expert opinion suggests that this could approximate GH¢70,000 per annum.

Required:

i) Using cost-benefit analysis (CBA) computations, evaluate if the project should be undertaken.

ii) Enumerate TWO limitations of evaluating projects in the public sector.

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  • 5 Marks

MA – Nov 2024 – L2 – Q3b – Activity-Based Costing (ABC) in the Service Sector

Assessment of ABC's applicability in the service sector and identification of four units in healthcare where it can be applied.

In their effort to build equitable, resilient, and sustainable systems for health, both The Global Fund and Gavi have approached you on the implementation of ABC systems to improve their customer profitability analysis.

Required:

Assess the applicability of Activity-Based Costing (ABC) in the services sector. In explaining your answer, identify four units in the healthcare sector where ABC systems are applicable and specify an appropriate cost driver for each.

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  • 4 Marks

MA – Nov 2019 – L2 – Q5a – Relevant cost and revenue

Evaluates the impact of cost-plus pricing strategy and requires profitability analysis of a new product launch for the first three months.

Graphix Communication Group Limited (GCGL) is a magazine publishing company. It comprises a number of different divisions, each publishing magazines in a different sector. GCGL is now considering publishing Financial Magazine. The Financial Magazine market is very competitive with a number of well-established titles already being published by GCGL’s competitors.
Financial Magazine is a monthly magazine.
GCGL has therefore commissioned an advertising campaign to launch its Financial Magazine. The price of the Financial Magazine has been set at full cost plus a mark-up of 20%.
Forecast variable cost per copy of the Financial Magazine:
Cost Description GH¢
Paper 0.83
Ink See note (i)
Machine cost 0.22
Other variable cost 0.15
The following additional information is available:
i) Each Financial Magazine needs 0.2 litres of ink. However, 10% of the ink input to the printing process is wasted. Ink costs GH¢5.40 per litre.
ii) In month 1, GCGL expects to sell 50,000 copies of the magazine to new customers at this price.
iii) After their first month of sales, GCGL expects 90% of first month’s customers to purchase the Financial Magazine in month 2. After the second month of purchase, GCGL expects to retain 85% of month 2 customers in subsequent months.
iv) As the magazine circulation area increases, sales to additional new customers in month 2 will be 20% of month 1 sales figure. 90% of this would be retained in month 3.
v) Sales to additional new customers in month 3 would be 30% of month 1 sales figures.
vi) Fixed overhead costs are apportioned by GCGL to the Financial Magazines based on first month sales volume. Total budgeted annual fixed overhead is GH¢18,000,000 and total budgeted annual magazine sales, including the Financial Magazine, is 12,000,000 copies.
vii) The sales price of the Financial Magazine will remain unchanged throughout the first three months.

Required:
a) Discuss TWO (2) advantages and TWO (2) disadvantages of the managing director’s pricing strategy in the circumstances described above.
(4 marks)

b) Produce a statement that shows the total profit for the first three months of Financial Magazine.
(10 marks)

c) Calculate the number of copies of the Financial Magazine that need to be sold to achieve a profit of GH¢100,000.
(6 marks)

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  • 6 Marks

MA – Aug 2022 – L2 – Q5b – Decision making techniques

This question calculates the monthly expected profit of running a canteen service using demand and variable cost probabilities

Aunty Dede Caterers runs a canteen service at a University and the following estimated information is available for the sale of lunch packs:

Monthly Demand Probability Variable Cost per Pack (GH¢) Probability
2,000 packs 0.3 GH¢30 0.5
2,500 packs 0.5 GH¢15 0.4
3,000 packs 0.2 GH¢20 0.1

The probabilities of demand and the probabilities of variable cost are mutually exclusive. The selling price of a lunch pack is GH¢50, and the University charges a monthly fee of GH¢1,200 for the usage of the cafeteria.

Required:
Calculate the monthly expected profit of running the canteen.

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  • 14 Marks

MA – Aug 2022 – L2 – Q5a – Standard costing and variance analysis

This question involves calculating the total hiring charge, running cost per kilometer, and effective transport charge for Carriers Private Ltd.

Carriers Private Ltd (CPL) was recently formed with the objective of providing sand transport services. It purchased 10 Sand Trucks with a capacity of 5 cubic metres each at a cost of GH¢150,000 per Truck. The monthly running costs and other information have been forecasted as follows:

  1. CPL expects each truck to run 5,000 kilometers a month during its lifetime of 4 years, which starts from the date of purchase. Out of the kilometers run each month, 50% is assumed to be by the empty truck that does not generate any revenue. At the end of year 4, each truck could be sold at an estimated consideration equivalent to 30% of the purchase cost.
  2. The following salaries will be paid to workers in CPL:
    • A driver would be paid GH¢700 per month. 11 drivers will be recruited, including a stand-by driver to replace a driver taking a leave.
    • A cleaner would be paid GH¢500 per month and 11 cleaners will be recruited.
    • Three office staff would be paid GH¢3,000 per month.
    • A garage worker would be paid GH¢500 per month.
    • Licensing and insurance per annum would be GH¢2,400.
    • Servicing, repairs, and maintenance would be GH¢2 per running kilometer.
    • The current fuel price per litre is GH¢7.30, and management expects to keep a leeway of 10% for inflationary adjustments. The empty truck could run 5 kilometers per litre, and when loaded could only run 3.25 kilometers per litre of fuel.

CPL expects to keep a profit mark-up of 30% on full cost.

Required:
i) Calculate the total hiring charge.
(6 marks)

ii) Determine the running cost for a month per kilometer.
(1.5 marks)

iii) Assess the effective transport charge for a month:

  • Per kilometer.
    (1.5 marks)
  • Per cubic metre-kilometer.
    (2 marks)

iv) Explain the importance of each cost unit in part iii) above, when applying them in different transport jobs.

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  • 5 Marks

MA – Aug 2022 – L2 – Q4b – Other aspects of performance measurement

This question discusses the relationship between conformance and non-conformance costs using data from Mante Ltd.

Mante Ltd is reviewing its progress toward meeting its objective of having a reputation for producing high-quality products. Extracts from the company’s records for each of the years ended 31 October 2020 and 2021 are shown below.

Description 2021 2020
% of units rejected by customers 15% 21%
% of units rejected before delivery 15% 5%
Cost as % of revenue:
Raw material inspection 10% 3%
Training 7% 4%
Preventive machine maintenance 8% 2%
Machine breakdown maintenance 4% 11%
Finished goods inspection 8% 2%

Required:
Discuss, using the above data, the relationship between conformance costs and non-conformance costs and its importance to Mante Ltd.

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  • 15 Marks

MA – Aug 2022 – L2 – Q4a – Discounted Cash Flow

This question involves calculating the IRR to assess the viability of acquiring a new plant for Tanko Ltd.

Tanko Ltd (TL) is engaged in the manufacturing and sale of a single product GG. The existing manufacturing plant is being operated at full capacity of 6,000 units per annum, but the production is not sufficient to meet the growing demand of GG. TL is considering replacing its existing plant with a new Japanese plant. The production capacity of the new plant would be 50% more than the existing capacity. The board of TL considers this expansion a high-risk investment and requires a minimum expected rate of return of 15% on its investment.

To assess the viability of this decision, the following information has been gathered:
i) The purchase cost and installation cost of the new plant will amount to GH¢3.14 million and GH¢0.45 million, respectively.
ii) The supplier would send a team of engineers to Ghana for final inspection of the plant before commissioning at a cost of GH¢120,000. 50% of this cost would be borne by TL.
iii) As a result of the installation of the new plant, fixed costs other than depreciation would increase by GH¢0.3 million per annum.
iv) The existing plant has an estimated life of 10 years and has been in use for the last 6 years. The machine supplier has offered to purchase the existing plant immediately at GH¢1.6 million.
v) During the latest year, 6,000 units were sold at an average selling price of GH¢550 per unit. Variable manufacturing cost was GH¢450 per unit. TL expects to increase sales volume by 25% in the first year after the plant’s installation. Thereafter, the sales volume would increase by 4% per annum. Selling price and variable manufacturing cost will increase by 5% per annum.
vi) The new plant would be depreciated using the straight-line method. The residual value of the plant at the end of its useful life of 4 years is estimated at GH¢350,000.
vii) TL’s cost of capital is 12%.

Required:
Using break-even rate (internal rate of return), advise whether TL should acquire the new plant.

 

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  • 10 Marks

MA – Aug 2022 – L2 – Q3b – Budgetary control

This question focuses on explaining how a rolling budget works and calculating a revised budget for Baya Ltd.

The Finance Manager of Baya Ltd has been criticised for using an incremental budget method in preparing the company’s budget. She, however, needs to respond to the issues raised at a board meeting and as a result, she is considering using different budgeting methods for the year-end 31 December 2022. She has asked you, the Management Accountant, to do some preliminary work to help her decide on which of the methods to use. She believes a rolling budget would be ideal for the fast-growing Baya Ltd in a relatively high inflationary country.

Baya Ltd’s incremental budget for the year-end 31 December 2022 is given below:

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Revenue (GH¢’000) 17,520 17,958 18,407 18,867 72,752
Cost of sales 9,636 9,877 10,124 10,377 40,014
Gross profit 7,884 8,081 8,283 8,490 32,738
Distribution costs (1,577) (1,616) (1,657) (1,698) (6,548)
Administration (4,214) (4,214) (4,214) (4,214) (16,856)
Operating profit 2,093 2,251 2,412 2,578 9,334

The actual figures for quarter 1 (which has just been completed) are:

On the basis of the quarter 1 results, sales volume growth of 3% per quarter is now expected.

Required:
i) Explain how Baya Ltd will operate a rolling budget.
(2 marks)

ii) Recalculate the quarterly rolling budget for Baya Ltd for the last three quarters of the year 2022 and the first quarter of 2023.
(8 marks)

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  • 10 Marks

MA – Aug 2022 – L2 – Q3a – Standard costing and variance analysis

This question asks for the calculation of five types of fixed overhead variances based on given production data.

The data below relates to Odeneho Plc and they are in respect of the production of its product, Milcho, for the first quarter ended 31 March 2022.

  • Budgeted output: 5,000 units
  • Standard hours to produce one unit: 2 hours
  • Budgeted fixed production overhead: GH¢25,000
  • Actual fixed production overhead incurred: GH¢25,840
  • Actual hours worked: 10,500
  • Actual units produced: 4,980

Required:
Determine the following:
i) Fixed overhead expenditure variance.
(2 marks)

ii) Fixed overhead capacity variance.
(2 marks)

iii) Fixed overhead efficiency variance.
(2 marks)

iv) Fixed overhead volume variance.
(2 marks)

v) Fixed production overhead variance.
(2 marks)

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  • 5 Marks

MA – Aug 2022 – L2 – Q2b – Budgetary control

This question asks for the similarities and differences between a budget and a standard in financial control.

Budgets and standards are very similar and interrelated, but there are notable differences between them.

Required:
Explain TWO (2) similarities and TWO (2) differences between a budget and a standard.

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  • 15 Marks

MA – Aug 2022 – L2 – Q2a – Activity-based costing

This question asks for the calculation of activity rates and the cost per unit of product X using activity-based costing.

The details of unit cost of products X, Y, and Z have been provided below:

Product X Y Z
Demand (units) 1,200 2,800 3,000
GH¢ GH¢ GH¢ GH¢
Direct Material 70 55 40
Direct Labour 65 60 38
Variable Overheads 11 8 7
Fixed Overhead 32 24 20

Additional information:

  • The fixed overheads were absorbed at the rate of GH¢8 per machine hour.
  • The budgeted fixed overheads of GH¢165,600 can be analysed into the following cost pools with their respective percentages for apportionment:
    Cost Pool Percentages (%)
    Batch 20
    Machinery 45
    Customer service 25
    Deliveries 10
  • The following also relates to the activities of the company:
Product X Y Z
Units in a batch 120 140 200
Quantities per delivery 100 280 250
Number of customers 50 180 220

Required:
i) Calculate the activity rates per batch, machine hour, customer service, and delivery.
(12 marks)

ii) Calculate the total cost of a unit of product X.
(3 marks)

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  • 20 Marks

MA – Aug 2022 – L2 – Q1 – Other aspects of performance measurement

This question asks about the Balanced Scorecard concept, its differences from traditional measures, and benchmarking to improve company performance.

Ancient Ltd is a company engaged in the assembling and selling of computers, mobile phones, and their accessories. This company has been the market leader for the last 5 years in this field but is now incurring losses due to decreasing demand and escalating production costs. Currently, the company evaluates its performance using financial measures. The managing director of Ancient Ltd has learned at a recently attended workshop that the concepts of Balanced Scorecard and Benchmarking could be used to improve the performance of organizations. It was also noted that the Balanced Scorecard should be considered at the strategic planning stage in order to set smart objectives.

Required:
a) Explain the concept of the Balanced Scorecard approach to performance measurement.
(2 marks)

b) State TWO (2) differences between the Balanced Scorecard and Traditional Performance measures.
(3 marks)

c) Explain the role of each perspective of the Balanced Scorecard approach at the strategic planning stage. (You are required to give an example of performance measures for each perspective.)
(8 marks)

d) How can the concept of benchmarking be used to improve the performance of Ancient Ltd.?
(3 marks)

e) Explain with an example, how benchmarking could be used to improve performance measures in relation to the customer perspective of Ancient Ltd’s Balanced Scorecard.
(4 marks)

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