NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JUNE 2013 EXAMINATION

Course Code: MBA 805                                                                               2 UNITS                                    

Course Title: MANAGEMENT ACCOUNTING

Time Allowed: 2 Hours.

Instructions: 1. Attempt Question 1 and any other two (2) Questions.

     2. Question 1 is compulsory and carries 30 marks

                           while the other 2 Questions carry 20 marks each.

                       3. Present all your points in coherent and orderly manner                                                                                                    

1. a] Define inventory control and state the three  cost categories associated with it.                      10 MARKS                                                                                             

        b] Using the following data, calculate

1. The reorder level
2. The minimum level, and
3. The maximum level.

                   Average usage         100 units per day

                   Minimum usage        60 units per day

                   Maximum usage     130 units per day

                   Lead time                 20-26 days

                   EOQ                           4,000 units

                                                                                    10 marks

       C] i. State any three assumptions governing the Economic Order Quantity (EOQ)?   3marks

          ii. Find the EOQ where the forecasted demand is 1,000 units month, the ordering cost is N350 per order, the the units cost N8 each and it is estimated that carrying costs are 15% per annum.  8 MARKS

2.  A] Define the term ‘variable costing’.5 MARKS

         B] A firm manufactures component BK 200 and the costs  

             for the current production level of 50,000 units are:

                  Costs per unit

                                                              N

        Materials                                   2.50 

        Labour                                        1.25

        Variable overheads                  1.75

        Fixed overheads                       3.50 

        TOTAL COST PER UNIT         N9.00

    Component BK 200 could be bought in for N7.75 and, if so,

   The production capacity utilized at present would be unused.

    Assuming that there no overriding technical consideration,

    should BK 200 be bought in or manufactured? Give reasons.

15. ARKS

3. a] What is Accounting Rate of Return (ARR)? 4 MARKS

    b] State three advantages and disadvantages each of ARR. 6 MARKS

c]  Mr. Felix was able to convince his Uncle to grant him a loan of     N200,000.00, which he intends to invest in a farming project. He estimates that the project will yield the following

                       Year                                                 Cash flow (N)

                         1                                                       60,000.00

                         2                                                       60,000.00

                         3                                                       80,000.00

                         4                                                       60,000.00

                         5                                                       40,000.00

There was no scrap value at the end of the fifth year and he desires to evaluate the  project on the basis of Accounting Rate of Return.

You are required to provide the ARR of this project on the assumption that the annual returns are profits after depreciation but before taxation. 10 MARKS

4.  Describe the master budget. 20 MARKS

5. a] Define Budgetary Control. 4 MARKS

    B] Discuss the advantages and disadvantages derivable from Budgetary Control System in an organisation. 16 MARKS