PLEASE REVIEW THESE QUESTIONS BEFORE YOU ENTER FOR YOUR TEST

AND FINAL EXAMINATION THANK YOU

AC405D

POSTGRADUATE DIPLOMA PROGRAMMES – 2018/2019

REVIEW QUESTIONS

Question 1
a) Use at least three points to differentiate financial accounting from managerial accounting
b) Write short notes on the following accounting concepts
i. Dual aspects/double entry
ii. Going concern
iii. Business entity
iv. Accounting circle
v. Liability
Question 2
Discuss what financial information would the following require from financial statements and
what decision are likely to make basing on that information
a) Shareholders
b) Prospective investors
c) Lenders/creditors
d) Employees
e) General Public

Question 3
Accounting as a language, it helps communication among accountants and between accountants
and non-accountants. Like other languages accounting uses different rules and concepts. With
examples explain the following as used in accounting:
a) Matching concept
b) Accrual basis
c) Accounting period
d) Asset
e) Liability
Question 4
Financial statements are basically prepared and communicated to external and internal users to
enable them make economic decisions, as such these financial statements have to be of high quality
and objective. The framework for financial reporting identified two fundamental characteristics of
financial statements which are faithfully representation and Relevance. In addition there are
enhancing characteristics like understandability, comparability and timeliness

Required
Discuss what you understand with the following qualitative characteristics of financial information
a) Relevance
b) Faithful representation
c) Understandability
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 d) Comparability
e) Timeliness

Question 5
Financial Statements are widely used for decision making purposes.

a) Discuss the information in the income statement, statement of change in equity and
statement of financial position that would be of particular interest to the shareholder of
the company
b) Explain how an asset could be controlled without being owned

Question 6
a) Explain the Two recognition criteria of elements of financial statements
b) Identify and define the five elements of financial statements
Question 7
It is true that companies operating into one industry can be compared for performance and other
financial stability indicators to allow decision markers to make economic decisions. However, in
order to perform a financial statement analysis, one should require a good understanding of
accounting policies/practices across comparable companies otherwise the results might be
misleading.
Required:
With examples discuss how the accounting policies/practices of the companies operating
in similar industry are likely to have misleading results of financial statement analysis.

Question 8
The Companies annual reports contains two types of information: soft and hard information.
Most of the soft information are voluntary and they cover many pages. The soft information
includes but not limited to letters/massages from the Board Chairman, Chief Executive Officer
(CEO)/Managing director, and the Chief Financial Officer.

Required
a) Explain the difference between soft and hard information found in the public companies’
annual reports
b) Discuss the possible reasons for the companies to used larger space of their annual
reports for soft information
c) Explain how the massage from the Board Chairman is different from that of the CEO of
the company

Question 9
In 2015, our financial performance reflected continued progress from our Growth Platforms, which
grew by 11% in the year and now contribute 57% of Total Revenue, which increased by 1% to
$24.7 billion in the year. Our Respiratory franchise grew by 7% during 2015, driven by a
strengthening portfolio, our Emerging Markets business and the availability of new products in the
US and EU. Brilinta/Brilique grew by 44% in the year, with strength in the US and Emerging
Markets, led by China, and Diabetes delivered an impressive performance, with encouraging
growth driven by Farxiga/Forxiga and the Bydureon Pen. Strong growth in Emerging Markets

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continued throughout the year with China, Brazil and Russia all delivering double-digit increases
and our Japan business maintained solid growth, with Symbicort, Crestor and Nexium all
maintaining leading market share positions in a competitive market environment. For the first time,
New Oncology, which includes the launches of Lynparza, Iressa (US) and Tagrisso, was included
as a Growth Platform, given our belief in its long-term importance for our future growth. This
massage have been extracted from AstraZeneca Plc Annual Report of 2015

This is part of the massage of the CFO of AstraZeneca that was extracted from AstraZeneca
Annual Report of 2015

Required
1. The above massage either come from the Chairman of the Board, the CEO or the CFO of
AstraZeneca PLC. With reasons explain to confirm who gave the message.
2. Explain who were the intend beneficiaries of this massage?

Question 10
Many companies are using a lot of shareholders money on social responsibility activities. Use any
two reasons to discuss why this practice exists.

Question 11
The following is a trial balance extracted from the books of Red-Stars Ltd on 31st December
2014 with the following additional information
th
Red-Stars Ltd Trial Balance as at 31 December 2014
Debit Credit
Sales and Purchases 11,000,000 18,200,000
Cash and bank 2,000,000
Drawings and share capital 2,500,000 9,000,000
Share premium 660,000
Plant, Property and Equipments 4,300,000
Dividends paid 1,200,000
Salaries and wages 2,000,000
Discounts 600,000 300,000
Debtors and creditors 4,900,000 2,740,000

Retained earning 1,300,000

Inventories as at 1st January 2014 2,900,000
Goodwill 800,000
Total 32,200,000 32,200,000

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Additional information
i. Closing stock was TZS 3,100,000
ii. During the year ending 31st Dec 2014 TZS 300,000 was received from share issue of
which 30,000 was share premium
iii. Prepaid salary and wages TZS 100,000

Required prepare
a) Income Statement
b) Statement of Change in Equity and
c) Statement of financial position of Red Stars Ltd as on 31st Dec. 2014

Question 12
The following is a trial balance extracted from the books of Yellow-Stars Ltd on 31st December
2014 with the following additional information

DR CR
TSHS ("000") (TSHS "000")
Capital - 252,000
Retained Earning 120,000
Stock at 1st January 2015 25,000 -
Plant, Property and Equipment 350,000 -
Purchases 360,000 -
Sales - 600,000
Drawings 40,000
Dividends 24,300
Selling and Distribution expenses 60,000 -
Discounts 5,000 4,000
Administrative expenses 18,600 -
General expenses 18,500 -
Debtors 55,200 -
Provision for Bad and Doubtful debt 600
Bank Loans 65,000
Creditors - 46,000
Cash in hand and Bank 36,000 -
Goodwill 95,000 -
TOTAL 1,087,600 1,087,600

You are given the following additional information:

1. Closing stock (13.12.2014) amounted to Tshs 60 millions
2. During the year 100 shares of face value Tshs 10,000 each were issues at Tshs 10,000 each
3. Accrued selling and distribution expenses is Tshs 5,000,000

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4. Prepaid general expenses Tshs 6,600,000
5. Outstanding administrative expenses TZS 500,000
6. PPE include motor vehicle TZS 30,000,000 bought on 1st January 2014 and its useful life is
15years. Yellow-Star uses straight line method of depreciation
7. Provision for doubtful debt is expected to increase to TZS 800,000
Required
a) Prepare a statement of Income for the period ending 31st December 2014
b) Statement of change in equity for the period ending 31st December 2014
c) Prepare a statement of Financial Position as at 31st December 2014

Question 13
The following information were extracted from the financial statements of White-Stars Company

2014 2015
Sales TZS 3,005,000 3,675,000
COGS TZS 2,566,270 3,028,200
Gross Profit TZS 438,730 646,800
Other Operating Expenses TZS 369,615 319,725
Operating Income (PBIT) TZS 69,115 327,075
Interest Expenses TZS 90,150 40,425
Profit Before Tax TZS (21,035) 286,650
Additional information
Current Assets TZS 1,000,000 1,200,000
Current Liabilities TZS 750,000 800,000
Equity TZS 2,050,000 2,336,650
Long-Term Debts TZS 1,800,000 500,000
Required
a) Use Horizontal analysis to analysis profitability of the company in year 2015
b) Calculate the following ratios
i. Return on Capital Employed (ROCE) for the two Years
ii. Current ratio for the two Years
c) Basing on the ratios calculated in c) above, provide an analysis on firm’s profitability and
Liquidity
Question 14

Fairview plc has a plant that can produce 20,000 units of Product C each year. The demand for the
product is steady and it is expected that 14,000 units will be sold next year. The selling price is
TZS 9,000 per unit and the variable cost is TZS5,000 per unit. The fixed costs will be TZS
20,000,000 per annum. In addition, TZS 5,000,000 will be spent on advertising the product.

a) Determine the breakeven point, ignore the additional cost

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b) Consider each of the following proposals separately
i) What profit is budgeted for next year if 14000 units of Product C are sold at TZS9,000 and
TZS15,000,000 is spent on advertising?
ii) How many units must be sold at TZS 9,000 per unit to increase the budgeted profit by 20%
if the advertising remains at TZS15,000,000 per annum?
iii) What is the maximum that could be spent on advertising the product if it is expected that
the campaign will increase the sales to 20,000 units at a selling price of TZS 8,000 per unit
and the Board of Directors expects a profit of TZS20,000,000.

Question 15

BE plc produces four products, which are sold in packs of 1 unit of A, 3 units of B, 4 units of C
and 5 units of D. The details of each product are:‐

Product A B C D
Selling price per unit in TZS 70,000 90,000 60,000 85,000
Material cost per unit in TZS 10,000 6,000 10,000 15,000
Labour cost per unit in TZS 20,000 35,000 20,000 25,000
Overhead cost per unit in TZS 30,000 25,000 20,000 15,000
Total cost per unit in TZS 60,000 66,000 50,000 55,000
Profit per unit in TZS 10,000 24,000 10,000 30,000
Expected monthly demand in Units 20 60 80 100

Only the material and labour costs are considered variable costs. The labour rate per hour is TZS
5,000.
a) Determine the number of packs that must be sold for the whole company to breakeven.
b) What is the level of profit expected each month?
c) If the number of units of each product were 80% of the expected monthly demand, what
would be the profit if the selling price per unit and the costs were at the expected levels.

Question 16

The Banqueting department of the Beach Hotel (BH) organizes special events. Next month a
wedding reception will be held in the Hotel. An assistant accountant has prepared a schedule
detailing the cost of wording as follows

Details Note TZS Response Explain

Yes/No
Food and Drinks 1,500,000

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 Waiters’ Wages 1 200,000
Supervisor’s Salary 2 100,000
Flower 500,000
Administration 3 300,000
Cleaning of Function Room 4 200,000
Room Rental 5 200,000
Central Management Costs 6 300,000
Total 3,300,000
Notes
1. The Waiters are not regular employees and work only when required for function. They are
paid TZS 20,000 per day and 10 waiters would be required for the wedding.
2. The supervisor is full-time employee of BH and is paid fixed salary. The charge here is portion
of his basic salary for the time he will spend supervising the event
3. Administration costs relate to the time spent by the banqueting department organizing the
event. All staff members in this department are full-time employees and are paid a fixed salary
4. An external clearing company is used to clean the function rooms before and after an event. It
charges TZS 200,000 per event
5. The wedding reception will be held in one of BH banqueting rooms. A notional rental charge
for the room has been added. The hotel building is actually rented from a property company
for a fixed annual rental
6. When costing an event, the accounting department adds 10% to the cost of each event to cover
central hotel management costs

Required:
Indicate whether or not each of the costs in the accountant’s schedule is relevant?

Question 17

Grace is about to tender for a contract which requires the use of two raw materials: steel and
tungsten. Five hundred (500) tons of steel and 1,000 tons of tungsten will be required to complete
the contract. In addition, 2,000hours of labour will be needed. Of this 1,200 hours are in assembly
process and the remainder (800 hours) in the finishing process. Grace will quote a price that allows
a 50% mark-up on relevant cost.

The following additional information is available for the resources required

Inventory Original price Current Price Net realizable

Now (Tons) per ton (TZS) per ton (TZS) value (TZS)
Steel 200 10,000 12,000 8,000
Tungsten 400 20,000 23,000 15,000

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 Steel cannot be used by Grace for any other purposes, but tungsten is used in all the company’s
manufacturing processes
 All labour is paid at TZS 4,000 per hour, but to complete the contract in time, labour for the
finishing process will be transferred from other work which generates contribution at the rate
of TZS 3,000 per hour. There is currently surplus capacity for assembly labour amounting to
1,000 hours for the duration of the contact. Owing to other agent work, any additional assembly
labour will have to be hired on a temporary basis at the rate of TZS 5,000 per hour.

Required
Determine minimum price Grace will quote on the contact

Question 18
MFI Plc produces three products: Small, Large and Super. Details of the products are shown below

Details Small Large Super

Selling price per unit TZS 650 1100 1800
Variable cost per unit TZS 300 650 1200
Contribution Margin TZS 350 450 600
Fixed costs TZS 130 200 400
Profit per unit TZS 220 250 300
Estimated annual sales in units 6,000 5,400 3,000
Machine time required in hours 600hrs 900hrs 750hrs

The hours required to produce the expected annual sales of all three products is a total of 2,250
machine hours. However, at the present time, the capacity of the plant is limited to a maximum of
1,800 hours.

Required

Determine, which products should be produced to maximise the company’s profit?

Question 19
ABC company manufactures three products (P1, P2 and P3) using different amounts of the same
grade of labour, which is in short supply. The following budgeted data relates to the products

Per unit: P1 in TZS P2 in TZS P3 in TZS

Selling price 120,000 140,000 95,000
Materials (TZS 2,000 per Kg) (40,000) (32,000) (22,000)

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 Labour (TZS 10,000 per Hour) (10,000) (20,000) (11,000)
Variable Overheads (20,000) (28,000) (24,000)
Fixed Overheads (6,000) (9,000) (12,000)
Profit per unit 44,000 51,000 26,000

Required
Determine, what order should the products be manufactured in to ensure that profit is maximised?
(Hint, labour hours are considered to be the limiting resources available)

Question 20
The basic premise of responsibility accounting is that managers should be held accountable for
variables or activities they control and it acts as a device to measure divisional manager’s
performance.
Required
a) Discuss the concept of control as used in responsibility accounting?
b) Discuss at least three requirements for implementing responsibility accounting in
organizations.

Question 21

Murray Company uses a single cost pool for fixed manufacturing overhead. The amount for
July 2012 was budgeted at TZS 250,000,000; however, the actual amount was TZS 350,000,000.
Actual production for July was 25,000 units, and actual machine-hours were 20,000. Budgeted
production included 35,500 units and 24,750 machine-hours.

Required determined
a) The budgeted fixed overhead rate per output unit (rounded to the nearest cent)?
b) The budgeted fixed overhead rate per unit?

Question 22

Using the data provided below, determine the production levels that should be set for each month
of the last half of year 2015
Jul Aug Sep Oct Nov Dec
Wanted ending inventory in units 138 156 220 280 232 188
Expected Sales in units 160 184 218 264 296 204
st
It was also expected that the level of inventory on 1 July 2015 shall be 148 units

Question 23

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Noble Company is a manufacturing company dealing with Brown Bread Production; the Company
has approached you to be employed as General Manager and you accepted the offer. On the process
you are asked to prepare operational budgets (Master Budget): Sales budget and schedule of sales
collection; production budget, Direct Material Purchase Budget, Direct Labour Budget,
Manufacturing Overhead budget and their respective schedules of cash disbursements for the year
ending June 2016. You are given the following information

1. Planned units (Brown Breads) in millions

2015 2016
Month Jul Aug Sep Nov Dec Jan Feb Mar Apr May Jun
Units 200 250 300 150 300 200 210 240 200 300 300

2. The selling price is TZS 500 per bread

3. Sales and cash collection pattern: All panned sales shall be made in the planned month and
cash shall be collected: 80% in the month of sale and 20% collected in the month following
sale. Sales on 30th June 2015 were planned to 100,000,000 Brown Breads
4. The planned ending inventory is expected to be 10% of the next month sales of bread and sales
in July 2016 is expected to be similar to that of June 2016
5. Every Brown Bread requires 0.20 Kg. of wheat flour whose cost is TZS 500 per Kg and 0.01
labour hours at TZS 10,000 per hour. All labour costs were pain in the month incurred.
6. The variable overhead cost per labour hour is TZS 5,000 while fixed overhead costs amount
to 300,000,000 each month. All variable and fixed overheads were paid in the month incurred
7. All purchases of wheat flour were made on credit. 70% of cash to be paid in the month of
purchase, the remaining balance paid in next month. June 2015 purchase is TZS
25,000,000,000
8. The company requires 10% of the next month wheat flour need for production as ending
inventory per month. Ending inventory in June 2015 is expected to be 4,000,000 Kg of flour

Question 24
The following information has been used to prepare a cash budget for the period ended 30th June
2013:
a) Opening cash balance at 31st January 2013 TZS 3,200,000
b) Sales TZS 12,000 per unit. Cash to be received three months after the sale
c) The following are the sales in units for twelve months

2012 2013
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
80 90 70 100 60 120 150 140 130 110 100 160

d) Raw materials used in production is TZS 4000 per unit, they are paid two months
before been used in production. Direct labor per unit is TZS 3,000 and paid in the
same month.

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 e) Production in units

2012 2013
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
70 80 90 100 110 130 140 150 120 160 170 180

f) Other variable expenses TZS 2,000 per unit of production. ¾ of the costs are paid in
the same month as production, and ¼ paid in the month after production
g) Fixed cost TZS 100,000 per month are paid monthly
h) Furniture bought and paid for in April 2013 TZS 800,000

CASH BUDGET
Details Jan Feb Mar Apr May Jun
Balance B/F 3,200,000
Add Receipts 960,000 1,080,000 840,000 1,200,000 720,000 1,440,000
Total 4,160,000 4,125,000 3,760,000 3,620,000 2,265,000 2,220,000
Less payments 1,115,000 1,205,000 1,340,000 2,075,000 1,485,000 1,395,000
Balance C/F 3,045,000 2,920,000 2,420,000 1,545,000 780,000 825,000

Required:
You are require to show how the figures in the cash budget have been determined

Question 25
You are given the following informs of Tip Top Ltd
a) Opening cash balance an at 1st April 2014 TZS 200,000
b) Receipts from legacy under a will on April 2014 TZS 10,000,000
c) Receipts from debtors: April TZS 800,000; May TZS 8,000,000; June TZS
16,000,000; July TZS 24,000,000 August TZS 18,000,000; September TZS
10,000,000
d) Payments: April TZS 200,000; May TZS 10,000; June TZS 22,000,000; July TZS
40,000,000; August TZS 24,000,000; September TZS 14,000,000
Required:
Draw up a cash budget showing the balances of each month for the six months to
September 2014

Question 26
Variance analysis highlights variations in income and expenses during a period compared to the
budget. However, the value and usefulness of the management accountants’ variance analysis
reports to the top management depends with the perception and willingness of top management to
take further actions on reported variances:-
Required:

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 a) What information does a variance analysis report of a manufacturing company is likely to
present
b) Discuss how the concept of “flexed budget” can be useful in making calculation of
variances meaningful.
c) Discuss in which ways top management can make use of the variance analysis reports to
maximize the value of the organization

Question 27
During May 2018 Chapakazi Ltd purchased 6,000kgs of material at a price of Tsh. 730 per kg that
was used to produce 2,000. Also, in that month the company incurred Tsh 11,674,500 to pay
workers who spent 6450 hours in production process.

The standards for one unit are as follows:

Direct Labour: 3 hours per unit @ Tsh 1,700 per hour
Direct Material: 2kgs per unit @ Tsh 750 per kg
Required:
i) Calculate material price variance, material usage Variance and total material cost
Variance
ii) Calculate labour rate variance, Labour Efficiency Variance and total labour cost
Variance
iii) Briefly explain the difference between planning and operational variances and who
should be held responsible when the two categories of variances happen.

Question 28
Sports Solution Ltd is a retail shop located at Karikoo that operates through three departments, all
in the same premises. The three departments occupy roughly equal-sized areas of the premises
whose rental costs is TZS 120,000,000 per years. This cost is equally portioned across the
department. The trading results for the year ended 30th September 2018 showed the following:

Sports Sport Sport

Details Total Sports
General equipment Clothes
Sales Revenue 200,000,000 170,000,000 90,000,000 460,000,000
Variable Costs 107,000,000 87,000,000 60,000,000 254,000,000
Contribution Margin 93,000,000 83,000,000 30,000,000 206,000,000
Fixed costs 40,000,000 40,000,000 40,000,000 120,000,000
Profit/(Loss) 53,000,000 43,000,000 -10,000,000 86,000,000

The general manager of the company – Mrs. Moto Mkali is on opinion that the Sport Clothes
department reduced the profit of the business from TZS 96,000,000 to TZS 86,000,000 as such

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she is planning to close the department during the accounting period that started 1st October 2018.
However, she has approached you to provide an analysis and advise her on the best decision about
the sport clothes department.

Required

Provide an objective analysis (use calculated figures) to advise as to whether the decision thought
by Mrs. Moto Mkali is viable for the Sports Solution Ltd Company.

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