(i) Explain why a firm in perfect competition may continue in the production of goods which it can only sell at a loss and why it cannot continue doing this indefinitely. (10 marks) (ii) Illustrate and explain the short-run supply curve of a firm in perfect competition (10 marks)

K, N and M have been trading in partnership as Meka Associates making water tanks for the last 5 years. They share profits and losses in the ratio 2:2:1 respectively. For the year ended 31 December 2005, Meka Associates made a profit adjusted for income tax purposes of Sh.60,498,500 before […]

Professor Ujuzi, a Kenyan, came back to Kenya from USA on 1 August 2005 to take up an appointment as a managing director of Good Metal Limited after a 15 year absence from Kenya. The letter of offer sent to him from the Good Metal Limited indicated that he would: […]

Outline the basic elements of an unqualified audit report

List and discuss the principal matters, which the auditors considers in forming an opinion on the financial statements.

List and briefly explain the general forms of qualifications available to the auditor in drafting his audit report, stating the circumstances in which each qualification is appropriate. Give an example of each circumstance

All publicly traded companies are required to have their financial statements audited by an independent firm of Certified Public Accountants. When planning for the year’s end, the director of audit, is concerned about two things; the cost of the audit (in shillings) and the length of time the audit will […]

(i) Explain why a firm in perfect competition may continue in the production of goods which it can only sell at a loss and why it cannot continue doing this indefinitely. (5 marks) (ii) Illustrate and explain the short-run supply curve of a firm in perfect competition (5 marks)

(a) Differentiate between economies of scale and returns to scale (5 marks) (b) Given a firm‟s demand function Q – 90 +2P = 0 and its average cost function AC = Q2 – 8Q + 57 + 2/Q, determine the level of output which maximizes profits (NB: only the first […]