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Cost Accounting-Day&Amp;Evening Question Paper
Cost Accounting-Day&Amp;Evening
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
UNIVERSITY EXAMINATIONS: 2010/2011
EXAMINATION FOR THE BACHELOR OF COMMERCE
CAA 103 COST ACCOUNTING-DAY&EVENING
DATE: DECEMBER 2011 TIME: 2HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
DONIX HOMELY ENTERPRISES is considering its plans for the year ending 31december
2011.it makes and sells a single product which has budgeted cost and selling price as follows:
Sh. per unit
Selling price 45
Direct materials 11
Direct labour 8
Production overhead :
• Variable 4
• Fixed 3
Selling overhead:
• Variable 5
• Fixed 2
Administration:
• Fixed 3
Fixed overhead costs per unit are based on a normal annual activity level of 96,000 units .These
costs are expected to be incurred at a constant rate throughout the year. Activity levels during
January andFebruary 2011 are expected to be:
January February
Units Units
Sales 7000 8750
Production 8500 7750
Assume that there will be no stocks held on January 2011
Required
(a) Prepare ,in columnar format ,profit statements for each of the two months of January and
February 2011 using:
(i) Absoption costing [6 Marks]
(ii) Marginal costing [6 Marks]
(b) Based upon marginal costing ,Calculate :
(i) The annual break even sales value and the [ 2 Marks]
(ii) The activity level in units which will yield an annual profit of sh 122800
[ 2 Marks]
(c) Explain 3 fundamental assumptions underpinning single product break even analysis.
[2 Marks]
[18 Marks]
QUESTION TWO
Furniture –making business manufactures quality furniture to customers .it has three production
and service departments .Budgeted overhead costs for the coming year are as follows
Total (sh)
Rent and rates 12,800
Machine insurance 6,000
Telephone charges 3,200
depreciation 18,000
Production supervisors salaries 24,000
Heating lighting 6,400
70,400
The three departments A,B and C and the two service departments-X and Y ,are housed in the new
premises, the details of which ,together with other statistics and information are given below
A B C X Y
Floor area occupied (sq.metres) 3000 1800 600 600 400
Machine value (sh000) 24 10 8 4 2
Direct labour hours budgeted 3200 1800 1000
Labour rates per hour Sh
3.20
Sh3.50 Sh3.40 Sh3.00 Sh3.00
Allocated overheads specific to each department
(sh000)
2.8 1.7 1.2 0.8 0.6
Service department X’s cost apportioned 50% 25% 25%
Service department Y’s cost apportioned 20% 30% 50%
REQUIRED
(a) Prepare a statement showing the overhead cost budgeted for each department, showing the
basis of apportionment used, also calculate suitable overhead a absorption rates.
[ 14 Marks]
(b) Two pieces of furniture are to be manufactured for customers .Direct cost are as follows
Job 123 Job 124
Direct material Sh 154,000 Sh 108,000
Direct Labour 20 hours Dept A 16 hours Dept A
12 hours Dept B 10 hours Dept B
10 hours Dept C 14 hours Dept C
Calculate the total costs of each Job. [4 Marks]
(c) If the firm quotes prices to customers that reflect a required profit of 25% on selling price,
calculate the quoted selling price for each job. [2 Marks]
[20 Marks]
QUESTION THREE
Migori Lubricants manufactures an industrial lubricant, which is formed by subjecting certain
crude chemicals to two successive processes. The out put of process 1 is passed to process 2,where it is blended with other chemicals. The process costs for period 3 were as follows:
Process 1
Material: 3000 kg @ sh 25 per kg
Labour :sh 12000
Process plant time: 12 hours @sh 20 per hour
Process 2
Material: 2000 kg @ sh 40 per kg
Labour 84,000
Process plant time: 20 hours @sh 13.50 per hour
General overhead for period 3 amounted to sh 357,000 and is absorbed into process costs ona
process labour basis.
The normal output of process 1 is 80% of input, while that of process 2 is 90% of input. Waste matter from process 1 is sold for sh 0.20 per kg, while that from process 2 is sold for sh 0.30 per kg
The output for period 3 was as follows:
Process 1 2,300 kg
Process 2 4,000kg
There was no stock or work in progress at either the beginning or the end of the period, and it may
be assumed that all available waste matter had been sold at the prices indicated
4
REQUIRED
Process 1 Account [4 Marks]
Process 2 Account [4 Marks]
Finished stock Account [3 Marks]
Normal loss Account [3 Marks]
Abnormal loss Account [3 Marks]
Abnormal gain Account [3 Marks]
[20 Marks]
QUESTION FOUR
Waondo Limited manufactures one standard product and operates a system of variance accounting
using a fixed budget. As an assistant cost accountant, you are responsible for preparing the
monthly operating statements .data from the budget, the standard product cost and actual data for
the month ended 31 November are given below
Budgeted and standard cost data:
Budgeted sales and production for the month: 10,000 units
Standard cost for each unit of product:
Direct material X: 10 kg at sh1 per Kg
Y: 5 Kg at sh 5 per Kg.
Direct Wages: 5 hours at sh 3 per hour
Fixed production overhead is absorbed at 200% of direct wages
Budgeted sales price has been calculated to give a profit of 20% of sales price
Actual data for the month ended 31 November:
Production: 9500 units sold at a price of 10% higher than that budgeted
Direct materials consumed:
X: 96,000Kg at sh 1.20 per Kg
Y: 48,000 at sh 4.70 per kg
Direct wages incurred 46,000 hours at sh 3.20 per hour.
Fixed production overhead incurred sh 290,000
Required
Material price variance [3 Marks]
Material Usage variance [3 Marks]
Labour rate variance [3 Marks]
Labour efficiency variance [3 Marks]
[12 Marks]
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