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Introduction To Cost Accounting Question Paper
Introduction To Cost Accounting
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
STAGE IV EXAMINATION FOR DIPLOMA IN BUSINESS MANAGEMENT
DAA 103: INTRODUCTION TO COST ACCOUNTING
DATE: APRIL 2010 TIME: 1½ HOURS
INSTRUCTIONS: Answer any THREE questions
Question One
Invermoriston plc is a manufacturer of agricultural machinery. The following data relates to
purchases and issues of a component used in the manufacture of a combine harvester.
Receipts
10 October - 100 units @ Sh14.50
18 October - 150 units @ Sh15.50
25 October - 100 units @ Sh16.00
Issues
4 October - 75 units
8 October - 60 units
17 October - 120 units
22 October - 90 units
At the beginning of October there were 180 units in stock which had a total cost of Sh2,520.
Required:
a) Draw up a stock record card on a FIFO basis, showing clearly the value of each stock issue and
the closing stock. (10 Marks)
b) Draw up a stock record card on a weighted average basis, showing clearly the value of
each stock issue and the closing stock. (10 Marks)
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Question Two
Twelve production employees at the McGregor Biscuit Company (MBC) are paid a basic wage of
Sh8.00 per hour plus overtime, as follows:
Monday to Friday up to 37 hours Sh8.00 per hour (basic rate)
Monday to Friday over 37 hours Time plus a quarter
Saturdays Time plus a half
Sundays and Bank Holidays Double time
In addition to this they each receive a fixed bonus of Sh10 each time weekly production exceeds
400,000 units. MBC company policy is to treat all bonuses and overtime premium as indirect labour
costs.
During the year ended 31 March 2010:
• 21,200 hours were worked at basic rate.
• 820 hours weekday overtime were worked.
• Every Saturday morning four people worked from 8am until 12 noon (assume a
52 week year).
• 6 employees came in one Sunday and worked from 10am until 4pm, cleaning up after a flood.
• The weekly bonus target was exceeded on seven occasions.
Required:
Calculate each of the following payroll costs for MBC for the year ended 31 March
2010:
a)Total basic pay (3 Marks)
b)Total overtime (12 Marks)
c) Total production bonuses paid (5 Marks)
Question Three
The Tempus Trolley Company makes shopping trolleys for three leading supermarkets –
Tosec, Sada and Ranibussy. All trolleys are made from a special type of indestructible wire mesh,
‘WMX’, for which there is a sole supplier – the Balkan Steel Company.
Due to a fire at the supplier, Tempus will be unable to satisfy the full demand from all three customers
for the next three months. As a financial manager at Tempus, you must decide which products to
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manufacture in order to make best use of this scarce resource. The total amount of WMX available for
the next three months will be 20,000 kgs.
Your investigations have yielded the following information about the three products:
Tosec Twister Sada Stealth Ranibussy Ranger
Wire mesh WMX 1kg @ Sh9.00 1.5kg @ Sh9.00 1.2kg @ Sh9.00
Other materials Sh14.00 Sh6.00 Sh11.80
Direct labour Sh13.00 Sh10.00 Sh11.00
Fixed overheads absorbed Sh8.50 Sh5.00 Sh5.50
Selling price Sh56.00 Sh58.00 Sh60.00
Market demand 9,000 12,000 10,000
Required:
a) Calculate the contribution per unit for each product. (9 Marks)
b) Calculate the contribution per kg of WMX for each product. (6 Marks)
c) Rank the products in order of preference to maximise contribution. (3 Marks)
d) Identify the optimum production schedule to maximise contribution.
Show your workings. (2 Marks)
Question Four
What factors should be considered when designing a wages incentive scheme? (20 Marks)
Question Five
(a) Although stocks of materials may be planned to maximize profitability, when stock record
cards are compared to actual physical stocks, differences often arise. Explain possible reasons
for these differences. (6 Marks)
(b) Bidii Enterprises is located at Kariobangi Light Industries area in Nairobi. The company
manufactures a product ‘Comex’ which is used in the building industry. The main raw
material used in the manufacture of ‘Comex’ is material B42000.
The following information relates to material B42000.
Annual requirements:
Ordering costs:
Annual holding costs:
Purchase price per unit:
Safety stock requirement:
144,000 units
Sh. 12,500 per order
20% of the purchase price
Sh. 500
None
Required:
i) The economic order quantity. (6 Marks)
ii) The number of orders needed per year. (4 Marks)
iii) Total cost of ordering and holding material B42000 per year. (4 Marks)
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