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Caa 103: Introduction To Cost Accounting Question Paper
Caa 103: Introduction To Cost Accounting
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
1
UNIVERSITY EXAMINATIONS: 2008/2009
FIRST YEAR STAGE III EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 103: INTRODUCTION TO COST ACCOUNTING
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ALL questions
QUESTION ONE
a) Illustrate how cost accounting differs from financial accounting. (8 Marks)
b) A company makes a single product with a sale price of Ksh. 10 and a marginal cost of Sh. 6.
Fixed costs incurred per annum are Sh. 60,000.
Calculate:
i) Number of units to break even (5 Marks)
ii) Sales at break-even point ( 2 Marks)
iii) The number of units needed to be sold to achieve a profit of Sh. 20,000 per annum
(2 Marks)
QUESTION TWO
a) The actual overhead expenditures and activity levels of the various cost centres of Joy
enterprises were as follows:
2
Machine
centre
Overhead costs
Activity level
Machine hours
Direct labour hrs
Actual overhead costs
1 1,015, 985 550,000 275,000 1.85
2 1,083,079 245,000 225,000 4.42
Assembly 1,030,936 515,000 2.0
3,130,000
He budget overhead costs for the three centres are given below:
Assembly 1.7975
Machine centre 1 2.15
Machine centre 2 4.615
Required
i) Establish the extend of under-recovery or over-recovery of overhead (5 Marks)
ii) Give your comments on the treatment of an over-recovery and under-recovery of
overheads in the profit and loss account. (3 Marks)
b) Discuss the comparative merits of absorption costing and marginal costing in the production
and Marketing of several products by a business. (10 Marks)
QUESTION THREE
The following are the receipts and issues of materials X in a factory during December 2007
Dec 1 Opening stock 50 kg @ sh 10 per kg
Dec 5 Issued 30 kgs
Dec 6 Received 60kgs @ sh 10.20 per kg
Dec 7 Issued 25 kgs (stock verification reveals loss of 1 kg)
Dec 8 Received back from orders 10 kg (previously issued at sh 9.15 per kg)
Dec 9 Issued 40 kg
Dec 10 Received 22 kg @ sh 10.30 per kg
Dec 11 Issued 33 kg
Using Fifo and Lifo method compute the value of the closing stock and show the comparative results.
(20 Marks)
3
QUESTION FOUR
Animal Health Limited produces a chemical code named TD which is used in the cattle dips and
sprays for control of ticks. The costs incurred in the process of manufacturing TD and other relevant
operating data for the month of October 2007 are as shown below:
Direct Material transferred into process:
5,000 kgs @ shs 17.68 per kg sh. 88,400
Conversion costs sh. 40,000
Output
Finished production 3,800 kgs
By-product 700 kgs
The By-product is transferred to another process where it is processed further to
form dog tick spray code named TDG.
The additional costs incurred in reprocessing the By-product and packaging it for
sale are as follows:-
Conversion cost - Shs. 5 per Kg
Packaging costs - Shs. 3 per Kg
The DTG is sold at Shs.20 per Kg. and the net realizable value is credited to the
TD production process account.
The normal output of the TD process per 1,000 Kg of direct
Material inputs is as follows:
Finished production (TD) 800 Kgs.
By-product 140 Kgs.
Normal process loss 60 Kgs.
Required:
i) Cost per unit of normal production (5 Marks)
ii) Prepare the following accounts for October 2007, recording transactions for the above
process to include:
Process Account (5 Marks)
By-product Account (5 Marks)
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