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Hps 2117 Question Paper

Hps 2117

Course:Bachelor Of Commerce

Institution: Dedan Kimathi University Of Technology question papers

Exam Year:2012

Adobe Systems
KIMATHI UNIVERSITY COLLEGE OF TECHNOLOGY
UNIVERSITY EXAMINATTION 2011/2012
SECOND YEAR FIRST SEMESTER EXAMINATION FOR THE BACHELOR OF COMMERCE
HBC 2117: COST ACCOUNTING
DATE: 12TH AUGUST 2011 TIME: 8.30AM – 10.30AM
Instruction: answer question ONE and any other TWO
QUESTION ONE

a) Explain the assumptions underpinning the economic order quantity (EOQ) model (4 marks)

b) Mdosi supermarket operates in Nyeri town. Annually, it orders 480,000 pens from a Nairobi based
distributor. A packet of twenty four pens delivered to Mdosi warehouse costs sh 480 including the
transport charges. The supermarket borrows money from BCD bank at an interest rates of 10% per
annum to finance its inventories.

The supermarket also incurs sh. 1500 to place an order for the pen and sh.8 carrying cost for each pen.
Required

i) Economic order quantity for the pens (4 marks)
ii) Total cost at EOQ (4 marks)

c) Distinguish between the following terminologies
i) Direct and indirect cost (2marks)
ii) Cost center and profit center (2 marks)
iii) Period cost and product cost (2 marks)
iv) Cost apportionment and cost allocation (2 marks)
v) Cost absorption and service department re-allocatiion (2 marks)

d) Explain four assumptions of cost volume profit analysis (4 marks)

e) A company produces a single product and has availed the following details for the product

Selling price per unit sh 100
Variable cost per unit sh 60
Fixed cost sh 2 million

Required

a) Break even point in sales (2 marks)
b) Units that must be sold to produce a target profit of sh 1 million (2 marks)

QUESTION TWO

a) The cost accounting department of M.K limited has suggested to establish the standard costing measures
in the industry but the production manager has stated that it is a waste of time and resources to establish
the standard. Explain to the production manager the advantages of setting the standards. (6 marks)

b) The following standards relates to product X produced by Mwamba manufacturers

Set standards per unit cost:
Materials 5 kg @ sh 40 =200
Labour 40 hours @sh1 = 40
240
Actual production for 100 units
Materials 490 kg @ sh 42 each = 20580
Labour 3960hrs @ sh 1.10each = 4356
Required

i) material cost variance (3 marks)
ii) material price variance (2 marks)
iii) material usage variance (2 marks)
iv) labour cost variance (3 marks)
v) labour rate variance (2 marks)
vi) labour efficiency variance (2 marks)

QUESTION THREE

a) Describe the factors to consider when fixing the minimum and maximum stock levels of a commercial
enterprises (6 marks)
b) The standard cost of a product produced by Rware manufacturers limited is as follows

sh
direct materials 24
direct labour 26
variable overheads 30
fixed overheads 40
standard cost 120

the fixed overhead figure was based on normal output of 50000 units per month. Selling costs of sh 10
per unit sold was incurred. The actual fixed cost incurred was sh 160,000. The actual data was
opening stock 28,000 units
closing stock 25,000 units
sales (sh 80/ unit) 50,000 units
Required

i. Income statement under marginal and absorption costing (10 marks)
ii. A reconciliation of net income under the two methods (4 marks)

QUESTION FOUR

a) What is Zero- based budgeting? (2 marks)

b) Explain 3 strengths and 3 weaknesses associated with ZBB (6 marks)

c) Kingongo limited has three production department and two service departments. The following is their
budgeted factory overheads for the year ended 31st January 2011.

Production department
P – sh 25,000
Q – sh 20,000
R – sh 15,000
Service deepartment
A – sh 10,000
B – sh 7800
Other service centers are charged out as follows
Details P Q R A B
Service department A 30% 30% 20% - 20%
Service department B 40% 30% 20% 10% -
Required
Allocate the service department costs to the production departments using the reciprocal method
(12 marks)
QUESTION FIVE

a) Distinguish between job order costing and contract costing (4 marks)

b) Omo without powerfoam processes a range of products which include a detergent which passes through
3 processes beefore completion and transfer to the finished goods stores. During the month of december
2010, the following data was extracted from the companies record.

Processes
1 2 3 total
Basic raw material ( 20,000 units) 12,000 - - 12,000
Direct materials added in process 17,000 19,000 11,000 47,000
Direct wages 8,000 12,000 24,000 44,000
Direct expenses 2,400 1,860 2,680 6,940
Units
Output 18,400 17,400 15,800
Normal loss in the process of
Output 10 % 5% 10%
Scrap value per unit sh 0.20 sh 0.50 sh 1.00
Production overheads are absorbed as a percentage of direct wages. There was no stock at the beginning
or closing of any process.
Required

i. process 1 account (4 marks)
ii. process 2 account (4 marks)
iii. process 3 account (4 marks)
iv. abnormal loss account (2 marks)
v. abnormal gain account (2 marks)

Hps 2117 Question Paper

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