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Buss 213: Cost Accounting Question Paper

Buss 213: Cost Accounting

Course:Cost Accounting

Institution: Kenya Methodist University question papers

Exam Year:2008

KENYA METHODIST UNIVERSITY

END OF SECOND TRIMESTER 2008 EXAMINATIONS

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTEMENT : BUSINESS ADMINISTRATION
COURSE CODE : BUSS 213
COURSE TITLE : COST ACCOUNTING
TIME : 2 HOURS

INSTRUCTIONS:
• Answer Question ONE and any other TWO Questions

Question 1
(a) Explain the following and the cost accounting treatment
(i) Direct materials
(ii) Direct labour
(iii) Overheads (3 marks)

(b) In a light engineering factory, the following particulars have been collected for the three month’s period ended on 31st December2008. you are required to prepare production over –heads Distribution Summary showing clearly the basis of apportionment where necessary.

Production departments Service departments
A B C D E
Direct wages Shs.
Direct materials Shs
Staff Nos
Electricity kWh.
Light Points Nos
Asset Value Shs.
Area Occupied Sq. m. 2,000
1,000
100
4,000
10
60,000
150 3,000
2,000
150
3,000
16
40,000
250 4,000
2,000
150
2,000
4
30,000
50 1,000
1,500
50
1,000
6
10,000
50 2,000
1,500
50
1,000
4
10,000
50

The expenses for the period were
Motive power Shs. 55,000: Lighting Power Shs. 10000; Stores Overheads Shs. 40,000; Amenities to Staff Shs. 150,000; Depreciation Sh. 1,500,000; Repairs and maintenance Shs. 300,000; General overheads Shs 600,000; and Rent and Taxes Shs. 27,500.
Apportion the expenses of service department E in proportion of 3 : 3 : 4 and those of service department D in the ration of 3 : 1: 1 to departments A, B, and C respectively
(13 marks)

(c) Bharat Chemicals Ltd. Manufacture and sell their chemicals produced by consecutive process.
The products of these processes are dealt with as under:
Process 1 process2 process 3
Transferred to next process 67% 60% -
Transferred to warehouse
For sale 33% 40% 100%

In each process 4% of the weight put in is lost and 6% is scrap which from process I realize Shs. 3 per ton, from process 2 Shs. 5 per ton and from process 3 shs. 6 per ton.
The following particulars relate to January, 2008:

Process1 process2 process 3
Raw materials used
In tons 1,400 160 1,260
Rate per ton Shs.10 Shs.16 Shs.7
Wages Shs. 1,000 Shs. 1,000 Shs. 1,000
Other expenses Shs. 5,152 Shs. 3,140 Shs. 2,898

Prepare Process Accounts showing cost per ton of each product. (14 marks)

Question 2
(a) The “Received” side of the stores ledger Account shows the following particulars:
Jan. 1 Opening Balance : 500 units @ Shs. 4
Jan. 5 Received from vendor: 200 units @ Shs 4.25
Jan 12 Received from vendor: 150 units @ Shs. 4.10
Jan 20. Received from vendor: 300 units @ Shs. 4.50
Jan 25 Received from vendor: 400 units @ Shs. 4

Issues of materials were as follows:
Jan 4 – 200 units: Jan 10 – 400 units: Jan. 15 – 100 units: Jan 19 100 units : Jan 26 – 200 units : Jan 30 – 250 units.

(i) Issues are to be priced on the principle of “First In First Out”. Write out the Stores Ledger Account in respect of the materials for the month of January. (5 marks)

(ii) What could have been the difference in the value of materials if the company was issuing the materials on a last in first out method? (5 marks)

(b) The following extract of costing information relates to commodity ‘A’ for the half year ending 31st December, 2008.

Shs Shs.
Purchases of raw materials 120,000 stock (31st Dec. 2008
-Raw materials 22,240
Works overheads 48,000 -finished products
Direct wages 100,000 (2,000 tons) 32,000
Carriage on purchases 1,440 work-in-progress
Stock (1st July, 2008) (1st July 2008) 4,800
-Raw materials 20,000 work-in-progress
-Finished products (31st Dec. 2008) 16,000
(1,000 tons) 16,000 sales – finished products 300,000

Selling and distribution overheads are Shs. 1 per ton sold. 16,000 tons of commodities were produced during the period.

You are to ascertain:
(i) Cost of raw materials used (2 marks) (ii) Cost of output for the period (2 marks) (iii) Cost of sales (2 marks) (iv) Net profit for the period (2 marks) (v) Net profit per ton of the commodity. (2 marks)

Question 3
The following data of X ltd is provided to you
- Opening stock (20,000 units)- valued at marginal costing Shs. 400,000 and total cost of Shs. 560,000
- Units produced 120,000 units
- Units sold 132,000 units
- Factory overheads (fixed) Shs. 200,000
- Variable factory overheads Shs. 714,000
- Selling costs
i. Variable Shs. 680,000
ii. Fixed Shs. 100,000
- Selling prices per unit Shs. 40

Required:
(a) Find the net profit under:
(i) Absorption costing (5 marks)
(ii) Marginal costing (5 marks)
(b) What are the main points of differences between absorption costing and marginal costing? (5 marks)
(c) What are the advantages and disadvantages of absorption costing? (5 marks)

Question four
Write short notes of the following with appropriate examples where possible
(i) Importance of budget in an organization (5 marks)
(ii) Essential of the material control in the company (5 marks)
(iii) Cost centre (5 marks)
(iv) Methods of the labour remuneration in the company (5 marks)

Buss 213: Cost Accounting Question Paper

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