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Hbc 2117 /Hps 2108 Cost Accounting Question Paper
Hbc 2117 /Hps 2108 Cost Accounting
Course:Bachelor Of Commerce
Institution: Dedan Kimathi University Of Technology question papers
Exam Year:2014
DEDAN KIMATHI UNIVERSITY OF TECHNOLOGY
UNIVERSITY EXAMINATIONS 2013/2014
EXAMINATIONS FOR THE
DEGREE OF BACHELOR OF COMMERCE/ BACHELOR OF PURCHASING AND SUPPLIES MANAGEMENT
HBC 2117 /HPS 2108 COST ACCOUNTING
DATE: JULY 2014 TIME: 2 HOURS
INSTRUCTIONS
Answer questions ONE and any other TWO questions.
QUESTION ONE
a) Narok mara tours limited has a fleet of tour cars for tour guides and marketing representatives running costs for the cars has been estimated as follows
1. cars costs shs 80,000 when new and have a guaranteed trade in value of shs 7,200 at end of two years depreciation is charged on a straight line basis
2. petrol and oil cost 78 shs/per mile
3. tyres cost shs 9,000 per set to replace replacement occurs after 30,000 miles
4. Routine maintenance costs shs 5,600 per car [on average] in the first year and shs 6,800 in the second year.
5. repairs average shs 100,000 per car over two years and are thought to vary with mileage the average car travels 25,000 miles per annum
6. tax, insurance, membership for motoring organization and so on cost shs 45,000 per annum
Required
Calculate the average cost per annum of cars which travel 15,000 miles per annum and 30,000 miles per annum [8 marks]
b) The following data relates to usafi industrial contract cleaners at two activity levels
Square meters cleaned 12,750 15,100
Overheads shs 73,950 shs 83,585
When more than 20,000 square meters are industrially cleaned its necessary to have another supervisor and so the fixed cost rises to shs 43,350
Required
Calculate the estimated overhead expenditure if 22,000 square meters are to be industrially cleaned [5 marks]
c) Steer limited produces an item which is manufactured in two consecutive processes information relating to process two during April 2011 is as follows
Opening inventory 800 units
Degree of completion:
Process 1 materials 100 % shs 4,700
Added materials 40 % shs 600
Conversion cost 30 % shs 1,000
6,300
During April 2011, 3,000 units were transferred from process 1 at a valuation of shs 18,100 added materials cost shs 9,600 and conversion cost were shs 11,800.
Closing inventory at 10th April 2011 amounted to 1,000 units which were 100 % complete with respect to process 1 materials and 60 % complete with respect to added materials conversion cost work was 40 % complete.
Steers limited uses the weighted average cost system for the valuation of output and closing inventory.
Required
Prepare process 2 account for April 2011 [8 marks]
d) Highlights six basic limitation of cost volume profit analysis [3 marks]
e) Differentiate between the following terms sunk, opportunity and differential cost giving relevant example in each case [6 marks]
QUESTION TWO
A. The trading results of creative limited for the year ended 11th april 2010 were as follows
Shs shs
Sales [at shs 5 per unit] 400,000
Less:
Material 160,000
Labour 64,000
Variable overhead 40,000
Fixed overhead 60,000 [324,000]
Profit 76,000
Additional information
During the year 2010 creative limited was operating at half capacity that is 50% capacity marketing and distribution director has estimated that the quantity sold could be doubled in 2011 if the selling price was reduced to shs 4 per unit. No change is anticipated in unit variable cost but certain administrative changes to cope with the additional volume of work increases fixed overhead by shs 10,000
Required
1. Evaluate the marketing manager proposal [13 marks]
2. Assuming that the market price was reduced as proposed, unit variable cost remaining as in 2010 and fixed overhead increased by shs 10,000 calculate what quantity would need to be sold in 2011 to yield a profit of shs 105,000 [7 marks]
QUESTION THREE
a) The budgeted and actual data for river arrow product company for the year ended 10th april 2011 are as follows
Budgeted actual
Direct labour hours 9,000 9,900
Direct wages shs 34,000 shs 35,500
Machine hours 10,100 9,750
Direct materials shs 55,000 shs 53,900
Units produced 120,000 122,970
Overheads shs 63,000 shs 61,500
The management accountant of river arrow Product Company has decided that overheads will be absorbed on the basis of labour hours
Required
Calculate the amount of under or over absorbed overhead for the year ended 10th april 2011 [7 marks]
b) Differentiate between period and product cost [2 marks]
c) Supa bakery makes two wheat products bread and scones. Information relating each products is as follows
Bread scones
Opening inventory nil nil
Production units 15,000 6.000
Sales [units] 10.000 5,000
Sales price per unit shs 20 shs 30
Unit cost SHS SHS
Direct materials 8 14
Direct labour 4 2
Variable production overhead 2 1
Variable sales overhead 2 3
Additional information
Fixed costs for the month shs 40,000
Production cost shs 15,000
Sales and distribution costs shs 25,000
Required
1. using marginal costing principles calculate supa bakery surplus or deficiency for the year 2011 [7 marks]
2. calculate the profits if sales has been 15,000 units of bread and 6,000 units of scones [ 4 marks]
QUESTION FOUR
a) Critically discuss the major differences between job order and process costing methods [6 marks]
b) The following data relates to uwezo traders for the period up April 2011
Month output [units] total manufacturing cost [shs]
November 2010 80 10,200
December 2010 90 10,900
January 2011 100 12,100
February 80 10,800
March 120 13,700
April 110 12,500
Required
1. Using regression analysis determine the fixed and variable cost for uwezo traders [7 marks]
2. Develop the cost estimation formulae to be used by uwezo traders [2 marks]
3. Determine the total manufacturing cost for the month of may 2011 if expected production is 152 units [2 mark]
c) Define the term equivalent units as applied in management accounting [3 marks]
QUESTION FIVE
a) Highlight five major differences between management accounting and financial accounting [5 marks]
b) Norton Company is currently selling 400 ovens per month [monthly sales of shs 100,000] the sales manager feels that a shs 10,000 increase in monthly advertising budget would increase the monthly sales by shs 30,000.
The current basic data for Norton limited is as follows
Sales price shs 250 per unit 100 %
Variable expenses shs 150 per unit 60 %
Contribution margin shs 100 per unit 40 %
Required
Determine and justify whether the proposal should be accepted or rejected [5 marks]
c) Italian domino makes and sells a product which has a variable cost for shs 30 and sells for shs 40 budgeted fixed costs are shs 70,000 and budgeted sales are 8,000 units. Calculate the break even point and the margin of safety [4 marks]
d) Differentiate between traditional costing and variable costing [3marks]
e) Describe the role of a management accountant in an organization [3 marks]
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