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Daa 103 Introduction To Cost Accounting Question Paper
Daa 103 Introduction To Cost Accounting
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2014
UNIVERSITY EXAMINATIONS: 2013/2014
STAGE IV ORDINARY EXAMINATION FOR THE DIPLOMA IN
BUSINESS MANAGEMENT
DAA 103 INTRODUCTION TO COST ACCOUNTING
DATE: AUGUST 2014
TIME: 1 1/2 Hours
INSTRUCTION: Answer any THREE questions
QUESTION ONE: (20 MARKS)
a)
Outline the benefits of maintaining an efficient stock control system.
(5 Marks)
The following are the stock movements of stock item PX660
Receipts Issues
(Units)
(Units)
01 April 1,000 at sh7 each
06 April 1,500 at sh8 each
10 April
14 April
900
2,000 at sh9 each
15 April
22 April
2,600
2,000 at sh9.50 each
27 April
3,100
The stock as at 31 March was 800 units valued at sh 6 each.
Required:
b)
Prepare stock cards for stock item PX660, showing the value of EACH of the two issues
and the value of closing stock using EACH of the following stock pricing methods:
i). FIFO
ii). LIFO
1
iii).
Weighted average method
(15 Marks)
QUESTION TWO: (20 MARKS)
Twelve production employees at the Mash Biscuit Ltd (MBL) 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 Public Holidays - Double time
In addition to this they each receive a fixed bonus of Sh10 each time weekly production exceeds
400,000 units. MBL company policy is to treat all bonuses and overtime premium as indirect
labour costs.
During the year ended 31 March 2014:
• 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 2014:
a) Total basic pays (3 Marks)
b) Total overtime (12 Marks)
c) Total production bonuses paid (5 Marks)
QUESTION THREE: (20 MARKS)
(a)
CODE SANAA LTD has three production departments and two service departments.
The following is their budgeted factory overheads for the year ended 30 September 2013:
DEPARTMENTS
Amount (shillings)
2
DEPARTMENT
Production
Amount (shillings)
A B 210,000
C 220,000
P 90,000
Q
Service
210,000
40,000
TOTAL
770,000
The service departments’ costs are to be re-apportioned as per the following percentages.
A B C
P 20 30 40
Q 20 20
P
40
Q
10
20
Required:
Re-apportion the service department costs to the production departments using the
simultaneous equation method.
(b)
(12 Marks)
You are informed that the overheads are absorbed on the basis of the direct labour hours
and the budgeted direct labour hours for the departments as given below:
Department
A 1000 hours
B 2500 hours
C 4000 hours
Required:
Determine the overhead absorption rates per hour for the three production departments
(8 Marks)
QUESTION FOUR: (20 MARKS)
EPZ Ltd. makes a chemical product and uses process costing. The following details relate to the
month of February 2014:
PROCESS ONE
Input
5,000 litres of chemical A at sh0.90 per litre
300 direct hours at sh4 per hour
3
Overhead cost sh2,650
4,750 litres transferred to Process 2
In Process 1 there is a normal loss of 5% of input – it has no scrap value.
PROCESS TWO
Input
4,750 litres from Process One.
1,150 litres of chemical B at sh1.50 per litre
200 direct hours at sh3.75 per hour
Overhead cost sh3,900
5,605 litres were transferred to finished
stock
There was no work in progress
In Process 2 there is a normal loss of 5% of input – it has no scrap value.
Required:
a) Complete the process account for Process 1. (8 Marks)
b) Complete the process account for Process 2. (8 Marks)
c) Distinguish between a normal and abnormal loss. (4 Marks)
QUESTION FIVE: (20 MARKS)
a)
Nutristar is a manufacturer of peanut Butter and has spare productive capacity which it is
seeking to utilize with the introduction of a new product, NutriHoney
You have been provided with the following information which relates to the product
NutriHoney.
Sh
Selling Price per unit 200.00
Direct Material Cost per unit 65.00
Direct Labour Cost per unit 55.00
Fixed Overheads per month 168,000
Required:
i. Calculate the unit contribution for product NutriHoney. (3 Marks)
ii. Calculate the break-even point for product NutriHoney. (3 Marks)
iii. Calculate the profit-volume (PV) ratio. (3 Marks)
4
iv.
Calculate how many units of product NutriHoney must be sold to make a profit of
Sh120,000.
b)
(3 Marks)
Differentiate between the following terms:
(i) Fixed costs and marginal costs (2 Marks)
(ii) Discretionary costs and period costs (2 Marks)
(iii) Cost tracing and cost accumulation (2 Marks)
(iv) Sunk costs and standard costs (2 Marks)
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