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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: APRIL 2014
TIME: 1 1/2 Hours
INSTRUCTION: Answer any THREE questions
QUESTION ONE: (20 MARKS)
(5 Marks)
i. Explain the meaning of cost accounting and give its objectives.
ii. Financial accounting and cost accounting are two different accounting systems. Identify and
explain the differences between the two systems.
(5 Marks)
iii. Identify and explain any five benefits of material control system.
iv. Many firms are currently experiencing high employee turnover. Identify and explain five reasons
for this.
(5 Marks)
(5 Marks)
QUESTION TWO: (20 MARKS)
a. Define EOQ and state the limitations of the EOQ model
(5marks)
b. EOQ model has assumptions that enable it to function properly. Enumerate and explain
five of these assumptions.
(5 Marks)
c. 3G Company has an annual demand for its material amounting to 50,000 tons pa. The
purchase price per ton for the stock item is Kshs 2,000 and the stock holding cost is 25%
of the purchase price. The ordering cost is Kshs 800 per order.
Required: Calculate:
i.
The EOQ.
(3 Marks)
ii. The total holding cost. (2 Marks)
iii. The total ordering cost. (2 Marks)
iv. The total relevant cost. (3 Marks)
QUESTION TWO: (20 MARKS)
Tembo ltd buys and sells product pick. It values stock on the basis of first in first out (FIFO). On
June 1 2013, stock in hand consisted of 4,500 units which were acquired at Kshs 50 per unit. The
operations for the month were as follows:
Date
Purchases
2
4
5
7
11
12
13
18
19
20
21
22
25
26
28
29
Sales
5,000 @ Kshs 48
6,000 @ Kshs 60
5,500 @ Kshs 49
4,000@ Kshs 50
7,000@ Kshs 61
5,000@ Kshs 50
6,000@ Kshs 47
7,000@ Kshs 62
8,000@ Kshs 64
6,000@ Kshs 49.50
5,000@ Kshs 65
7,000@ Kshs 50
6,000@ Kshs 49
2,000@ Kshs 47
500 @ Kshs 60
14,000@ Kshs 64
The company incurred operating costs of Kshs 450,000 during the month.
Required:
Prepare the stores ledger card using FIFO.
(20 Marks)
QUESTION FOUR: (20 MARKS)
a) Briefly explain CVP analysis and give its assumptions.
(5 Marks)
b) Enumerate and explain five benefits of using break-even analysis.
(5 Marks)
c) Xylex Ltd provided the following information with respect to their products.
Estimated FC = Kshs 1,200,000
Variable cost = Kshs 200 per unit
Selling price = Kshs 400 per unit
(10 Marks)
Required:
i.
Calculate the number of units to be sold so as to break even
ii.
iii.
iv.
v.
How many units must be sold to earn Kshs 300,000 target profit
What profit would result if 800 units are sold?
What selling price will have to be charged to have a net profit of Kshs 3,000 on
sales of 8,000 units?
How many additional units must be sold to cover the extra fixed cost of Kshs
800,000 incurred in advertising?
QUESTION FIVE: (20 MARKS)
a. Define the following terms:
(6 Marks)
i.
Budget
ii. Budgeting
iii. Budgetary control
b. State and explain 4 advantages and 4 disadvantages of budgetary control.
(8 Marks)
c. The following information was extracted from the books of KK Ltd regarding its
budget for the 2nd quarter of 2013.
Sales
February
Kshs 50,000
March
Kshs 40,000
April-June
Kshs 60,000 per month
Half the sales are cash. 90% of the credit sales are collected in the month
following the month of sale and the balance one month later. Purchase budget for
the 2nd quarter (April-June) was 15,000 units, 18000 units and 25,000 units
respectively at Kshs 2 per unit. Purchases are made in cash so as to take
advantage of a cash discount of 5%. Wages and salaries for the 2nd quarter are
budgeted at Kshs 13,000 per month.
Manufacturing and other expenses for the quarter are:
Cash expenses
Kshs 9,000
Depreciation
Kshs 15,000
Selling expenses
Kshs 6,000
Administration expenses
Kshs 4,000 (equally in April and May only)
Required:
Prepare a cash budget for the 2nd quarter.
(6 Marks)
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