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Cost Accounting Ii Question Paper
Cost Accounting Ii
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2010
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
INSTITUTE OF OPEN LEARNING (IOL)
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 404:
COST ACCOUNTING II
DATE: Saturday, 24th July, 2010
TIME: 8.00 a.m. – 10.00 a.m.
------------------------------------------------------------------------------------------------------------
INSTRUCTIONS:
? Answer ALL questions.
? Show all your workings clearly.
Question One
During the year ending 31/12/2009 a company’s profits have been estimated from the
costing system to be Kshs.230,630 whereas the financial profit was Kshs.166,240 for the
same period. The following information was also given for the same period:-
The costing records show:-
i)
A stock ledger closing balance of Kshs.781,970
ii)
A direct wages absorption account with a closing credit balance of Kshs.248,670
iii)
A factory overheads absorption account with a closing credit balance of
Kshs.197,140
iv)
Administration expenses calculated at 3% of the selling price.
v)
Selling prices including 5% of selling expenses.
The financial profit and loss statement for the year ending 31/12/2009 was as follows:-
Page 1 of 5
Kshs.
Kshs.
Sales
3,465,000
Less cost of sales:
Opening stock
2,471,790
Purchases
821,540
3,293,330
Less closing stock
(751,210)
2,542,120
Direct wages
231,330
Factory overheads
208,260
(2,981,710)
Gross profit
483,290
Interest received
3,160
486,450
Less Expenses
Selling expenses
221,760
Administrative expenses 98,450
(320,210)
Net profit
166,240
======
Required:
a)
Prepare a statement reconciling the costing profit with the financial profit.
(12 marks)
b)
Give three main reasons why the profit shown by the company’s cost accounts
may differ from that shown by its financial accounts.
(3 marks)
Question Two
a)
Using appropriate examples distinguish between joint products and by products.
(4 marks)
b)
A process costing Kshs.400,000 produces 3 products – x, y and z. Output
details are as follows:
x – 6000 litres
y – 10,000 litres
Page 2 of 5
z – 20,000 litres
Each product may be sold at the completion of the process as follows:-
Sales value at the end of the first process
x
Kshs.10/litre
y
Kshs.4/litre
z
Kshs.10/litre
Alternatively further processing of each individual product can be undertaken to
produce an enhanced product thus:
Subsequent Processing Sales Value after final
Costs process
Enhanced product x
Kshs.14/litre
Kshs.20/litre
Enhanced product y Kshs2/litre Kshs.8/litre
Enhanced product z Kshs.6/litre Kshs.16/litre
Required:
Calculate the apportionment of joint process costs to products x, y and z using the
constant gross profit method.
(11 marks)
Question Three
The following budgeted information relates to Thika Traders for the forthcoming period.
Products
A
B
C
000
000
000
Sales and production (units)
50
40
30
Kshs.
Kshs.
Kshs.
Selling price (per unit)
45
95
73
Prime cost (per unit)
32
84
65
Hours
Hours
Hours
Machine department
(Machine hours per unit)
2
5
4
Assembly department
(direct labour hours per unit)
7
3
2
Page 3 of 5
Overheads allocated and apportioned to production departments (including service cost
centre costs) were to be recovered in product costs as follows:
Machine department at Khs.1.20 per machine hour
Assembly department at Kshs.0.825 per direct labour hour.
You ascertain that the above overheads could be re-analysed into cost pools as follows:-
Cost Pool
Kshs. 000
Cost driver
Quantity for
the period
Machine services
357
Machine Hours
420,000
Assembly services
318
Direct labour hours 530,000
Set up costs
26
Set-ups 520
Order processing 156 Customer orders 32,000
Purchasing 84 Suppliers orders 11,200
You have also been provided with the following estimates for the period:
Products
A
B
C
Number of set ups
120
200
200
Customer orders
8,000
8,000
16,000
Suppliers orders
3,000
4,000
4,200
Required:
a)
Prepare and present profit statements using
i)
Conventional absorption costing
(5 marks)
ii)
Activity Based costing
(10 marks)
b)
Comment on why activity based costing is considered to present a fairer valuation
of the product cost per unit.
(5 marks)
Question Four
You have been asked about the application of the learning curve as a management
accounting technique:-
a)
Define the Learning curve
(2 marks)
b)
Explain the theory of learning curves
(3 marks)
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