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Bac 404: Cost Accounting Question Paper
Bac 404: Cost Accounting
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2011
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2011/2012
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 404:
COST ACCOUNTING
DATE: Monday, 28th November 2011
TIME: 2.00 p.m. – 4.00 p.m.
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INSTRUCTIONS:
Answer ALL questions.
QUESTION ONE
(i)
Below are the data concerning department B of a manufacturing corporation that uses a
process cost system.
Units received from Department A
500,000
Units added in production
100,000
Units transferred to finished good inventory
530,000
Ending units in process
10% are 30% complete
45% are 60% complete
15% are 75% complete
35% are 85% complete
Costs transferred in
£ 300,000
Costs added by department
Direct materials
£ 560,772
Direct labours
£ 363,888
Factory overhead (applied)
£ 262,592
Page 1 of 6
Direct materials are added at the 62% stage of production and conversion costs are
evenly throughout the process. No beginning work-in-progress inventory exist.
Required:
(a)
Calculate the equivalent units of production for direct materials and conversion
costs.
(7 marks)
(b)
Calculate the costs of ending work-in-process inventory.
(3 marks)
(c)
Differentiate the following terms as used in cost accounting:
(i)
Cost Tracing
(ii)
Cost allocation
(iii)
Cost assignment
(ii)
Gianncopolous S.A. uses a job costings system at its Korinthos Plant. The plant has a
Machining Department and an Assembly Department. Its job-costing system has two
direct cost categories (direct materials and direct manufacturing labor) and two
manufacturing overhead cost pools. (the Machining Department, allocates using actual
machine hours and the Assembly Department, allocated using actual labour cost.) The
2007 budget for the plant is as follows:
Machining
Assembly
Department
Department
Manufacturing overheads
£ 1,800,000
£ 3,600,000
Direct manufacturing labour costs
£ 1,400,000
£ 2,000,000
Direct manufacturing labour hours
100,000
200,000
Machine hours
50,000
200,000
Required
1) What is the budgeted overhead rate that should be used in the Machining
Department? In the Assembly Department?
2) During the month of February, the cost record for job 494 shows the following:
Page 2 of 6
Machining
Assembly
Department
Department
Direct materials used
£ 45,000
£ 70,000
Direct manufacturing labour cost
£ 14,000
£ 15,000
Direct manufacturing labour hours
1000
15000
Machine hours
2000
1000
What is the total manufacturing overhead costs in job 494?
QUESTION TWO
A construction company has undertaken to construct a bridge. The following particular
relate to this bridge for the year ended 31st December 2005
Ksh. (000)
.
Materials:
Direct purchases
50,000
Issued from the store
10,000
Wages for labour:
4,500
General plant in use
Countless down value
100,000
Depreciation thereon
10,000
Direct expenses
3,500
Share of general overheads
2,000
Materials on hand at 31 December
1,000
Materials lost by fire
500
Salvage valve thereof
150
Wages accrued at December 31
5,000
Direct Expenses accrued at December 31
5,000
Value of work certified
159,000
Cost of uncertified work
4,500
The value of the contact is Ksh,. 215,000,000 and it is the practice of the contractee, as
per the terms of the contract to retain 10% of work certified.
Required
Prepare the contract account, arrive at the cost of the work-in-progress and show how
the various items would appear in the balance sheets.
(17 marks)
Page 3 of 6
QUESTION THREE
(a)
The Dotto Company has two service and two producing department. It uses the algebraic
method to allocate budgeted services departments costs. The following information is
available:
Services Provided By
Departments
Budgeted Cost Department A
Department B
Total Costs
Service A
£10,000
20%
Service B
£20,000
30%
Factory overhead costs
Production 1
£14,000
15%
45%
Production 2
£6,000
50%
35%
£50,000
100%
100%
Direct labour hours
Production 1
10,000
Production 2
5,000
Required
Using the preceding information, allocate the service department?s budgeted total costs,
using the algebraic method.
(8 marks)
(b)
Milner Manufacturing Company uses a job order costing system and standard costs. It
custom manufactures one product whose standard cost is as follows:
Direct materials (20 yard at £ 0.90 per yard)
£18
Direct labour (4 hours at £6 per hour)
£24
Total factory overhead (applied at 5
6 of direct labour
cost, the ratio of variable costs to fixed cost is 3:1
£20
Variable selling, general and administrative costs
£12
Fixed selling, general and administrative expenses
£7
Total units costs
£81
Page 4 of 6
The standard are based on “normal” activity of 2400 direct labour hours. Actual activity
for the month of October 2010 was as follows:
Direct labour (2400 hours at £6.10 per hour)
£ 12,810
Total factory overhead (500 units actually produced)
£11,100
Required
Compute the variable factory overhead application rate per direct labour hour and the
total fixed factory overhead on the basis of normal activity.
(7 marks)
QUESTION FOUR
A distraught employee, Guy Pirault-Mame, put a torch to a manufacturing plant on a
blustery day 26 February. The resulting blaze completely burnt the plant and its content.
Fortunately, certain accounting records were kept in another building. They revealed the
following for the period from January „2008 to 26 February 2008
Direct materials purchased
£3.2 million
Work in progress in January „2008
£680,000
Direct materials in January „2008
£320,000
Finished goods in January „2008
£600,000
Indirect manufacturing costs
40% of conversion cost
Revenues
£10 million
Direct manufacturing labours cost
£3.6 million
Prime costs
£5.88 million
Gross margin percentage based on sales
20%
Costs of good available for sale
£9 million
The loss was fully covered by insurance. The insurance company wants to know the historical
costs of the stock as one factor, considered when negotiating a settlement.
Page 5 of 6
Required
Calculate the cost of
1) Finished good stock, 26 February 2008
(5 marks)
2) Work in progress stock 26 February 2008
(5 marks)
3) Direct materials stock 26 February 2008
(5 marks)
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Page 6 of 6
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