Bac 404 Cost Accounting 2 Question Paper

Exam Name: Bac 404 Cost Accounting 2 

Category: 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.
------------------------------------------------------------------------------------------------------------------
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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