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Cost Accounting (Acct 219) 3Rd Trimester 2015 Question Paper
Cost Accounting (Acct 219) 3Rd Trimester 2015
Course:Bachelor Of Business Information Technology
Institution: Kenya Methodist University question papers
Exam Year:2015
COST ACCOUNTING (ACCT 219) 3rd trimester 2015
KENYA METHODIST UNIVERSITY
END OF 3'RD 'TRIMESTER 2015 (PT) EXAMINATION
SCHOOL : BUSINESS AND ECONOMICS
DEPARTMENT : ACCOUNTING, FINANCE & INVESTMENT
UNIT CODE : ACCT 219
UNIT TITLE : COST ACCOUNTING
TIME: 2 HOURS
INSTRUCTIONS
Answer question one and any other two questions
Question One
Briefly distinguish between the following terminologies used in cost accounting clearly stating the importance of the distinction for decision making purposes;
Controllable costs and non-controllable costs
(2 Marks)
Semi-fixed and semi-variable costs
(2 Marks)
Product costs and periodic costs
(2 Marks)
Relevant costs and irrelevant costs
(2 Marks)
Sunk costs and standard costs
(2 marks)
Expo Company limited makes a chemical that passes through three production processes 1, 2 and 3. In the month of March 6000 litres of the basic raw material prices at shs.240,000 were introduced into the process1. Subsequently the following costs were incurred;
Element of cost Total
shs Process 1
shs. Process 2
shs. Process 3
shs
Direct Material (additional) 87,500 30,000 40,000 17,500
Direct labor 110,000 40,000 50,000 20,000
Direct expenses 16,900 6,000 1,600 9,300
Normal loss per process was estimated as:
Process 1 10%
Process 2 5 %
Process 3 8%
Output of each process was
Process 1 5,300 units
Process 2 5,000 units
Process 3 4,700 units
The loss in each process represented scrap which could be sold at the following values;
Process 1 sh.20 per unit
Process 2 sh.44 per unit
Process 3 sh.65 per unit
There were no stocks of materials or work – in- progress at the beginning or end of the month
The output of each process passes directly to the next process and finally to finished stock.
Production overhead is absorbed by each process on a basis of 50 per cent of the cost of direct labor
Required:
Process 1 account
(5 Marks)
Process 2 account
(5 Marks)
Process 3 account
(5 Marks)
Abnormal loss account
(3 Marks)
Abnormal gain account
(2 Marks)
Question Two
On November 1 2008 Jiwe construction company ltd was awarded a contract to construct an office block for the association of women accountants of Kenya (AWAK). The office block is scheduled for completion by 31st March 2010.
The following information extracted from the books of Jiwe construction company ltd related to the contract for the year ended 31 October 2009.
Shs.
Material issues – from central stores
By suppliers direct on site
5,500,000
14,200,000
Labor charges 10,100,000
Amounts paid to subcontractors 4,501,000
Plant and machinery bought on November 1, 2008 6,000,000
Loose tools and consumables 126,000
Head office expenses – apportioned 1,184,000
On October 31,2009 the stock of materials at site amounted to shs.2,100,300. On the same data the amounts outstanding with respect to wages were sh.350,000 and for subcontract work, sh.25,000.
Jiwe construction co. ltd received sh.36 million from AWAK which represents the amount of certificate issued by their architect in respect of work completed to 31 October 2009 after deducting 10% retention money. It is estimated that work costing sh.360,000 is not covered by this certificate
You are also informed:
The plant and machinery specifically purchased for the project is to be depreciated at a rate of 20% straight line with no residual value.
Jiwe construction company ltd only takes 2/3 of the profit on work certified to its revenue account
Required:
Contract account for the period ended 31 October 2009.
(8 marks)
Contractee’s account.
(4 marks)
Calculate the work in progress.
(4 marks)
Illustrate how the various items would appear in the balance sheet of the company.
(4 Marks)
Question Three
The following transactions relates to stem MZOOL stocked by KeMU in one of its campuses for the month of March 2014
Receipts Issues
Date Quantity Unit Cost Date Quantity
3 250 18 6 330
10 270 21 16 280
17 310 22 23 225
19 280 21 26 395
25 275 22 28 260
27 320 23 30 695
30 225 24
The closing balance for the month of February 2014 was 300 units valued at sh.20
Required:
Store ledger using FIFO method. (10 marks)
Outline the different components of an operating statement.
(5 Marks)
Elaborate on the Just in Time (JIT) principle in stock maintenance.
(5 Marks)
Question Four
From the following information prepare a cost statement clearly showing the various components of the cost of production (20 Marks)
Sh.
stock on 1st January 2007 48,000
Raw materials 9,800
work in progress 120,000
finished goods 148,000
wages paid to the factory workers 52,000
factory insurance 400,000
plant balance on 1st January 2007 180,000
factory rent 200,000
cleaning costs 350,000
purchase of raw materials
stocks at 31st December 2007
Raw materials 21,000
work in progress 6,000
carriage on raw materials 42,000
return of raw materials to suppliers 6,200
salary of marketing manager 200,000
fixed admission expenses 140,000
salesman commission 60,000
Question Five
Mjengo Ltd is a medium sized company which operates three production departments and two services department, the three production departments are: machinery department D, machinery department E and Assembly department. The two service departments are: stores department and general support department
sh. sh.
Indirect salaries and wages
Machinery department D 2,500,000
Machinery department E 2,500,000
Assembly 3,750,000
Stores 2,750,000
General support 3,700,000
15,200,000
Indirect materials
Machinery Department D 1,250,000
Machinery Department E 2,012,500
Assembly 262,500
Stores 0
General support 25,000
3,550,000
others:
electricity 1,250,000
taxes on building 2,500,000
insurance of machinery 375,000
depreciation of machinery 3,750,000
insurance of building 625,000
salaries of site workers 2,000,000 10,500,000
29,250,000
The following additional information is available from the books of Mjengo ltd;
1.
Book value of machinery Area occupied (square meters) Number of direct labor employees hrs
Mach.Dept D 20,000 25,000 750 2,500,000
Mach.Dept.E 12,500,000 12,500 500 2,500,000
Assembly 2,500,000 37,500 750 5,000,000
Stores 1,500,000 37,500 250
General support 1,000,000 12,500 250
37,500,000 125,000 2500
2. The total direct and indirect materials issued to the production departments are as follows;
Machinery department D 10,000,000
Machinery department E 7,500,000
Assembly 2,500,000
20,000,000
REQUIRED:
Prepare an overhead analysis sheet showing clearly the bases of apportionment.
(14 Marks)
Allocate service department cost to the production departments using direct method. (Hint: the appropriate allocation bases are total material costs and direct labor hours for stores department and general support department.
(3 Marks)
You are informed that the overheads are absorbed on the basis of percentage material cost. Determine the overhead absorption rates for each production department.
(3 marks)
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