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Cost Accounting (Acct 219) 1St Trimester 2016 Question Paper
Cost Accounting (Acct 219) 1St Trimester 2016
Course:Bachelor Of Business Information Technology
Institution: Kenya Methodist University question papers
Exam Year:2016
COST ACCOUNTING (ACCT 219) 1ST TRIMESTER 2016
KENYA METHODIST UNIVERSITY
END OF 1'ST 'TRIMESTER 2016 (FT) EXAMINATION
SCHOOL : BUSINESS AND ECONOMICS
DEPARTMENT : ACCOUNTING, FINANCE AND INVESTMENTS
UNIT CODE : ACCT 219
UNIT TITLE : COST ACCOUNTING
TIME: 2 HOURS
Instructions:
1.
A) Discuss 3 bonus schemes used in accounting for labour (6 marks)
B) Define how costs are classified according to behavior (4 marks)
Company XYZ Ltd. manufactures a product, which passes through three processes. Given below is data relating to the financial process in the month of November:
Shs
Transfer from process 2 10,000 units 300,000
Materials 230,400
Labour 105,600
Overheads 50,400
The normal process loss is estimates at 2%. During the month of November 7,200 units were completed and transferred to finished goods. In addition, 2,000 units remained as work-in-progress whose degree of completion was 60% for materials, labour and overheads. The selling price of normal loss units its estimated at shs.30 per unit.
Required
Calculate the cost of completed units transferred to finished goods.
Calculate the value of work-in-progress at end of November.
Assuming that any units or normal or abnormal loss were sold at a price of SH.30 per unit, show the Abnormal Loss Account, as it would appear after the units are sold. Assume that abnormal loss units are complete in all respects.
(20 Marks)
2.
AC Limited is a small company that undertakes a variety of jobs for its customers.
Budgeted Profit and Loss statement For the year ending 31st December 2003
Shs Shs
Sales 750,000
Costs:
Direct materials 100,000
Direct wages 50,000
Prime cost 150,000
Fixed production overhead 300,000
Production cost 450,000
Selling, distribution and
Administration cost 160,000 610,000
Profit Shs.140,000
Budgeted data:
Labour hours for the year 25,000
Machine hours for the year 15,000
Number of jobs for the year 300
An enquiry has been received and the production department has produced estimates of the prime cost involved and of the hours required to complete job A57.
Shs
Direct materials 250
Direct wages 200
Prime cost Shs.450
Labour hours required 80
Machine hours required 50
You are required to
Calculate by different methods six overhead absorption rates:
Calculate cost estimates for job A57 using in turn each six overhead absorption rates calculated in (a).
(20 marks)
3.
Koriata, a retailer, provides the following data for 2001 and 2002:
December 31, 2001(shs.) December 31, 2002 (shs.)
Cash 200,000 -
Trade accounts receivable 84,000 78,000
Merchandise inventory 150,000 140,000
Accounts payable –merchandise (95,000) (98,000)
Budgeted sales for 2002 are shs. 1,200,000; sales for 2001 were shs. 1,100,000. Cash sales average
20 percent of total sales each year. Cost of goods sold for 2002 is estimated to be shs. 840,000.
Budgeted 2002 variable operating expenses are shs.120,000. They vary in proportion to sales and
are paid 50 % in the year incurred and 50% the following year. Unpaid variable
expenses are not included in accounts payable above.
Fixed operating expenses, including shs.35,000 depreciation and shs.5,000 uncollectible accounts
expense, total shs.100,000 per year. Such expenses involving cash payments are paid 80 % in
the year incurred and 20 % the following year. Unpaid fixed expenses are not included in
accounts payable above.
Required:
Prepare a cash budget for 2002 with supporting computations on cash receipts from credit
sales and cash disbursements for purchases of merchandise and operating expenses. (20 marks)
4(a).
A sales budget for the first five months of 1999 is given for a particular product line
manufactured by Watamu Co. Ltd.:
Sales Budget (in Units):
January 10,800
February 15,600
March 12,200
April 10,400
May 9,800
The inventory of finished products at the end of each month is to be equal to 25%
of the sales estimate for the next month. On January 1st, there were 2,700 units of product on
hand. No work is in process at the end of any month.
Each unit of product requires two types of materials in the following quantities:
Material A: 4 units
Material B: 5 units
Materials equal to one-half of the next month’s requirements are to be on hand at the end
of each month. This requirement was met on January 1, 1999
Required:
Prepare a production and direct materials purchase budget showing the quantities of each type of material to be purchased eachmonth for the first quarter of 1999.
(14 marks)
4(b). Define the following terms:
Sunk costs
Prime costs
Conversion Costs
(6 marks)
5.
Jengo construction company was awarded a small contract on 1 July 2005 at an agreed price of Sh.4,000,000. The contract was expected to be completed by 31 March 2006.
The following expenditure was incurred during the year ended 31 December 2005.
Sh.
Materials delivered to site 1,200,000
Materials sold (Cost Sh.21,000) 13,000
Variable overheads 48,500
Plant delivered to site 400,000
Payment to Sub-contractors 100,000
Wages paid 506,000
Proportion of Head Office costs 60,000
On 31 December 2005 the value of plant was 265,000 and materials remaining at the site was Sh.20,000. The cash received form the client was Sh.2,100,000.
In order to complete the contract on time the following estimates of expenditure were budgeted by the contractor:
Sh.
Additional materials 600,000
Additional wages 380,000
Additional plant 120,000
Head office expenses 15,000
The value of the plant at the end of the contract will be Sh.195,000. a contingency of Sh.55,000 was provided for.
Required
A contract account for the year ended 31 December 2005 showing the amount to be transferred to the profit and loss account (20 marks)
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