Advanced Cost Accounting Question Paper
Advanced Cost Accounting
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
THIRD YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE
CAA 305-A: ADVANCED COST ACCOUNTING (SATURDAY)
DATE: AUGUST 2010 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
a) What is a flexible budget? Explain the purposes of a flexible budget in cost accounting (6 Marks)
b) Discuss any four standards of ethics to cost and management accountants (8 Marks)
c) What is the role of a cost accountant in the organizational structure? (5 Marks)
d) Distinguish between under applied overheads and over applied overheads. Explain the approaches
available to an organization for disposing overheads in financial reporting (6 Marks)
QUESTION TWO
a) A manufacturing enterprise started a Job 219 and completed it on July 12, 2010. The job cost sheet
indicates that 128 direct labour hours were spent on Job 219 in the cutting department and 162
hours were spent on it in the finishing department. If the manufacturing overhead rates are Ksh.
1.52 per direct labour hour for the cutting department and 1.87 per direct labour hour for the
finishing department, how much overhead should be added to the job cost sheet for Job 219?
(5 Marks)
b) Determine the adjusted amount of cost of goods manufactured to be shown on the income statement
of the Amberson Company from the following data:
2
Ksh.
Finished goods, July 1, 2010 152,820
Finished goods, July 31, 2010 168,290
Cost of goods manufactured 379,340
Over or under applied manufacturing overhead 1,630 DR balance (5 Marks)
c) Miller corporation manufactures industrial springs and coils that are sold to other companies for
assembling into machinery. The following costs were incurred during the month of February 2010.
i) Raw materials purchased: Ksh 182,640
ii) Raw materials used: Direct materials, Ksh. 120,290; Indirect materials, Ksh. 24,630
iii) Factory wages earned: Ksh. 92,740
iv) Factory wages allocated: Direct labour, Ksh. 77,820; Indirect labour, Ksh.14,920
v) Voucher recorded for manufacturing overhead costs incurred: Ksh. 22,800
vi) Depreciation on factory building: Ksh. 30,490
vii) Depreciation on factory equipment: Ksh. 7,480
viii) Manufacturing overhead costs applied to jobs worked on: Ksh. 79,423
ix) Finished goods transferred to warehouse: Ksh. 281,460
x) Finished goods sold and shipped to customers: Ksh. 198,150 (cost)
xi) Finished goods sold and billed to customers: Ksh. 297,225 (selling price)
Required:
Prepare the general journal entries to record the above transactions/events (11 Marks)
d) Distinguish between a job order and a process costing system (4 Marks)
QUESTION THREE
a) Hainey’s Dry Mix company produces a single product. All materials are added at the beginning
of production. On January 1, 2009, 10,000 pounds of the product were in process in the
Refining Department, the first department. During the month, 75,000 pounds were placed into
production and 73,000 pounds were transferred out to the Toning Department, the second
department. On January 31, 12,000 pounds were still in process in the Refining department.
The ending inventory is estimated to be complete as to materials and two-thirds (2/3) complete
as to labour and overhead. Cost data for the month of January are shown below:
3
Materials Labour Overheads
Ksh Ksh Ksh
Beginning work in process inventory 32,000 12,760 7,200
Added during January 308,000 133,040 67,320
Required:
i) Determine the equivalent units of production for the month (6 Marks)
ii) Prepare a cost of production report for the Refining Department for the month
(10 Marks)
iii) Show the value of ending work –in-process inventory (4 Marks)
b) Explain the net realizable value method of cost assignment. What would you consider as the
limitation of this approach as a cost assignment method? (5 Marks)
QUESTION FOUR
a) Discuss some common causes of normal lost units in production. How are manufacturing costs
related to normal spoilage or normal lost units accounted for? (7 Marks)
b) As the cost accountant of Duluth Production Company, you have been asked by your employer
to explain why the unit cost of materials increases dramatically in the winter. You have
discovered that some of the materials are affected by extremely cold weather and as a result
become unusable during the manufacturing process. Your employer asks you whether you
should treat this as loss as a normal loss or an abnormal loss and how the problem affects cost
per unit manufactured. Provide a brief answer (5 Marks)
c) Briefly, discuss the five methods of analyzing cost behavior in cost foresting (10 Marks)
d) Explain zero based budgeting (3 Marks)
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