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Acct 314: Cost Accounting Question Paper
Acct 314: Cost Accounting
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2009
COURSE CODE: ACCT 314
COURSE TITLE: COST ACCOUNTING
STREAM: Y3S1
DAY: FRIDAY
TIME: 2.00 – 4.00 P.M.
DATE: 20/03/2009
INSTRUCTIONS:
Answer any FOUR questions.
QUESTION ONE
a) Define cost accounting and give 3 uses of cost accounting (9mks)
b) Define the following terms
i) Cost units (2mks)
ii) Cost centre (2mks)
iii) Cost accumulation (2mks)
c) The following information relates to factory with 4 departments. Department D is
a service department.
Overheads costs Shs.
Rent 80,000
Repairs to plant 50,000
Depreciation of plant 40,000
Light and heat 20,000
Supervision 60,000
Repairs to buildings 30,000
Basis of apportionment information
A B C D
Area (sq metres) 1,500 1,200 800 500
Number of employees 35 25 25 15
Value of plant Shs. 500,000 300,000 200,000 -
Required:
To prepare overhead analysis sheet (10mks)
QUESTION TWO
The following shows the material movements of item A001 in Andy Ltd during
December 2007.
Date Purchases Price Issues
Dec 1 400 25
“ 5 200 15
“ 7 400
“ 9 10
“ 12 300 16
“ 14 100
“ 15 75
“ 24 400 16
“ 26 365
Required:
To prepare stores ledger card showing the prices at which issues are charged out
using weighted average method. (12mks)
b) Baringo construction company won a contract to construct Mgotio village
polytechnic at a cost of Ksh.120 million. The company’s financial year ends on
31 March 2008.
The following data relate to the contract.
Shs.000
Material issued to site 21,500
Labour cost engaged 3,600
Plant purchased and installed 18,000
Direct expenditure 4,800
General management charges 1,750
Materials returned to store 2,500
Work certified 85,000
Wages accrued 31.03.2008 300
Value of plant 31.03.2008 12,000
Cost of work not certified 7,000
The company had received from the college progress payments amounting to Shs.
60 million and contract is considered to be at its maturity stage.
Required:
i) To prepare contract account showing the profit taken to profit and loss
account.
ii) Prepares contractees account. (13mks)
QUESTION THREE
a) State five assumptions of the basic economic order quantity model. Present the
model graphically. (10mks)
b) A company uses a special component in the manufacture of its products which it
orders from outside supplier. Appropriate data is as follows;
Annual demand 2000 units
Ordering cost Shs.20
Carrying cost 20% of the item price
Basic item price Shs.10 per unit. The supplier offer the following discount terms on the basic price.
Range discount.
400 – 799 2%
800 – 1599 4%
1600 and over 5%
Required:
To determine the optimal order quantity (15mks)
QUESTION FOUR
a) The manufucture of product ‘ghee’ requires 3 distinct processes 1 – 3. On
completion in process 3 the product is passed to finished goods stock account at
cost. During the month of July 2007, 3000 units of input materials (raw
materials) at Shs.25 per unit were introduced to process I and costs accumulated
to the process and process I output transferred to process II at Shs.52.6. There
was no process loss or gain. The following is the costs incurred for process 2 and
3.
Elements of cost Process cost (Shs.)
2 3
Direct material 12,000 18,000
Direct labour 20,000 10,000
Direct expenses 2,800 2,000
Production overheads 30,000 15,000
Production overheads was absorbed into process at 150% of direct labour. There
was no stock of raw materials or work in progress at the beginning of the period.
Required:
To prepare process 2 and process 3 account (12mks)
b) Briefly explain the meaning and cost accounting treatment of the following.
i) Normal loss (3mks)
ii) Abnormal loss (3mks)
iii) Scrap (2mks)
QUESTION FIVE
a) Define cost accounting techniques and name four common techniques used by
management accountant. (10mks)
b) Sweets manufacturers produce sweets for sale in local market. During the year
2007, 90,000 cartons were produced and sold. The following information relate
to costs incurred.
Direct material Shs. 3,200,000
Direct labour Shs. 1,480,000
Production overheads:
Variable (40%) 320,000
Fixed (60%) 480,000
Selling and distribution overheads:
Variable 900,000
Fixed 300,000
The selling price per carton is Shs.80
Required:
i) To prepare profit and loss statement using marginal cost concepts.
(8mks)
ii) Calculate break even point in units. (2mks)
iii) Calculate the C/S ratio of the product and determine the sales value
required to make a profit of Shs.40,000. (5mks)
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