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Cost Accounting Y3s1 2010 Question Paper
Cost Accounting Y3s1 2010
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2010
COURSE CODE: ACCT: 314
COURSE TITLE: COST ACCOUNTING
STREAM: Y3S1
DAY: FRIDAY
TIME: 2:00 – 4:00 P.M.
DATE: 19/03/2010
INSTRUCTIONS
1. Answer ANY FOUR questions. Be neat and orderly. Shall all the workings for they shall be
awarded marks. All question carry equal marks.
2. Time allowed TWO hours. Marks shown at the end of each question.
QUESTION 1
Nakuru refineries produce a single product from one of its manufacturing processes. The following
information of process inputs, outputs and work-in-process relates to the most recently completed
period.
- Opening work in process 21,700 units
- Materials input 105 ,600 units
- Output completed 92,400 units
- Closing work in process 28,200
The opening and closing work in process are respectively 50% and 40% complete as to
conversion costs. Losses occur at the beginning of the process and have a scrap value of sh. 4.50
per units. The normal losses are 5% of material inputs. The opening work in process include raw
materials costs of shs.564,200 and conversion costs of sh.305,970. Costs incurred during the
period were;
Materials input costs Sh.2,766,720
Conversion costs Sh.2,261,950
Required:
(i) Prepare a production report for the Department using the weighted average method
(WAM) of valuation. (13 marks)
(ii) Prepare journal entries to record the above information. (6 marks)
(iii) Post the above journals to relevant ledger accounts. (6 marks)
QUESTION 2
Kab University which is trying to estimate its cost function provides you with the following records of
the number of students and the catering costs.
Week ago Number of students (000) Catering cost (000)
1 80,000 656,000
2 86,000 692,000
3 87,000 683,000
4 94,000 698,000
5 95,000 707,000
6 97,000 703,000
7 104,000 712,000
Required:
a) Draw a graph showing the relationship between the number of students and catering costs. Make a brief
content of the chart. (4 marks)
b) Estimate the cost function (y=a+bx)
(i) Two point method. (4 marks)
(ii) Least square method. (9 marks)
c) Comment on the cost model under the least square method. (2 marks)
d) Briefly explain six steps the management of Kab University can use to estimate the cost function.
(6 marks)
QUESTION 3
a) Clearly state the main steps that Unga Ltd a merchandise company should follow in developing a
master budget. (12 marks)
b) State the merit and demerits the management of Unga Ltd is likely to encounter while applying
the participative approach to budgeting. (10 marks)
c) Distinguish between a product cost and a period cost. Give few examples. (3 marks)
QUESTION 4
Nakuru Ltd produces a single product. Variable manufacturing overheads are applied to products
on the basis of direct labour hours. The standard costs for one unit of product are as follows:
Direct materials: 6 ounces at $0.05 per ounce…………………….……………$3.
Direct labour: 1.8 hours at $10 per hour ……………………………..……………$18.
Variable manufacturing overheads: 1.8 hour at $5 per hour………………$9.
During the month of April, 2,000 units were produced. The costs associated with the April’s
operations were as follows:
Materials purchased: 18,000 ounces at $0,60 per ounce.
Materials used in the production 14,000 ounces.
Direct labour: 4,000 hours at $9.75 per hour.
Variable manufacturing overheads costs incurred $20,800.
Required:
a) Compute the budgeted cost of making one of the products. (5 marks)
b) Calculate the following variances:
(i) Direct material variances. (6 marks)
(ii) Direct labour variances. (6 marks)
c) State the labour merits and demerits of Activity Based Budgets (ABB). (8 MKS)
QUESTION 5
Ken Ltd manufactures a line of electric garden tools that are sold in the hardware stores. The
company’s controller has just receive the sales forecast for the coming year for ken’s three
product; weeder, hedge clippers and Leaf blowers. The preliminary budget information is
presented below:
Weeder Hedge clippers Leaf blower
Sales units 50,000 50,000 100,000
Contribution margin per unit Sh. 1,000 Sh.2,000 Sh.1,700
Variable cost per unit
Manufacturing Sh. 1,300 Sh. 1,200 Sh. 2,500
Selling Sh. 500 Sh. 400 Sh. 600
The fixed factory overheads are budgeted at sh. 200 million and the company’s fixed selling and
administration expenses are forecasted to be sh.60 million. The company has an effective tax rate
of 40%.
Required:
a) Determine Ken Ltd’s budget net income. (3mks)
b) Assuming the sales mix remains as budgeted; compute the break-even point both in total and
for each product. (12 mks)
c) Determine the total sales ken ltd must make in order to earn a net income of
Shs.45 million. (5 mks)
d) State any five limitations of the cost volume profit analysis that the controller will face in
evaluating Ken’s company budget. (5 mks)
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