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Acct 314: Cost Accounting 2010/2011 Question Paper
Acct 314: Cost Accounting 2010/2011
Course:Bachelor Of Commerce
Institution: Kabarak University question papers
Exam Year:2010
KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2010/2011 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF COMMERCE
COURSE CODE: ACCT 314
COURSE TITLE: COST ACCOUNTING
STREAM: Y3S1
INSTRUCTIONS:
1. Answer question ONE and any other THREE questions.
2. Be neat and orderly.
3. Show all the workings.
4. Where appropriate give your answer to two decimal places.
QUESTION ONE (COMPULSORY)
Assume Kepa ltd uses two processes that is forming in department A and finishing in
department B. Direct materials are introduced at the beginning of the process at
department A and additional direct materials are added at the beginning of the process in
department B.
Conversion costs are applied evenly throughout both processes. As goods are completed
in process A, they are transferred to process B and when complete in process B, they are
transferred to the finished goods inventory.
Data for department ‘A’ for the recently completed period is given below:
• Opening work in process (40 % complete) 20 000 units. This opening working in
process consists of direct materials costing Ksh.8, 000 and conversion costs of
Ksh.10, 220.
• Units completed and transferred out 90, 000 units.
• Units started during the period 80 000 units.
• Ending work in process (50 % complete) 4 000 units.
• A normal loss of 10% of production was anticipated and the spoiled units realized
Sh.4 each.
Costs incurred during the current period were: material inputs Ksh.44 000, direct labour
Ksh.12 000 and fixed overheads Ksh.24 000.
Required
(a) Prepare the production report for department (A) under the weighted average method
of valuation (WAM). (13mks)
(b) Prepare journal entries for the above information (6mks)
(c) Prepare relevant ledger accounts for the situation in (b) above. (6mks)
QUESTION TWO
Pake ltd which is trying to estimate its cost function provides you with the following
records of production costs and machine hours for twelve months:
Months Machine hours
[000s]
production costs
[Ksh. 000s]
1 34 595
2 44 605
3 31 502
4 36 458
5 30 385
6 48 728
Required:
a) Estimate the cost function (y=a + bx) under Least square method (10mks)
b) Estimate the cost function (y=a + bx) under High-low method (6mks)
c) Briefly explain six steps of developing the cost model (9mks)
QUESTION THREE:
Super Ltd manufactures and sells two products namely: TVS and Radios. The manager
who is trying to estimate the company’s break-even points for the next month presents
you with the following forecast concerning the unit selling prices , sales mix and variable
costs per unit for the two products as follows;
Products TVS Radios
Unit variable cost Sh.120 Sh.70
Sales units 600 400
Unit selling price Sh. 200 Sh100
The fixed production costs are budgeted at ksh. 75, 000 and the company’s fixed selling
and administration expenses are forecasted to be Sh.25, 000. The company has an
effective tax rate of 20%.
Required:
(a) Determine Super’s budgeted net income. (4mks).
(b) Determine total break even points in: (i) units (ii) shillings (8mks)
(c) Calculate Break-even points in (i) units (ii) shillings for each product. (8mks)
(d) Determine the total sales the manager must make in order to earn a net income of
sh.80, 000 for the next month. (5mks)
QUESTION FOUR:
(a) Discuss the suitability, merits and demerits of imposed budget. (10mks)
(b) Briefly explain any five classification of cost. (15mks)
QUESTION FIVE
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 $0.50 per ounce.
Direct labour: 1.8 hours at $10 per hour
Variable manufacturing overheads: 1.8 hours at $5 per hour.
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 unit of the product. (5mks)
(b) Calculate the following variances:
i ). Direct material variances. (6mks)
ii ). Direct labour variances. (6mks)
(c) Citing suitable examples, discuss the main steps that the management of Kabarak
should follow in applying activity based costing (ABC) approach in determining the
fees per student. (8mks)
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