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Hbc2117:Cost Accounting Question Paper
Hbc2117:Cost Accounting
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2014
QUESITON ONE – (30 MARKS)
(a) State the objectives of budgetary planning and control systems. (5 Marks) (b) Identify the limitations of using budgeting systems to regulate business activities. (5 Marks) (c) The following information relates to idem P003 stocked by 2000 products Ltd for the month of April 2000:
Date Receipts Units Issues units Unit cost (Sh). April 3 2,400 18 4 3,200 6 2,600 20 12 2,700 14 3,000 22 18 2,800 21 20 2,200 22 2,600 23 25 3,800 26 3,100 24 27 2,500 25 28 3,200 26 29 6,900
2
The closing balance for March 2000 was a batch of 3,000 units received at a unit price of Sh.19.
Required: (a) Stores perpetual inventory record for item P003 for May 2000 under LIFO system of stores issues. (14 Marks) (b) Closing stock valuation. (6 Marks)
QUESTION TWO – (20 MARKS)
(a) Explain the advantages of centralized system of maintaining stores. (6 Marks) (b) Explain the assumptions behind the determination of Economic Order Quantity (EOQ). (6 Marks) (c) The following information is given for material Y-20 Consumption: Annual 360,000 units Maximum 1,200 units/day Minimum 800 units/day Normal 900 units/day Re-order period 12 – 24 days Re-order quantity 32,00 units
Required: (i) Re-order level (3 Marks) (ii) Minimum stock level (3 Marks) (iii) Maximum stock level (3 Marks)
QUESTION THREE – (20 MARKS)
(a) Define marginal costing and give its limitations. (6 Marks) (b) The following data relate to Kenya Ltd. for the year ended 31 December 1999. Sh. ‘000’ Sales 24,000 Less: Total costs 20,000 Net profit 4,000
Fixed costs account for 40% of the total costs.
Required: (i) Margin of safety. (2 Marks)
3
(ii) Break-even point in sales (2 Marks) (iii) Sales required to earn profit of Shs.6,000,000 (2 Marks) (iv) In order to increase sales, the management has the following two options; 1. To increase sales by 25% on incurring a sales promotion cost of Sh.2,500,000 2. To increase sales by 15% on reducing selling price by 5%.
Advise the management on which option they should take. (8 Marks)
QUESTION FOUR – (20 MARKS)
(a) Explain the advantages and disadvantages of the high-low method of cost estimation. (6 Marks) (b) Central Machinery Ltd. is preparing its budget for the year ending 30 June 2004. For the fuel expenses consumption it is decided to estimate an equation of the form, ?? = ?? + ????, where y is the total expense at an activity level x, a is the fixed expense and b is the rate of variable cost. Month Machine hours Fuel oil expense Month Machine hours Fuel oil expense
2003 (Sh. ‘000’) Sh. ‘000’) 2004 (Sh. ‘000’) Sh. ‘000’)
July 34 640 January 26 500
August 30 620 February 26 500
September 34 620 March 31 530
October 39 590 April 35 550
November 42 500 May 43 580
December 32 530 June 48 680
The annual total and monthly average figures for the year ended 30 June 2003 were as follows:
Machine hours Fuel oil expense
Annual total 420 6,840
Monthly average 35 570
4
Required: (i) Using the high-low method, estimate and interpret the fixed and variable cost elements of the fuel oil expense. (6 Marks) (ii) Using the results in (i) above, predict the fuel oil expense for November 2004 if experience indicates that 41,000 machine hours will be used. (2 Marks) (iii) Briefly explain the main uses of marginal costing in an organization. (6 Marks)
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