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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:2012
QUESTION ONE (30 MARKS)
a) Distinguish between the following terminologies as used in cost Accounting: (i) Committed fixed costs and discretionary fixed costs (3 Marks) (ii) Period costs and product costs. (3 Marks) (iii) Job costing and process costing (3 Marks) (iv) Cost allocation and cost apportionment (3 Marks) (v) Joint products and by products (3 Marks) b) The following relates to Kenya Ltd for the year ended 31 December 2010. Sales 24,000 Less total costs 20,000 Net profit 4,000 Fixed costs accounts for 40% of total of total costs. Required: (i) Margin of safety (2 Marks) (ii) Break-even point in sales (2 Marks) (iii) Sales required to earn profit of Sh.6,000,000. (2 Marks) (iv) In order to increase sales, the management has the following options. 1. To increase sales by 25% on incurring a sales promotion cost of Sh2,500,000. 2. To increase sales by 15% on reducing selling price by 5%. Advise the management on which option to take. (4 Marks) c) Distinguish between Cost Accounting and Financial Accounting (5 Marks)
QUESTION TWO (20MARKS)
a) Variable costing is very important as a management aid in decision making: Briefly explain the four important decisions made using variable costing. (8 Marks) b) ORACS Ltd manufactures and markets a slimming agent which they sell for sh200 per bottle. Current output is 4,000,000 bottles per month which represents 80% of the capacity. They have the opportunity to utilize their surplus capacity by selling their product at sh130 per bottle to a retailer who will sell it at own lebel product. The total costs for the last month were sh4,600,000 of which sh1,400,000 were fixed costs. This order? (8 Marks) c) From the situation in (b) above, what other factors which need to be considered before a final decision is made? (4 Marks)
QUESTION THREE (20 MARKS)
a) Briefly differentiate between Batch costing and contract costing (2 Marks) b) An architect assesses the value of work done to be sh300,000,000. The client has already paid sh190,000,000 and the agreed retention percentage is 15%. What is the amount of the current progress payment? (3 Marks) c) Montesuper Developments has three contracts in progress and their details are as follows: Contract MS1 MS2 MS3 Sh,’000’ sh,’000’ sh,’000’ Contract price 250,000 370,000 200,000 Cost to date 45,000 154,000 160,000 Estimated cost to complete 90,000 100,000 10,000 Value of work certified 60,000 140,000 190,000 Progress payments received 40,000 130,000 150,000 Cost of work certified 38,000 128,000 156,000
Required: Interim profits if any should be taken on the three contracts. (No profits have been taken so far) (15 Marks)
QUESTION FOUR (20 MARKS)
a) Distinguish between fixed budget and flexible budget (2 Marks) b) which costs Sh136 per kilogramme and direct labour which costs Sh600 per hour. raw material, 15 minutes of direct Additional information 1. The company is in the process of preparing budgets for the financial year ending 30 June 2011. 2. The fixed production overheads for the year ending 30 June 2011 are estimated as follows: Shs. Depreciation of plant and machinery 1,500,000 Insurance 600,000 Supervision 2,100,000 Other fixed overhead(non-production) are estimated as follows: Shs. Depreciation of office equipment 900,000 Advertising 600,000 Salaries 6,480,000 3. Allocated selling and administration expenses for the year ending 30 June 2011 are estim 4. The budgeted opening and closing inventories of raw material and finished 1 July2010 30 June 2011 Raw material 15,000kg 3,000 kg Finished goods 1,500 units 7,500 units 5. 2011. Required: Prepare the following budgets for the year ending 30 June 2011. (i) Sales budget (in shillings) (2 Marks) (ii) Production budget (in units) (3 Marks) (iii)Direct materials budget(in shillings) (3 Marks) (iv) Direct labour budget (in shillings) (3 Marks) (v) Manufacturing overhead budget (in shillings) (3 Marks) c) Outline the benefits that a firm derives from budgeting (4 Marks)
QUESTION FIVE (30 MARKS)
a) The information given below relates to X Ltd which manufactures a single type of chemical. Overhead processing costs for the last thirteen months has been shown below. Period overhead cost Output es 1 770 120 2. 820 150 3 810 160 4 830 170 5 960 210 6 900 170 7 940 200 8 950 200 9 940 180 10 870 160 11 800 140 12 820 150 13 790 140
Required: (i) Use high-low method to estimate the cost function (4 Marks) (ii) Use regression analysis method to estimate the cost function (14 Marks) (iii) Why would you prefer regression analysis to high-cost method in cost estimation (2 Marks)
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