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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
QUESTIONONE (25 MARKS)
a. Explain the term budgetary control and state its importance to a business firm. (2 Marks) b. State and briefly the limitations of budgets I tem management of business firms. (3 Marks) c. LATEX Ltd are retailers who sell ceramic tiles. During the months of Jan to March 2012, there were price fluctuations. Due to the above problem the company had to adjust its selling prices. The following transactions took place during the period: 3 JAN opening stock was 5,000 tiles valued at sh. 825,000. 10 JAN orders placed with the company increased, so extra tiles had to be obtained from Mombasa. Therefore 22,000 tiles were purchased at a cost sh. 140 each but in addition; there was a freight and insurance charge of sh. 5 per tile. 31 JAN during the month 20,000 tiles were sold at a price of sh. 220 each. 4 FEB a new batch of 14,000 tiles was purchased at a cost of sh. 175 per tile. 28 FEB the sales for the month of August were 14,000 tiles at a selling rice of sh. 230 each. 1 MARCH a further 24,000 tiles were purchased at a cost of sh. 195 each. 30 MARCH 270,000 tiles were sold during September at price of sh. 240 each. The cost accountant of LATEX Ltd decided he would apply first –in –first-out basis and weighted average methods of material pricing for purposes of comparison. Required: i. A stores ledger card using the two methods and showing stock values at 30 March 2012. (4 Marks)
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ii. The trading accounts using each of the above methods. (6 Marks)
QUESTION TWO (10 MARKS)
a. Describe the duties of a cost accountant in an organization. (1 Mark) b. Differentiate the following terminologies as used in cost accounting (1 Mark) i. Relevant costs and irrelevant costs (1 Mark) ii. Cost center and cost unit (1 Mark) iii. Semi-fixed and semi variable costs (1 Mark) iv. Sunk costs and product costs (1 Mark) c. State and briefly explain three bases of cost classification. (5 Marks)
QUESTION THREE (10 MARKS)
Bidko Ltd produces a detergent which passes through two processes namely mixing and refining completion. The following data relate to the refining process for the month of October 2012:
Opening stock 5,000 units
Cost of opening stocks
Sh.
Materials 100,000
Labour 25,000
Overheads 60,000
Total cost 185,000
During the month, 20000 units were passed from the mixing to the refining process. Costs incurred during the month were:
Sh.
Labour 125,000
Overheads 108,100
Other materials 45,300
Total cost 278,400
At the end of the month, 21,000 units had been completed and passed to finished goods while 4,000 units were still in the process having reached the following stages:
Materials 100%
Labour 80%
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Overheads 60%
Required:
Process account.
QUESTION FOUR (10 MARKS)
a. Laply Ltd has three production departments and two service departments. The following is their budgeted factory overheads for the year ended 30 September 2012. Sh. Sh. Production departments X 240,000 Y 180,000 Z 220,000 640,000 Service departments A 86,000 B 44,000 130,000 770,000 The service department costs are to be re-apportioned as per the following percentages: X Y Z A B A 20 30 35 - 15 B 30 30 30 10 - Required: a. Re-apportion the service departments costs to the production departments using the simultaneous equation method. (4 Marks) b. You are informed that the overheads are absorbed on the basis of the direct labour hours and the budgeted direct labour hours for the departments as given below:
Department X 100 hours
Y 2500 hours
Z 4000 hours
Required:
Determine the overhead absorption rates per hour for the three production departments. (6 Marks)
QUESTION FIVE (15 MARKS)
a. Explain the reasons why construction companies find it prudent to declare profits on uncompleted contracts. (2 Marks) b. On 4 May 2012, HYOUNG Construction Company was contracted by Ministry of Road. To construct a road n Nairobi at a contract price of sh. 950,000,000. Work commenced on the contract on 28 July 2011. Retention money was agreed at 10%
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of work certified. At the end of the first year, no profits were declared as the contract was considered to be in its infancy. The following details relate to the contract for the year ended 31 December 2012. Sh. Balances brought forward 1.1.2012 Materials on site 4,500 Accrued wages 1,250 Plant (cost) 150,000 Cost of work done 158,000 Work certified to 31 December 2011 160,000 Transactions during the year: Materials delivered to site: Ex-stores 14,600 By suppliers 128,400 Additional plant (cost) 120,000 Subcontractors fees 18,450 Consultancy fee 28,000 Inspection fee 500 Salaries and wages 160,000 Head office expenses 1,200 Material transfers out 15,000 Materials sales (cost sh. 19, 8000) 22 Plant hire 250 Direct expenses 2,600 Total cash received from contractee 580,000 Work certified during the year 660,000 Cost of work uncertified 42,000 Balances carried forward: Materials on site 51,000 Wages accrued 2,800 Plants have been purchased for use on this contract. Hyoung Construction Company provides for depreciation on plant at 12 ½% per annum on costs. Required: i. Contract account for the year to 31 December 2012, clearly showing the profits/losses) on contract for the year. (6 Marks) ii. Valuation of work –in –progress (3 Marks) iii. Account of ministry of road (4 Marks)
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