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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:2013
QUESTION ONE (30 MARKS)
a) The Cost Accountant of Jenuna Limited has identified cost drivers and cost entries of company. Using relevant examples, explain the meaning of cost drivers, cost centre and cost unit. (6 marks) b) Outline the application of marginal costing technique. (6 marks) c) Critically evaluate any THREE methods of valuing materials issued from store. (6 marks) d) An employee is compensated on piece rate base. James Karanja completed 1680 units in the month of March 2013. Determine wages payable to him using the following schedule. (6 marks)
No. of Units Rate of wages per unit (Shs.) 1 250 63.20 251 500 64.40 501 1000 65.50 Over 1000 66.00
e) Explain methods of recognizing profits from Construction Projects. (6 marks)
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QUESTION TWO (20 MARKS)
Zament Limited Manufacturing Company is in the process of preparing its budget for the upcoming production period. The following data relates to the company for the year ended 30th November 2011.
Year Month Machine Hours Electricity Expense 2010 December 51.0 960 2011 January 45.0 930 2011 February 51.0 930 2011 March 58.5 885 2011 April 63.0 750 2011 May 48.0 795 2011 June 39.0 750 2011 July 39.0 750 2011 August 46.5 795 2011 September 52.5 825 2011 October 64.5 870 2011 November 72.0 1020
The total annual and monthly expenditure for the year end 30th November 2011 was as follows:
Machine Hours lectrcty xpense hs.’000’ Annual (Total) 630,000 10,260,000 Monthly (Average) 52,500 855,000
Required:
a) Estimate the fixed and valuable element of the electricity expense using: i) The high-low method. (7 marks) ii) The least square regression analysis. (8 marks)
b) Describe factor, that should be taken into account when choosing an order quantity. (5 marks)
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QUESTION THREE (20 MARKS)
The following information has been extracted from the books of Solakos Limited for the year ended 31st March 2012.
Production 30,000 Sales 24,000 Production Cost incurred Direct materials 7,200 Direct Labour 1,800 Variable Overhead 1,500 Fixed Overhead 2,700 Selling and administration overhead Sales Salaries 450 Variable Sales Commission 300 Promotion & Advertising 480 Other fixed cost 720 The Company unit selling price is Shs.550.
Required:
i) Profit and loss statement under direct/marginal costing approach. (7 marks) ii) Profit and loss statement under indirect /absorption costing approach. (7 marks) iii) An explanation of the differences in profit or loss in (i) and (ii) above. (6 marks)
QUESTION FOUR (20 MARKS)
Autotech Enterprises has two production departments namely Bodywork and Repairs. In addition there is an administration department which oversees operation for the whole company. All the three departments share the same premises although the operation areas are clearly distinguished. Given below is the information relating to overhead cost budgets for the company for the financial year 2006.
Power and Lighting 240,000 Depreciation: Premises Plant and Equipment 24,000 12,000 Insurance: Premises Plant & Equipment 30,000 15,000 Rates 4,500 Supervisory salaries: Bodywork Department Repair Department 54,000 45,000 Other office Administrative costs 489,000 913,500
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The management would like to develop overhead absorption rate for the financial year 2007. Given below is information relevant for this purpose.
Bodywork Repair Office Area occupied (m2) 5,000 3,000 2,000 Estimate value of premises (Shs.) 400,000,000 320,000,000 240,000,000 Value of Plant and Equipment (Shs.) 80,000,000 20,000,000 2,008,000 Power Consumption (Kilowatts) 2,500 1,500 1,000 Direct Labour Hours 20,000 20,000 20,000
The policy of the company is to distribute costs on the following basis:
1. Power and Lighting based on power consumption. 2. Insurance Based on estimated value of items. 3. Rate Based on area occupied by the property. 4. Depreciation Based on value of asset at 2.5% per annum for buildings on premises and 10% per annum for plant and equipment. 5. Office Administration cost Total office administration costs are to be apportioned to the two departments equally.
Required:
a) A schedule showing the apportionment of the above costs among the three departments including the re-apportionment of the total office cost. (7 marks) b) Overhead absorption rate for the bodywork and the repair department. Use labour hours as the absorption basis. (6 marks) c) The price to be charged for Job Q50 assuming a profit mark up of 50% is considered appropriate given that job Q50 incurred the following amount in the two departments.
Bodywork Repair Materials (Shs.) 1,200,000 800,000 Labour cost (Shs.) 450,000 300,000 Labour Hours 10 6 2,500 1,500 20,000 20,000 (7 marks)
QUESTION FIVE (20 MARKS)
Free area product limited who are manufacturers and retailers produce A, B and C employs 120 direct workers who work group bonus scheme. The company engages three grade workers who are paid a bonus of the excess of time allowed over time taken. The bonus paid is 80% of the workers base rate and is shared by workers in proportion to the time spent on its
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work. The following production debt has been extracted from the company record for approval.
Product Unit produced Time allowed per unit A 640 63 B 1,280 120 C 2,400 100
Grade of workers
No. of direct workers
Base rate per hour
Hours worked per week 1 40 300 30 2 16 270 64 3 64 240 50
Required:
a) Percentage of hours served to hours taken. (5 marks) b) Bonus due to the group. (5 marks) c) Gross earning due to the group. (5 marks) d) Explain the objective of budgetary control. (5 marks)
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