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Cost Accounting Ii Question Paper

Cost Accounting Ii 

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009



KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING

EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

BAC 404: COST ACCOUNTING II

DATE: MONDAY 10TH AUGUST 2009
TIME: 2.00 P.M. – 4.00 P.M.

INSTRUCTIONS:
• Answer ALL Questions.
• Show ALL your workings


QUESTION ONE

The national Avionics has just completed the assembly of 50 geographical balloons made for
the geodetic survey specially equipped to measure atmosphere weather conditions in the
Mora region. The company is now being asked to submit an estimate on costs for an
additional 40 units. Its management has noted that the direct labour hours on each unit seem
to be declining. For the first 20 units produced the average hours per unit were 420. for the
assembly of 50 units, however the average hours per unit dropped to 325.

Required
a)
Estimate the parameters of National Avionics learning curve for assembly of
geographical
ballons.
(8
marks)
b)
Calculate the total hours required to assemble 90 units.

(3 marks)
c)
Suppose incremental costs (labour plus unreliable overhead costs) are kshs 12 per

direct labour hour. What would be the incremental assembly cost for a new order.










(4 marks)
Page 1 of 5
d)
National Avionics wins its order for the next 40 units and in addition produces

another 10 balloon for another customer. Its cumulative experience with producing

these 100 balloons shows 28,000 total direct labour hours. Is this consistent with the
learning
curve
you
estimated.
(5
marks)

QUESTION TWO
A company manufactures a product where process costing is followed and work in progress
inventory at the end of the period are valued on FIFO basis. At the beginning of one period,
the inventory of work in progress showed 400 untis, 40% complete and valued as follows:





Kshs
Material 3,600
Labour
3,400
Overheads
1,000

In the period, materials were purchased for Kshs. 75,000. Wages and overheads in the period
totaled kshs. 79,800 and Kshs. 21,280 respectively. Actual issue of materials to production
was Kshs. 68,500. Finished stock in inventory account was 2500 units. At the end of the
process some 500 units were not fully processed but had reached the level of completeness as
follows:
Materials

- 80%
Labour
and
overheads
- 60%

Required
Prepare the process cost report for the period, showing the apportionment of cost to finished
goods
and
work
in
progress.
(20
marks)

QUESTION THREE
a)
State and explain the reasons as to why profit or loss between cost and financial

records may differ in an interlocking cost accounting system.
(3 marks)
Page 2 of 5
b)
The cost books of Kakamega Ltd reported the profits for the year ended 30/9/2008

as kshs. 1,209,750. The financial books of the company disclosed the following

position for period ended on the same date.



Manufacturing Account for the year ending 30/9/2008



Kshs
Kshs




Kshs
Raw materials:




Transfer to Finished
Opening Stock
47,500


Stock Account
2,785,000
Purchases 1,372,500

1,420,000
Less closing stock
(45,000)
1,375,000
Direct labour



887,500
Factory overhead



535,000
2,797,500
Work in progress
Opening

210,000
Closing (222,500)

(12,100)


________





2,785,000

2,785,000

Finished Stock Account




Kshs





Kshs
Opening
Stock
290,000 cost of Sales transferred
Transfer
from
manufacturing
to
trading
A/C
2,767,500
Account 2,785,000
closing stock


307,500
3,075,000
3,075,000






Page 3 of 5

Trading,
profit
and
Loss
Account

for
the
year
ended
30/9/2008





Kshs

Kshs
Sales

4,612,500
Less
cost
of
sales
(2,767,500)
Gross
profit

1,845,000
Discount received




45,150
Bank interest received



925
Dividends received



7,500


1,898,575

Less Expenses
Administration expenses

390,000
Distribution
expenses
254,550
Discount allowed


37,775
Debenture
interest


21,250
Fines


12,500
Losses of Non trading nature
8,750
(724,825)
Net
profit
1,173,750)


Additional information
i)
The valuation in the cost books were AS FOLLOWS

Opening
Balance
Closing

Balance




Kshs

Kshs.
Raw materials

49,225

46,250
Work in progress
207,000

218,250
Finished
stock
284,900 320,250

Page 4 of 5
i)
Depreciation amounting to Kshs 153,650 was charged in the cost books, whereas
factory overhead in the financial books included 146,825 for this expense
heading.
ii)
The profit shown in the cost books has been arrived at after charging notional
rent of the 37,500 and interest on capital of Kshs. 75, 000.

Required
Prepare a Memorandum reconciliation account for the year ending 30/9/2008.











(12 marks)






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