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Cost Accounting (Acct 219) 1St Trimester 2014 Question Paper

Cost Accounting (Acct 219) 1St Trimester 2014 

Course:Bachelor Of Business Information Technology

Institution: Kenya Methodist University question papers

Exam Year:2014



COST ACCOUNTING (ACCT 219) 1ST TRIMESTER 2014
KENYA METHODIST UNIVERSITY

END OF 1'ST 'TRIMESTER 2014 (FT) EXAMINATION

SCHOOL : BUSINESS AND ECONOMICS
DEPARTMENT : ACCOUNTING, FINANCE AND INVESTMENT
UNIT CODE : ACCT 219
UNIT TITLE : COST ACCOUNTING

TIME: 2 HOURS
INSTRUCTIONS

Answer question One and two other questions

Question One

A company has two production departments X and Y, and three service departments; stores, maintenance and production and control. The following data is available
Stores Maintenance Production & control X Y Total
Area in square meters 300 40 100 3000 4200 8000
No. of employees 4 12 30 200 300 546
Name of equipment (£ ’000’ - 8 - 20 12 40
Electricity (000 units) - 20 - 320 210 550
No. of extraction points 1 2 - 14 23 40
Indirect material cost (£) 11 25 44 31 63 174
Indirect labor cost (£) 287 671 1660 1040 1805 5463
Other overhead costs for the year are as follows:-

£ £
Rent 800 power 550
Factory administration cost 2184 Heat and light 80
Machine depreciation 440 Fumes extraction plant 120
Machine insurance 40
Required:

Prepare an overhead analysis sheet showing the basis for the apportionments made (10 marks)
Although the profit and loss account is a record of past achievement the calculations required for certain expenses involved for estimates of the future, what is meant by this statement? Provide three examples where estimates of the future are used
(10 marks)
Briefly explain the following terms as used in process costing
Normal loss
(2 marks)
Abnormal loss
(2 Marks)
Joint products
(2 marks)
Explain the main factors that affect the stock levels in an organization of your choice
(4 marks)
Question Two

Tradewinds Company makes a chemical that passes through 3 production phases 1, 2 and 3. In the month of October 5000 litres of a basic raw material priced at sh.120,000 were introduced in process 1, subsequently the following costs were incurred.

Process 1

Direct labor sh.50,000
Direct expenses sh.30,000
At the end of the process 4,500 litres were passed into process 2

Process 2

Direct materials (additional) sh.66,300
Direct labor sh.60,000
Direct expenses sh.24,000
At the end of the process 4,700 litres were passed on to process 3

Process 3

Direct materials (additional) sh.25,680
Direct labor sh.20,000
Direct expenses sh.4,800
At the end of the process 4,680 litres were passed onto the finished goods account

Normal process losses for each of the process were

Process normal loss
1 3%

2 2.5%

3 Nil

The loss in each process resulted from evaporation due to heating hence nothing of value realized from these losses

There was no work in progress

Output from one process directly passes on to the next process

Manufacturing overheads are absorbed by each process at 25% of direct labor cost

Required: prepare

Process 1, 2, 3 accounts
(18 marks)
Abnormal loss or gain accounts
(2 marks)
Question Three

State the rationale for holding stocks
(5 Marks)
Discuss any five factors to consider when determining stock levels
(5 Marks)
The following information is given for a part
SB 25

EOQ = 32,000 units

Maximum usage = 1200 units per day

Minimum usage = 800 units per day

Lead time = 12 -20 days

Required

Reorder level
(4 marks)
Maximum level
(4 marks)
Minimum level
(4 marks)
Average level
(4 marks)
List any four assumptions of the EOQ model
(4 marks)
Question Four

Highlight two advantages using the following inventory valuation methods
FIFO
(2 Marks)
LIFO
(2 marks)
The budgeted production overheads ad other budgeted data of Calculate Ltd are as follows:-
Budget 36,000
Overhead cost for the period 32,000
Direct material costs 40,000
Machine hours 10,000
Direct hours of labor 18,000
Direct labor cost 10,000
Required;

Determine the absorption rates of overheads (10 marks)
Dyer processing company had work in progress at the beginning and end of 2008 as follows
Percentage of materials Completion conversions
Jan 1st 2008 3000 units 40% 10%
Dec 31st 2008 2000 units 80% 40%
The company completed 40,000 units of finished goods during 2008. Manufacturing costs incurred during 2008 were as follows

Materials sh.242,600
Conversion costs sh.445,200
Inventory as at Jan 1st 2008 was carried at a cost of sh.10,600 (materials sh.7000 conversion costs sh.3,600)

Assuming the company employees a weighted average method

Compute equivalent units of production for materials and conversion cost
(6 Marks)
The paper cost of ending goods in process
(10 marks)
Question Five (20 marks)

What is a flexible budget
(5 Marks)
Inspite of rapid expansion and growth the management has the responsibility of cost management to increase the profit
Give any option available for improving a company profits and liquidity without setting external funds (10 marks)
What are the main duties of a budget committee
(5 Marks)






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