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Cost Accounting (Acct 219) 2Nd Trimester 2014 Question Paper
Cost Accounting (Acct 219) 2Nd Trimester 2014
Course:Bachelor Of Business Information Technology
Institution: Kenya Methodist University question papers
Exam Year:2014
COST ACCOUNTING (ACCT 219) 2nd trimester 2014
KENYA METHODIST UNIVERSITY
END OF 2ND TRIMESTER 2014 (PT) 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 any other TWO Questions
Question One
Assume that the beginning work in progress in Maendeleo company ltd in the month of November was 1.000 units which were 100% complete in terms of materials and 75% complete as to conversion. Raw materials costs relating to beginning work in progress amounted to shs. 3000 and conversion was 1000. 10,000 units were completed during the period and transferred to finished goods stock a/c 2000 units were still in process and were 100% complete in relation to materials shs. 33,000 conversion shs. 43,000.
Required:
Use both weighted average and FIFO methods to determine cost per equivalent unit and value of ending inventory. Prepare the process cost report.
(8marks)
Distinguish between classification of costs by traceability and time.
(4marks)
AC limited is a small company that under takes a variety of jobs for its customers
Budgeted profit and lost statement for the year ending 31st December 2003.
Shs. Shs.
Costs: 750,000
Direct materials 100,000
Direct wages 50,000
Prime cost 150,000
Fixed production overhead 300,000
Product cost 450,000
Selling, distribution and
Administration cost 160,000 610,000
Shs. 140,000
Budgeted data:
Labour hours for the year 25,000
Machine hours for the year 15,000
Number of jobs for the year 300
An enquiry has been received and the production department has produced estimates of the prime cost involved and of the hours required to complete job A57.
Shs.
Direct materials 250
Direct wages 200
Prime cost shs. 450
Labour hours required 80
Machine hours required 50
You are required to:
Calculate by different methods six overheads absorption rates.
(12marks)
Calculate cost estimates for job A57 using in turn each six overhead absorption rates calculated in a).
(8marks)
Question Two
A manufacturing company produces two products namely Q & P. Two types of material x and y are used in manufacture of these products. The following information is provided by the company for the year 2012.
Budgeted sales
Product Quantity price
Q 18,000 65
P 20,000 80
b) Materials used
Material X Y
Unit cost shs. 6 shs. 3
Quantity used
Q 3 6
P 5 4
There were the following stocks
Product Opening Closing
Q 3000 1500
P 2000 2500
Material
X 5000 6000
Y 2000 3000 (20marks)
Required:
Sales budget
Production budget
Material usage in quantities budget
Materials purchases in quantity and value.
Question Three
XYZ limited has been awarded a contract to build a house. This is a contract No. 45 for the company and the contract price is shs. 2.65 million. At the end of the company`s financial year the contract was 85% complete and hence regarded as being near completion. You are also provided with the following information about the contract:
Particulars shs.
Materials purchased and delivered 580,000
Materials issued from store 60,000
Materials returned to store 7,000
Site expenses 200,000
Plant sent to site 100,000
Architect`s fees 30,000
Plant returned from site 10,000
Subcontractor`s fee 105,000
Head office overheads absorbed 60,000
Additional information:
1. The portion of the work which was completed during the year and certified by the architect was assessed as representing 75% of the whole contract price. The contractee payments to this extent less 10% retention money
2. The management of the company decided for the purpose of preparing the company`s annual accounts to make a provision of a third of the national profit against the possibility of defects and other contingencies arising later in respect of the work already certified for payment.
Required:
Prepare the contract account
Amount of profit or loss to be taken to the main profit and loss account of the company
Value of work in progress.
(20marks)
Question Four
A company uses a budgeted overhead rate in apply overheads to production orders on a labour costs basis for department A and on machine hours basis for department B. At the beginning of the year, the company made the following productions.
Dept. A Dept. B
Budgeted factory overhead 72,000 75,000
Budgeted direct labour cost 8,400 17,500
Budgeted machine hours 500 10,000
During the month of January the cost for the job order no. 105 which was processed through department showed the following:
1 Dept. A Dept. B
Materials issued shs. 30 45
Direct labour cost shs. 36 25
Machine hours 6 hrs. 15 hrs.
Calculate:
The pre-determined overhead rate for each.
(6marks)
Assuming that job no. 105 had 30 units of the product was used what was the total cost for the job.
(6marks)
Distinguish the following cost classifications:
Classification by behavior
Classification by function
Classification by traceability
Classification by time.
(8marks)
Question Five
A retail company has been viewing the adequacy of its stick control system and has identified three products for investigation. Relevant details for the three products are set out below:
ITEM CODE EOQ Stock ware house and stores Weekly sales (shs.000) Gross margin (see note 1)
(000 units) (000 units) Shs/unit at cost minimum Normal maximum % of sales
14/36
3
11/175
14/24
3 25
500
250
325
422.7
190 2.25
0.36
0.87 26
130
60 28
143
96 30
160
128 42
46
37
Note 1
Gross margin – sales – purchase cost of product
Outstanding order: item code 14/243- order for 250,000 units placed 2 trading days ago.
There are 6 trading days per week.
All orders are delivered by suppliers into the retailers central warehouse. The lead time is one week from the placement of order. A further week is required by the retailer in order to transfer stock from central ware house to stores both of these lead times can be relied upon.
Required:
Calculate for each product
The minimum and maximum weekly sales units
The stock re-order level
The maximum stock control level.
(15marks)
Comment upon the adequacy of the existing stock control of the three products.
(5mark
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