- PQR limited is a manufacturer of sports shoes. The company uses a standard system. The standard
cost per pair of spots shoes is as follows:(Solved)
PQR limited is a manufacturer of sports shoes. The company uses a standard system. The standard
cost per pair of spots shoes is as follows:
Additional information
1. During the month of March 2011, production was 10,000 units as planned but he sales made
were 8,000 units
2. The total fixed production overhead variance during the month was sh. 100,000 adverse
3. The standard fixed production overhead absorption rate was based on a budgeted activity of
10,00 units
4. There was no opening stock at the beginning of the month
5. All units were sold at the standard selling price
6. Other costs incurred during the month were as follows:
Required:
a) Income statement for the month of March 2011 using
i. Absorption costing
ii. Marginal costing
b)
i. Explain the reason why the income statement under absorption costing shows a different
profit or loss figure compared with the income statement under marginal costing.
ii. Reconciliation statement of the difference between the profit or loss under absorption
costing and marginal costing in (a) above
Date posted: February 22, 2019. Answers (1)
- Highlight six advantages of break-even charts.(Solved)
Highlight six advantages of break-even charts.
Date posted: February 21, 2019. Answers (1)
- Daiton Ltd. manufactures four products; AA, BB, CC and DD. The budgeted income statement for the
month of June 2012 is as follows:(Solved)
Daiton Ltd. manufactures four products; AA, BB, CC and DD. The budgeted income statement for the
month of June 2012 is as follows:
Required;
a) Calculate the shortfall in the hours available.
b) Rank the products in order of priority based on the contribution per hour.
c) Advise the management on the most profitable product mix.
d) The management of Daiton Ltd. is considering whether to discontinue the manufacture of product
BB which is' expected to realize a loss in June 2012.
Advise the management whether product BB should be discontinued from production, citing two
reasons for your advice.
Date posted: February 21, 2019. Answers (1)
- Jino Ltd. produces four products namely; A, B, C and D. The following are the firm's budgeted
figures for the month of July 2013(Solved)
Jino Ltd. produces four products namely; A, B, C and D. The following are the firm's budgeted
figures for the month of July 2013
Additional Information:
1. Material costs is sh. 10 per kilogramme and the maximize firm has a total of 500 kilogramme
2. Labour is paid at sh. 10 per hour and is limited to 360 hours
Required;-
a) Determine the limiting factor
b) Calculate the production mix that would maximize profit for the month
Date posted: February 21, 2019. Answers (1)
- Agnes Kaseo and Peter Poah, decided to venture into the same business in the year 2012. They
sell the same type product in the same type...(Solved)
Agnes Kaseo and Peter Poah, decided to venture into the same business in the year 2012. They
sell the same type product in the same type of market.
They have provided the following budgeted income statement for the year ending 30 June 2014:
Required:
Income statement for the month of April 2013 using:
i) Absorption costing.
ii) Marginal costing
Date posted: February 21, 2019. Answers (1)
- Neb Ltd. manufactures three products namely; A, B and C which use the same inputs but in
different quantities.
In addition to these inputs, each unit of...(Solved)
Neb Ltd. manufactures three products namely; A, B and C which use the same inputs but in
different quantities.
In addition to these inputs, each unit of product C uses a component MT200 which the company
currently purchases from an external supplier for Sh.80 per unit.
The following estimated data relates to the month of January 2014:
Additional information:
1. The monthly fixed costs amount to Sh. 150,000.
2. The company has reverse engineered the component MT200 and has realized that it could make
the component in-house at the following costs per unit:
Sh.
3. In the month of January 2014, the maximum availability of skilled labour is 5,400 hours but all
other resources are readily available
4. There would be no incremental fixed costs incurred as a result of making the component in house.
5. The company bases all short-term decisions on profit maximization.
6. The company would either buy the component or make it in-house; it would not use a mixture of
the two options:
Required:
Advise the management of Neb Ltd. on the optimal production plan for the month of January 2014.
Date posted: February 21, 2019. Answers (1)
- Tec Ltd. manufactures a single product branded 'Zed' for sale on the local and international
market.
The cost structure per unit of product 'Zed' is as follows:(Solved)
Tec Ltd. manufactures a single product branded 'Zed' for sale on the local and international
market.
The cost structure per unit of product "'zed' is as follows:
Additional information:
1. The current sales level for the company amounts to Sh. 800,000.
2. The fixed overheads per unit have been calculated based on the current sales level of 4,000
units.
Required:
i) Sales price per unit.
ii) Current profit or loss.
iii) Break even point in units and shillings.
iv) Suggest four measures that could be taken to improve the current profit position
Date posted: February 21, 2019. Answers (1)
- Wanga Ltd. manufactures a wide range of products. The company has approached you for advice
on an order for a product branded 'Venzo'. This is a...(Solved)
Wanga Ltd. manufactures a wide range of products. The company has approached you for advice
on an order for a product branded "Venzo". This is a one-off order.
The costs associated with the order are as follows:
Additional information:
1. Material A: The cost of Sh.10 per kilogramme is the original purchase cost incurred several
years ago. This material is no longer in use by the business and if not used for this order, it
would be sold as scrap at Sh.3 per kilogramme.
2. Material B: This is in continuous use by the business. The historical cost of the material was
Sh.7 per litre although current supplies are being purchased at Sh.6.50 per litre.
3. Material C: Wanga Ltd. has 600 kilogrammes of this material in stock and new supplies
would cost Sh 4 per kilogramme. If the current stock of this material is not used for the order,
it would be used as a substitute for Material Z which cost Sh.7 per kilogramme in another
production process. 2 kilogrammes of Material Care substituted with I kilogramme of
Material Z.
4. Department X: This department has spare labour capacity sufficient for the order which
would be retained within the department.
5. Department Y: This department is currently working at full capacity. The existing staff could
either work overtime to complete the order, paid at 150% of normal rate or Wanga Ltd. could
divert labour hours from the production of other units that currently average a contribution of
Sh.3 per labour hour.
6. Overheads: These are absorbed at a pre-determined rate. There will be no incremental costs
incurred as a result of accepting this order.
Required:
i. Advise the management of Wanga Ltd. on the minimum price that they should accept
for product 'Venzo'.
ii. Justify your treatment of each cost as either relevant or irrelevant as applicable in
each case.
Date posted: February 21, 2019. Answers (1)
- Tamu Ltd. manufactures three products namely; Exe, Wye and Zed. The following information
relates to the company's budget for the first quarter of the financial year...(Solved)
Tamu Ltd. manufactures three products namely; Exe, Wye and Zed. The following information
relates to the company's budget for the first quarter of the financial year ending 31 December
2015:
Additional information;-
1. The above budget is based on full production capacity.
2. The factory manager proposes that if the whole production capacity was used to produce each
product in turns, then at any given time, 24 units of Exe, 12 units of Wye and 9 units of Zed could
be manufactured and that production switching costs would be negligible.
3. The sales manager reports that the maximum sales will be as follows:
Date posted: February 21, 2019. Answers (1)
- Sifa Ltd. manufactures and sells a single product. The following information regarding the
company for the year ended 31 October 2014 is provided:(Solved)
Sifa Ltd. manufactures and sells a single product. The following information regarding the
company for the year ended 31 October 2014 is provided:
The following changes are expected to occur during the year ending 31 October 2015:
1. Variable selling and distribution expenses will reduce by 5% due to increased efficiency of the
sales staff.
2. Variable overheads will increase by 3%.
3. Labour cost will reduce by 4%.
4. Material cost will increase by 2% due to inflation.
5. Selling price will reduce by 3% in order to attract customers.
6. No stock is expected at the end of the period.
Required;-
i) Expected break even sales for the year ending 31 October 2015.
ii) Expected margin of safety in sales value for the year ending 31 October 2015.
iii) Expected sales value at which a profit of Sh.2, 250,000 will be realised.
iv) A summary of the operating statement to show net profit in (b) (iii) above.
Date posted: February 21, 2019. Answers (1)
- Kenya Industrial Chemical limited (KICL) produces an industrial chemical branded Alpha. During the
production process a by-product Beta and a toxic waste T are also produced.
During...(Solved)
Kenya Industrial Chemical limited (KICL) produces an industrial chemical branded Alpha. During the
production process a by-product Beta and a toxic waste T are also produced.
During the month of October 2005, KICL recorded the following information in relation to the
production process.
Additional Information:
1. The toxic waste T is produced at the final production stage. KICL incurs sh. 80 to dispose of a
litre of T
2. Beta is transferred to a subsequent operation where it is packed at a cost of sh.25 per litre
This cost has not been included in the direct materials and conversion costs shown above.
During the month of October 2005, 300 litres of Deta were sold at a retail price of sh. 75 per litre
3. If is the company's policy to credit the account with the net realizable value of Beta produced
4. The normal output from the production process per 10,000 litres of direct materials is;
Required:
a) Prepare the following accounts for the month of October 2005
i. Process account
ii. By-product
iii. Normal loss account (toxic waste)
iv. Abnormal loss account (toxic waste)
b) Determine the abnormal gain or loss products A,B
Date posted: February 21, 2019. Answers (1)
- Jitegemee limited company uses a process costing system in its operation. In one of the production processes, two joint products A and B and a...(Solved)
Jitegemee limited company uses a process costing system in its operation. In one of the
production processes, two joint products A and B and a by-product C are produced
The following additional information is provided:
1. Each processing run requires 12,500 kilograms of output.the costs incurred are as follow:-
2. It is expected that 20% of the input will be damaged in the production process. This is sold as
scrap at sh. 10 per kilogram. The damaged items are detected at the end of the production
process.
3. The output from the production process is as follows:-
4. Product A has to be processed further at a cost of sh. 100 per kilogram before sale
5. The joint costs are allocated to the products on the basis of net releasable value
Required:
i. Determine the total cost of the output from the production process
ii. Calculate the allocated joint costs for product A and product B
iii. Prepare a process account for the production process above
Date posted: February 21, 2019. Answers (1)
- Go easy Limited crushes and refines mineral one into three products in a joint cost operation.
Costs and production for 1991 were as follows:-(Solved)
“Go easy” Limited crushes and refines mineral one into three products in a joint cost operation.
Costs and production for 1991 were as follows:-
Department X:
Initial joint costs sh. 2,100,000 producing 100,000 kilograms of Alco,
300,000 kilograms of Devo and 500,000 kilograms of Holo
Department Y: Processes Alco further at a cost of sh. 500,000
Department Z: Processes Devo further at a cost of sh. 1,000,000
Results 1991
Alco 180,000 kilograms completed; 95,000 kilograms sold for sh. 100 per
kilogram; Final inventory 5,000 kilograms
Devo: 300,000 kilograms completed; 295,000 kilograms sold for sh. 30 per
kilogram; final inventory 5,000 kilograms
Holo: 500,000 kilograms completed; 495,000 kilograms sold for sh. 5 per
kilograms; final inventory 5,000 kilograms; Holo required no further
processing
Required:
a) Use the net realizable –value method to allocate the joint costs of the three products
b) Compute the total costs and unit costs of ending inventories
Date posted: February 21, 2019. Answers (1)
- The West Africa Industries Limited buys crude vegetable oil: The refining of these oils results in four
products A, B and C which are liquids and...(Solved)
The West Africa Industries Limited buys crude vegetable oil: The refining of these oils results in four
products A, B and C which are liquids and D which is a heavy residue. The cost of the oil refined in
1992 was sh. 1,104,000 and the refining department had total processing costs of sh. 2,800,000. The
output and sales for the four products in 1992 were as follows:-
Required:
a) Assume that the next realizable value of allocating joint is used. What is the net income for
products A, B C and D? Joint cost total sh. 3,904,000
b) The company has been tempted to sell at split-off directly to other processors. If the alternative
had been selected, sales per litre would have been A, sh. 150, B sh. 5, C sh. 8 and D sh.30. What
would the net income be for each product under these alternatives?
Date posted: February 21, 2019. Answers (1)
- The following information is obtained in respect of process 2 of the month of September;(Solved)
The following information is obtained in respect of process 2 of the month of September;
There was a normal loss in the process of 10% of production units' scrapped realized sh. 50 per unit,
use FIFO method
Required:
i. Statement of production
ii. Statement of cost and evaluation
iii. Process account
iv. Abnormal loss / gain account
Date posted: February 21, 2019. Answers (1)
- a) Calculate the cost of completed units transferred to process 3
b) Calculate the value of closing WIP
c) Show (i) Process 2 account
(ii) Abnormal Gain account(Solved)
Required:
a) Calculate the cost of completed units transferred to process 3
b) Calculate the value of closing WIP
c) Show (i) Process 2 account
(ii) Abnormal Gain account
Date posted: February 21, 2019. Answers (1)
- The following data is shown in respect to month of August for process 3(Solved)
The following data is shown in respect to month of August for process 3
Required:
Using weighted average method show relevant accounts
Date posted: February 21, 2019. Answers (1)
- Kenya chemical industries limited, process a range of products including bleaching detergent which
passes three processes before completion and transferred to finished goods store. The following
information...(Solved)
Kenya chemical industries limited, process a range of products including bleaching detergent which
passes three processes before completion and transferred to finished goods store. The following
information was extracted from the books of the company for the month of October.
Date posted: February 21, 2019. Answers (1)
- Pakawa Ltd. employs five processes to manufacture a hybrid fertilizer branded 'Sunshine'.
The data below relates to process C for the month of October 2005:(Solved)
Pakawa Ltd. employs five processes to manufacture a hybrid fertilizer branded 'Sunshine.
The data below relates to process C for the month of October 2005:
Material costs are added to the product as the end of the process and conversion costs are assumed to
be incurred uniformly throughout the process. Manufacturing overhead is applied to the product on
the basis of 50 per cent of labour cost.
Additional information:
1. Units lost during processing are considered to be a normal occurrence unless the numbers of lost
units exceed 5 per cent of total units accounted for. The cost of normal loss is absorbed by the cost
of total units accounted for.
2. Lost units in excess of 5 per cent are considered abnormal. This cost is separately identified and
written off as a loss. The company cost accounts follow a policy of assigning only transferred-in
costs to abnormally lost units.
Required:
Using the FIFO method of valuing inventory, prepare process C statement for the month of October
2005 showing:
(i) Total cost assigned to good units and transferred to process D.
(ii) Total loss due to abnormal lost units.
(iii) Valuation of closing work-in-progress in total and by elements of cost
(d) Identify the causes of losses in process costing
Date posted: February 21, 2019. Answers (1)
- (a) In relation to process costing, explain the following terms:
(i) Direct material costs
(ii) Conversion costs
(b) Explain the features that are necessary for process costing to...(Solved)
(a) In relation to process costing, explain the following terms:
(i) Direct material costs
(ii) Conversion costs
(b) Explain the features that are necessary for process costing to be effectively applied in a
business entity?
Date posted: February 21, 2019. Answers (1)