UNIVERSITY EXAMINATIONS

Transcription

1 KABARAK UNIVERSITY UNIVERSITY EXAMINATIONS 2015/2016 ACADEMIC YEAR FOR THE DEGREE OF BACHELOR OF COMMERCE ACCT 314: COST ACCOUNTING DAY: WEDNESDAY DATE: 13/04/2016 TIME:2:30-4:30 P.M STREAM: Y3S1 INSTRUCTIONS: 1. THIS PAPER COMPRISE OF FIVE QUESTIONS 2. QUESTION ONE IS COMPULSORY AND CARRIES 30 MARKS 3. OUT OF QUESTIONS TWO TO FIVE ANSWER ANY TWO QUESTIONS QUESTION ONE 1. Distinguish between cost accounting, management accounting and financial accounting 2. Management is about planning, organizing, directing and budgeting. Explain how cost estimation and forecasting helps management perform the role of management. 3. The following are the costs of the units of products as shown in the question week Number of units Cost of production Page 1 of 5

2 And further given that the equation Y = a + bx represent the cost function of the production process, determine the cost of the 8 th, 9 th and 10 th week if the production was 420, 515 and 610 respectively using the high low method and regression analysis 4. The equation EOQ = 2DC C h O (10 marks) define each of the terms represented by a symbolas used in cost accounting ( 5 marks) 5. Explain how the equation in 4 above can be derived mathematically (2 marks) 6. The learning effect can be represented by the equation Y = ab X explain what each of the symbols stands for (3 marks) QUESTION TWO ABC LTD specializes in labour intensive production. As a means of curbing wastage they have introduced a newlabour control method. The method involves clocking in, control of idle time, reward system and group membership. The following formula has been put in place to ascertain the group earning Y = µ + ax + bw - cz where µ = is the basic pay, a = normal rate per hour worked X = total hours worked by the group b = rate per hour of overtime worked W = hours of overtime worked c = rate per hour of idle time Z = total hours of idle time. The pay is calculated on a daily basis and summed up for 12 days to ascertain the group s fortnight s pay. The minimum pay is shared equally among group members and cz ax + bw You are further provided that there were 2 groups of five members and the following information was recorded µ = 400 per day per person, rate per normal hour of work = 88 shillings, rate per hour of overtime = 120 rate per idle hour = 120 day normal hours Over time worked Idle time worked Group one Group two Page 2 of 5

3 Required 1. If the same data was replicated in the following week Ascertain the groups fortnight earnings (6 marks) 2. What are the short falls of such a method of remunerating workers? (6 marks) 3. Suggest a better way of remunerating workers (6 marks) 4. Explain the difference between group bonus schemes and individual bonus schemes (2 marks) QUESTION THREE 1. What are the merits and demerits of marginal costing? (3 marks) 2. When would it be more appropriate to use marginal costing as opposed to absorption costing? (2 marks) 3. You are given the following data in relation to the activities of XYZ company ltd and you are further informed that the selling price per unit of the product is shillings 200 Activity level Total cost 5000 units 3,000, units 3,600,000 Required 1. Determine the BEP of the product ( 5 marks) 2. Calculate the BEP in shillings (2 marks) 3. What would be the margin of safety if the activity level was 30, 000 units? 4. If the company intends to make a profit of 57,000,000 shillings before tax, what should the sales be in shillings and in units? (3 marks) 5. If the company wanted to make the same profit as in 4 above after tax and the tax rate is 30%, what should be the sale? QUESTION 4 a. The Polex company is in the process of preparing the fourth quarter budget for 2016 and the following data has been assembled The company sells a single product at a price of Kshs 25 per unit. The estimated sales volume for the next six months is as follows: September October November 13,000 units 12,000 units 14,000 units Page 3 of 5

4 December 20,000 units January 9,000 units February 10,000 units All sales are on account. The company s collection experience has been that 30% of the months sales are collected in the month of sale, 68% are collected in the month following the sale, and 2% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e. accounts receivable less allowance for uncollectible accounts) will be Kshs 211,000 on September 30, 2012 Management s policy is to maintain ending finished goods inventory each month at a level equal to 30% of the next months budgeted sales. The finished goods inventory on September 30, 2012 is expected to be 3,600 units To make one unit of finished product, 5 kg of material are required. Management s policy is to have enough materials on hand at the end of each month to equal 40% of next months estimated usage. The raw materials inventory is expected to be 25,200 kg on September 30, The cost per Kg of raw materials is Kshs 2 and 70% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable for raw material purchases is expected to be Kshs 37,980 on September 30, Required: i. Prepare a sales budget in units and in shillings, by month and in total for the fourth quarter (October, November and December), (8 marks) ii. Prepare a production budget in units, by month and in total for the fourth quarter of (8 marks) b. Budgetary Control is the process of establishment of budgets relating to various activities and comparing the budgeted figures with the actual performance for arriving at deviations. Explain the objectives of budgetary control. (4 marks). Page 4 of 5

5 QUESTION 5 a. The following records were obtained from Solo Manufacturing Company. Input-100 Kg of Material yields a Standard Output of 10,000 unit Standard Price per Kg of Material Kshs 20 Actual Quantity of Material issued and used by Production Department 10,000 Kg. Actual Price per Kg of Material Kshs 21 Actual Output 9,000 Units Number of Employees 200 Standard Wage Rate per Employee per Day Kshs 4 Standard Daily Output per Employee per Day 100 Units Total Number of Days Worked 50 Days Idle Time Paid for and Included in above Half Day Actual Wage Rate per Day Kshs 4.50 Required: Compute i. Material Cost Variance (3 marks) ii. Material Price Variance (3 marks) iii. Material Usage Variance (3 marks) iv. Labor Cost Variance (3 marks) v. Labor rate variance (3 marks) b. The CEO of South & East Ltd has noted that costs for its production department are increasing each month and she is concerned that soon the company will run into losses. Advice the CEO on the appropriate steps she should take to achieve cost control for the company Page 5 of 5