AFT 06202: PRINCIPLES OF COST ACCOUNTING REVIEW QUESTIONS

QUESTION 1
The following data relates to the monthly output and related costs for Only Clean Plc, a
soap manufacturing company.
Month Output in units Total cost (fixed cost +variable cost)
April 10,000 50,000,000
May 11,000 54,000,000
June 12,000 58,000,000
July 13,000 62,000,000
Required:
Separate the Variable cost and Fixed cost using High/low method analysis

QUESTION 2
A company incurs the following costs at various activity levels:
Activity level in units Total costs
5,000 250,000,000
7,500 325,000,000
10,000 400,000,000
Required:
Using the high-low method what is the variable cost per unit?

QUESTION 3
Summer Ltd produces a product, Winter. For 2013, production was 10,000 units with total
costs of Tshs150,000,000. For the next year, 2014, the budget is prepared for the
production of 15,000 units with total costs of Tshs220,000,000. The production capacity of
the company is 12,000 units per annum. If the company exceeds its limit, its fixed costs will
increase by Tshs20,000,000.
Required:
What will be the variable costs per unit?

QUESTION 4
In a computer chip manufacturing unit, one chip requires 2.5 hours of labour per chip at
Tshs10,000 per hour, direct material worth Tshs20,000 and direct expenses per chip
amounting to Tshs5,000. The rent of the workshop is Tshs1,000,000; the watchman’s
monthly salary is Tshs1,000,000, administrative staff salary amounts to Tshs2,500,000 per
month and the floor manager is paid a salary of Tshs2,500,000 per month.
 Required:
Prepare a monthly statement showing the fixed and the variable cost components at the
output level of 500 computer chips for the month.

QUESTION 5
Genilia Plc has incurred the following overhead costs during 2023.
Details Amount in Tsh
Factory rent 20,000,000
Depreciation on factory building 10,000,000
Canteen expenses 5,000,000
Lighting 10,000,000
Additional information for primary distribution is as follows:
Details Production Production Service Service
Department department B department X department
A Y
Floor area occupied (in 30 40 20 10
square metres)
Number of employee 300 400 250 50
Required:
Apportion the overheads to various departments of the organisation.

QUESTION 6
Show the apportionment of the following costs:
Details Amount in Tsh
Fixed costs
Rent and rates 4,000,000
Insurance 20,000,000
Depreciation on plant and machinery 25,000,000
General department expenses 37,500,000
Variable costs
Indirect wages 15,000,000
Fuel and power 20,000,000
Maintenance expenses 10,000,000
Additional information related is as follows:
Details Depart. A Depart. B Depart. C Depart. D Totals
Floor area 2,000 2,000 4,000 2,000 10,000
(sq ft)
Cost of plant 100,000,000 250,000,000 50,000,000 100,000,000 500,000,000
 and
machinery
Horse power 16,000 24,000 20,000 20,000,000 80,000
Labour 5,000,000 10,000,000 15,000,000 20,000,000 50,000,000
hours
Machine 12,000,000 9,000,000 6,000,000 3,000,000 30,000,000
hours
Direct 25,000,000 25,000,000 20,000,000 5,000,000 75,000,000
expenses
Direct wages 30,000,000 30,000,000 26,000,000 15,000,000 101,000,000
Direct 27,000,000 19,500,000 15,500,000 - 62,000,000
Materials
Department D is a service department and all other departments are production
departments.

QUESTION 7
Ace Ltd has three production departments and two service departments. The expenses for
these departments as per primary distribution summary are as follows:
Production departments Amount in Tsh
A 6,000,000
B 5,200,000
C 4,800,000
Service department
Stores 800,000
Time-keeping and accounts 600,000
Additional information:
Details Department A Department B Department C
Number of workers 160 120 120
Value of stores 5,000,000 3,000,000 2,000,000
requisition
Required:
Apportion the costs of service departments over the production departments.

QUESTION 8
Sequin Plc has furnished the overhead cost details relating to two production departments,
Assembling and Finishing, and three service departments, Timekeeping, Stores and
Maintenance:
Details Production Production Time Stores Maintenance
 Depart A depart. B
keeping Service Service
service department departmentO
department
Overheads as 320,000,000 560,000,000 160,000,000 200,000,000 120,000,000
per primary
distribution
Further information is available and is used as a basis for distribution:
Details Production Production Timekeeping Stores Maintenance
department department service service service
A B department department department
No. of 80 60 - 40 20
employees
No. of store 48 40 - - 12
requisitions
Machine 2,400 1,600 - - -
hours

Required:
Prepare the secondary distribution table using the step down approach.

QUESTION 9
Beauty Company sold 200,000 units of its only beauty cream at TZS40,000 per unit.
Variable costs are TZS28,000 per unit (out of which manufacturing costs are TZS22,000
and selling costs are TZS6,000). Fixed costs are TZS1,584 million (manufacturing fixed
costs of TZS1,000 million and selling costs of TZS584 million). There is no opening or
closing inventory.
Required:
(a) What is the break-even point for this product?
(b) What is the number of units the company must sell to earn a net income before taxes of
TZS120 million?
(c) What is the number of units that must be sold to earn an income of TZS180 million?

QUESTION 10
Pastry Inc has set a target to produce 50,000 units of its product. The variable cost per unit
of the product is TZS5,000 and the per annum fixed cost is TZS50 million. The company
expects to earn a profit of TZS25 million.
Required:
What should be the per unit selling price?
QUESTION 11
Doll Co runs a toy manufacturing unit. The company‘s target for 20X9 is to manufacture
30,000 units. The per unit selling price of the product is TZS12,000. The total variable cost
of the product is TZS6,000. During 20X9 the company expects to earn a profit of TZS48
million.
Required:
What must be the company‘s per annum fixed cost?

QUESTION 12
A company makes a single product with a sales price of TZS500 and a variable cost of
TZS300. Fixed cost are TZS3,000, 000 per annum.
Required:
Calculate the following:
(i) Number of units at break even point.
(ii) Sales at break even point.
(iii) Contribution to sales ratio (C/S ratio).
(iv) Number of units need to be sold to achieve a profit of TZS1,000,000 per annum.
(v) Level of sales amount to achieve a profit of TZS1,000,000 per annum.

QUESTION 13
The sales executive of Cool-one Ltd expects to sell 60,000 units of air coolers in the year.
The production manager has estimated the requirements of the raw materials for producing
each unit of air-cooler as:
1. Raw material X – 4 units
2. Raw material Y – 6 units
The opening and closing balances of the finished goods and raw materials estimated are as
follows:
Details Beginning inventory of next year Closing inventory of next year
X 10,000 11,000
Y 15,000 17,000
Finished goods 8,000

Required:
Prepare a purchase budget showing the total amount of raw material purchased

QUESTION 14
The following information is about selling and distribution overhead costs to be incurred by
Colourful Park Ltd during the year 2019. The sales revenue for the year ended is Tshs1,600
million.
Particulars % of sales
a. Variable expenses
Sales commission 6%
Wages and salaries 2.5%
Travelling expenses 3%
Advertising and promotion expenses 1%
b. Fixed and selling expenses
Marketing staff salary 50,000,000
Advertising expenses 30,000,000
Depreciation expenses 45,000,000
Warehousing expenses 75,000,000
Required:
Prepare a selling and distribution expenses budget.

QUESTION 15
You have been given the following information of Masantula Ltd:
a. Finished goods:
Details Renon Renux
Budgeted sales in units 12,000 10,600
Budgeted selling price 16,000 22,000
Finished goods at 1 January 2019 2,400 540
Finished goods at 31 December 2019 1,060 3,200
b. Direct materials
Details A B
Materials per unit of production
Renon 3kg 4kg
Renux 1kg 6kg
Opening inventory of raw material 2,840 16,000
Closing inventory of raw material 1,600 2,660
c. Direct labour
For the production of one unit of Renon and Renux, 4 and 6 direct labour hours are
required respectively. Labour is paid at Tshs9,600 per hour.
Required:
Prepare the following budget for the year ended 31 st December 2019.
I. Sales budget
 II. Production budget in units
III. Direct material usage budget in units
IV. Direct material purchase budget
V. Direct labour budget