UNIVERSITY EXAMINATIONS 2017/2018 ACADEMIC YEAR

2ND YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF

COMMERCE

COURSE CODE/ TITLE: BAC B203: COST ACCOUNTING

END OF SEMESTER II DURATION: 2 HRS

DAY/TIME:FRIDAY 5.00PM – 7.00PM DATE: 19.10.2018

INSTRUCTIONS

Attempt question ONE (Compulsory) and any other TWO

Question One

The following information is available from the books of Musomba Manufacturing

Company Ltd

Shs.

Stocks on Jan. 1st 2000

Raw materials 25,000

Work in progress 38,000
Finished goods 42,000

Stocks on December 31st Dec. 2000

Raw materials 30,000

Work in progress 32,000
Finished goods 45,000
Purchase of raw materials 280,000
Carriage inwards 7,000
Returns of raw materials 13,000
Direct wages 80,000
Salaries (40% factory, 30% salesmen) 60,000

Page 1 of 4
Rent (30% factory, 30% office, 40% warehouse) 40,000
Factory power 15,000
Factory expenses 20,000
Administration expenses 12,000
Selling and distribution expenses 18,000
Sales 650,000

Required:

i) Prepare production statement

ii) Prepare a profit statement. (30marks)

Question Two

The following information relates to stores ledger card for product C.

October 1st received 500 units @ 20

October 9th received 300 units @ 22
October 10th issued 400units
October 15th issued 200 units @ 25
October 25th issued 300 units
October 27th received 200 units @ 26
October 30th issued 100 units @ 26

Required:

Prepare a stores ledger card and show value of closing stock on 30th October under the
following:

i) LIFO
ii) FIFO (20marks)

Question Three

XYZ chemicals limited process a range of products including a detergent “satisha”

which passes through three processes before completion and transfer to warehouse.
During April, data recurring to this was as shown:

Page 2 of 4
Basic Raw materials (10,000units) 15000 - - 15000

Direct materials a… 7500 9500 5500 23500

Direct Wages 4000 6000 12000 22000

Direct Expenses 1100 930 1340 3470

Production overheads 16500

Note: Production overheads is absorbed as a percentage of direct wages.

Units Units Units

Output 9200 8850 7900

Normal loss in 5 5 10
percentage
Value of scraps per 2 3 5
unit (Ksh)

There was no stock at the start or at the end in any process.

Required

i) Process 1 (4marks)
ii) Process 2 (4marks)
iii) Process 3 (4marks)
iv) Abnormal loss (2marks)
v) Abnormal gain (2marks)

A company was on annual demand for material ‘p’ of 25000 tons per annum. The cost
price per ton is Shs. 2000 and stockholding is 25% per annum of the stock value.
Delivery cost per batch is Shs. 400.

Required:

E.O.Q (4marks)

Question Four

Page 3 of 4
 i) The total output of Mr. Wasonga for one week was 480 units. He was
allowed 8 minutes per unit. He completed these units in 52 hours. Its wage
rate per hour is Shs. 18.

Required:

a) Halsey Scheme
b) Rowan Scheme (10marks)

ii) Briefly distinguish between the following terminologies used in cost

accounting clearly stating the importance of the distinction for decision
making.

a) Controllable and non-controllable costs. (2marks)

b) Fixed cash and marginal costs (2marks)
c) Discretionary cost and periodic loss (2marks)
d) Abnormal loss and normal loss (2marks)
e) Specific order costing and batch costing. (2marks)

Question Five

a) Explain the purpose of cost accounting. (8marks)

b) The following information is available from manufacturing company.

Total overheads shs. 600,000

Total direct wages shs. 480,000
Total direct material costs shs. 500,000
Direct labour hours shs. 75,000
Direct machine hours shs. 50,000
Units of output shs. 750,000

Required:

Calculate six overhead absorption rates. (6marks)

c) What are the differences between const accounting and financial accounting?
(6marks)

Page 4 of 4