KABARAK UNIVERSITY

UNIVERSITY EXAMINATIONS
MAIN CAMPUS/NTC
THIRD SEMESTER, 2018/2019 ACADEMIC YEAR
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

ACCT 314: COST ACCOUNTING

STREAM: Y3S1 TIME: 2.00-4.00 PM
EXAMINATION SESSION: MAY-AUGUST 2019 DATE: 18/7/2019

INSTRUCTIONS TO CANDIDATES

1. Answer Question 1 and any other two questions in the answer booklet provided.

2. Do not write on your question papers. All rough work should be done in your
answer booklet.
3. Clearly indicate which question you are answering.

4. Write neatly and legibly.

5. Edit your work for language and grammar errors.

6. Follow all the instructions in the answer booklet

SECTION A: (Compulsory) TOTAL MARKS FOR THIS SECTION IS 30.

1.i).Explain three differences between cost accounting and financial accounting (6 marks)
ii).State four assumptions of cost volume profit (CVP) analysis (4 Marks)
iii) Describe four bases of broad classification of costs (4 marks)
iv).Some scholars define cost accounting in terms of what it does (ICMA, Horngren, etc). While
this is acceptable it still leaves room for the definition of what cost accounting really is

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 1 of 6
Required;
i. Define cost accounting in terms of what it really is. (4 Marks)
v). Kamakwa ltd has provided you with the following information
week Units produced Total cost
Shs.
1 66 1363
2 55 1303
3 70 1385
4 80 1340
5 81 1446
6 70 1385
7 68 1374
8 64 1352
9 60 1330
10 59 1324

Required, if in the next three weeks the expected production will be 90, 95 and 100 units, Use
the following methods to estimate the corresponding costs
i. High low method (3 marks)
ii. Visual/scatter method (3 marks)
iii. Simple linear regression method (6 marks)
(TOTAL 30 MARKS)
SECTION B. TOTAL MARKS FOR THIS SECTION IS 40.

ANSWER ANY TWO QUESTIONS FROM THIS SECTION. EACH QUESTION IN

THIS SECTION CARRIES 20 MARKS.

QUESTION TWO
Midundo Company Ltd. Produces tubes for soccer ball. The following information was provided
for the year 2018:
Shs.
Production 20,000 tubes
Sales 15,000 tubes

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
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Production costs
Direct materials 2,400,000
Direct labour 600,000
Variable overheads 500,000
Fixed overheads 900,000
Selling and Administration
Sales commission 250,000
General expenses (variable) 160,000
Overheads (fixed) 240,000
The company sells each tube at a price of Shs. 300
Required to prepare:
(a) Income statement on the basis of absorption costing (8 marks)
(b) Income statement on the basis of Marginal costing (8 marks)
(c) Reconciliation statement for the profits obtained in (a) and (b) above (4 Marks)
(TOTAL 20 MARKS)
QUESTION THREE
i).A company manufactures a single product. Budget and standard cost details for next year
include:
Selling price per unit Sh.24.00
Variable production cost per unit Sh.8.60
Fixed production costs Sh.650,000
Fixed selling and distribution costs Sh.230,400
Sales commission 5% of selling price
Sales 90,000 units
Required toCalculate:
(a) The break-even point in units. (4 Marks)
(b) The percentage by which the budgeted sales can fall before the company begins to make a
loss. (2 Marks)
The marketing manager has suggested that the selling price per unit can be increased to Sh25.00
if the sales commission is increased to 8% of selling price and a further Sh10,000 is spent on
advertising.

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 3 of 6
(c) The revised break-even point based on the marketing manager’s suggestion. (4 Marks)
ii).The following information was provided for the stores of ufunisa leo enterprises for the month
of January 2019.
1. Opening Stock 400 units @ Sh. 30 Sh. 12,000
2. Purchases 200 units @ Sh. 28 Sh. 5,600
15. Sales 125 units @ Sh. 50 Sh. 6,250
21. Purchases 80 units @ Sh. 25 Sh. 2,000
27. Purchases 100 units @ Sh. 32 Sh. 3,200
29. Sales 175 units @ Sh. 48 Sh. 8,400
30. Sales 140 units @ Sh. 55 Sh. 7,700
Required
a). Prepare Store Ledger Card (SLC) form the above information on the basis of weighted
average ( 8 marks)
b) Calculate the cost of sales for the same period (2marks)
(TOTAL 20 MARKS)
QUESTION FOUR
Kangolitian fabricators ltd has five machine operators who are paid according to the time the y
spend at the machine and the number of units they produce. They also earn a bonus depending on
how fast they work. For every hour the save they are paid 80% of the normal rate. The following
data was available for the month of April 2019.
S. NO National Employment Units Time Rejected Time
ID No No produced allowed units taken
per unit
1 04821900 KAN-0412 459 2HRS 50 718
2 23489000 KAN-0322 490 2HRS 60 800
3 12456700 KAN-3456 235 4HR 0 400
4 32456500 KAN-2456 454 2HRS 52 900
5 98124400 KAN-3434 800 1HR 120 600
6 76845500 KAN-2342 900 1HR 130 400
7 00012300 KAN-1231 1000 1HR 150 450

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 4 of 6
The company does not punish anybody for rejected units but only pays for good units
Required;
Prepare a pay roll for the seven workers ignoring the statutory deductions (20 marks)
(TOTAL 20 MARKS)
QUESTIONFIVE
i).Rumish enterprises has set the following standard costs per unit
Material MM1 150 shillings per Kg,
Material MM2 250 shillings per Kg and
Material MM3 300 shillings per 0.1kg
Rumish enterprises produces only one product which requires 5 Kgs of Material MM1, 3 kgs of
material MM2 and ½ kg of material MM3
Labour is also in three categories i.e Skilled , semi-skilled and unskilled which is paid for at the
rate of 1500, 1000 and 500 per hour respectively and the requirement per unit is 5 hours, 50
hours and 150 hours per unit. Fixed costs are 2.5 million the selling price per unit is 0.2 million
Rumish is preparing the budget for 2020 and the following has been agreed on
That the market can absorb 10,000 units in the year if the selling price is sh.200,000 and 8000
if the selling price is sh. 250,000 and if the price is dropped to sh.180,000 the market can absorb
20,000 units
Required
Prepare a flexible budget and advice Rumish on the price to charge (10 marks)
ii).A Tunuu Construction Company Ltd. commenced its business of construction on 1 January
2018. The trial balance as on 31 December2018 showed the following balances:
Particulars Dr. Cr.
Paid-up Share capital 100,000
Cash received on a/c of contract (80% of work certified) 120,000
Land and Building 30,000
Machinery at cost (75% at site) 40,000
Bank 4,000
Materials issued to site 40,000
Direct Labour 55,000
Expenses at site 2,000

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 5 of 6
Lorries and Vehicles 30,000
Furniture 1,000
Office Equipment 10,000
Postage and Telegrams 500
Office Expenses 2,000
Rate and Taxes 3,000
Fuel and Power 2,500
220,000 220,000
The contract Price is Sh. 300,000 and work certified is sh.150,000. The work completed since
certification is estimated at sh. 1,000(at cost). Machinery costing sh. 2,000 was returned to stores
at the end of the year. Stock of material at site on 31 December2018 was of the value of
sh.5,000. Wages outstanding were sh. 200. Depreciation on Machinery at 10%.
You are required to prepare contract account to show profit from the contract and show how
the work-in-progress will appear in the books as on 31 December2018. (10 Marks)
(TOTAL 20 MARKS)

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 6 of 6