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Bac 404 Assignment April 2020

The document provides cost accounting data and questions for Kenyatta University's Cost Accounting II assignment. It includes 17 years of data on total labour costs, direct labour hours, and machine hours to analyze the relationship between the variables. It also provides production process information for Dodoka Limited's hair oil manufacturing for September 2016 to prepare process accounts for the two processes and explain the implications of normal loss and scrap value on equivalent unit costs.

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Ruth Nyawira
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134 views4 pages

Bac 404 Assignment April 2020

The document provides cost accounting data and questions for Kenyatta University's Cost Accounting II assignment. It includes 17 years of data on total labour costs, direct labour hours, and machine hours to analyze the relationship between the variables. It also provides production process information for Dodoka Limited's hair oil manufacturing for September 2016 to prepare process accounts for the two processes and explain the implications of normal loss and scrap value on equivalent unit costs.

Uploaded by

Ruth Nyawira
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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KENYATTA UNIVERSITY

DIGITAL SCHOOL OF VIRTUAL AND OPEN LEARNING


IN COLLABORATION WITH SCHOOL OF BUSINESS
DEPARTMENT OF ACCOUNTING AND FINANCE
BAC 404: Cost Accounting II ASSIGNMENT

Instructions; Answer ALL Questions

QUESTION ONE

LABO
UR LABOUR MACHINE
Year COST HOURS HOURS

2002 2700 230 260

2003 2790 285 240

2004 2890 310 220

2005 2950 310 250

2006 3200 320 240

2007 3400 340 220

2008 3460 440 270

2009 2870 240 190

2010 2620 360 210

2011 2200 300 270

2012 4160 490 350

2013 3370 390 410

2014 1800 210 240

2015 3760 410 380

2016 2950 470 520

2017 2150 340 260

2018 2750 240 240


The above data is in respect of how total labour costs are related to direct labour hours and machine
hours. Data is for the last 17 years

E-view program was used to analyze the data and the following results were obtained;
Dependent Variable: SERIES02
Method: Least
Squares
Date: 07/29/02 Time: 08:16
Sample: 2002 2018
Included observations: 17

Variable Coefficient Std. Error t-Statistic Prob.


         
SERIES03 5.768833 1.858787 3.103547 0.0078
SERIES04 -1.32928 1.815718 -0.732096 0.4762
C 1386.168 470.6487 2.945228 0.0106
         
R-squared 0.489029 Mean dependent var   2942.353
Adjusted R-squared 0.416033 S.D. dependent var   591.2226
S.E. of regression 451.799 Akaike info criterion   15.22314
Sum squared resid 2857713 Schwarz criterion   15.37017
Log likelihood -126.3967 Hannan-Quinn criter.   15.23775
F-statistic 6.699395 Durbin-Watson stat   2.205967
Prob(F-statistic) 0.009094      

Required;
a) State the resultant cost function and interpret the results to gauge the economic plausibility of the model

b) Predict the labour cost for year 2019 based on expected performance of 225 labour hours and 230 machine hours

QUESTION TWO
a) Dodoka Limited manufacturesa unique hair oil branded Dodokaline. The product undergoes two
manufacturing processes before emerging as a complete product. The following information relates to
production undertaken during the month of September 2016.
Process 1 2
Input 250,000 litres @ Sh. 62.50 per litre
Added Costs:
Material 5,750,000 4,606,250
Labour 4,812,500 3,806,250
Overhead 2,062,500 2,640,000
Normal loss 10% of input 5% of input
Scrap value Sh. 18.75 per litre Sh. 42.50 per litre

Output:
To process 2:200,000 litres To finished goods 162,500 litres
To W.I.P C/f 25,000 litres
- Previous process costs 100%
- Added material 80%
- Labour 70%
- Overhead 50%

There was no opening work-in-progress in either of the two processes. Losses in process 2 had the following degree of
completion: previous process costs 100%, added material 70%, labour 50% and overheads 50%.

Required:
(a) Process accounts for both processes for the month of September 2016 (show all your computations).

(b) Explain the implication of the following to the costs of equivalent units:
(i) Normal loss
(ii) Scrap value

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