ST.

MARY’S UNIVERSTY
BUSINESS FACULTY
DEPARTMENT OF ACCOUNTING

AN ASSESMENT OF COST ACCOUNTING PRACTICE

CASE STUDY IN KALITY FOOD SHARE COMPANY

BY

GIRUM KETEMA

FERHAN MOHAMMED

HANA LELISA

JUNE, 2014

ADDIS ABABA
 AN ASSESMENT OF COST ACCOUNTING PRACTICE
CASE STUDY IN KALITY FOOD SHARE COMPANY

BY

GIRUM KETEMA

FERHAN MOHAMMED

HANA LELISA

A SENIOR ESSAY SUBMITTED TO THE DEPARTMENT OF

ACCOUNTING IN PARTIAL FULLFILMENT OF THE
REQUIRMENTS FOR THE DEGREE OF BACHELOR OF ART IN
ACCOUNTING

JUNE, 2014

ADDIS ABABA
 ST. MARY’S UNIVERSTY

AN ASSESMENT OF COST ACCOUNTING PRACTICE

CASE STUDY IN KALITY FOOD SHARE COMPANY

BY

GIRUM KETEMA

FERHAN MOHAMMED

HANA LELISA

BUSINESS FACULTY

ST. MARY’S UNIVERSITY

Approved By the Committee of Examiners

______________________ __________________

Department head signature

______________________ __________________

Advisor signature

______________________ __________________

Examiner signature

______________________ __________________

Examiner signature
 ACKNOWLEDGEMENT

First of all, we would like to thank those how cooperated by giving their time for answer to our
interview and questions.

Next we would like to send our appreciation of our advisor INS.YESERASH ALEMU for
giving us a continuous guidance through the process of this paper. The paper would not have
been done this way without her help.

Finally our gratitude goes to cost accounting department of the company workers how gave us
the necessary information for fulfillment of our paper

a
 LIST OF TABLES
Table 2.1: The difference between job order costing and process costing……………….13

Table 3.1: Presentation of the characteristics of the study participants…………………...18

Table 3.2.1: Respondents answer about the cost accounting department…………………20

Table 3.2.2: Respondents answer about the cost accounting department…………………22

Table 3.2.3: Issue related with store keeper and costing department………………………24

Table 3.2.4: Presentation of accounting system and production……………………………25

Table 3.2.5: Presentation of product costing system………………………………………..27

Table 3.2.6: Issue related with manufacturing overhead allocation…………………………31

Table 3.2.7: Presentation of byproduct, spoilage and process costing………………………34

Table 3.2.8: costing system effectiveness and convenience…………………………………36

b
 ACRONYMS

KFSC = Kality Food Share Company

APOHR = Actual Product Overhead Rate

UC = Unit Cost

TC = Total Cost

PO = purchase order

c
 TABLE OF CONTENTS
Acknowledgement………………………….………………………………………………………………………………………………….a
List of tables……………………………………..…………………………………………………………………………………………………b
Acronyms……………………………………….….………………………………………………………………………………………………..c
CHAPTER ONE……………………………….…………………………………………………………………………………………………….1
INTRODUCTION…………………….…………………………………………………………………………………………………………….1
1.1 Back ground of the study……………………………………………………………………………………………………………….1
1.2 Background of the organization..…………………………………………………………………………………………………..2
1.3 Statement of the problem …………..………………………………………………………………………………………………..3
1.4 Research question……..………………………………………………………………………………………………………………….3
1.5 Objective of the study…………………………………………………………………………………………………………………….4
1.5.1 General Objective………………………………………………………………………………………………………………….4
1.5.2 Specific Objective…………………………………………………………………………………………………………………..4
1.6 Significance of the study………………………………………………………………………………………………………………….4
1.7 Scoop of the study……………………………………………………………………………………………………………………………4
1.8 Limitation of the study……………………………………………………………………………………………………………………..5
1.9 Research design and methods………………………………………………………………………………………………………….5
1.9.1 Research design……………………………………………………………………………………………………………………..5
1.9.2 Source and type of data………………………………………………………………………………………………………….6
1.9.3 Population and sampling design……………………………………………………………………………………………..6
1.9.4 Data collection method……………………………………………………………………………………………………………6
1.9.5 Method of data analysis………………………………………………………………………………………………………….6
1.10 Organization of the study……………………………………………………………………………………………………………7
CHAPTOR TWO……………………………………………………………………………………………………………………………………….8
Review of related Literature…………………………………………………………………………………….…………………………….8
2.1 Definition of cost accounting…………………………………………………………………………………………………………8
2.2 Classification of costs………………………………………………………………………………………………………………………8
2.2.1 Cost in their relation to the production……………………………………………………………………………………..9
2.2.2 Cost in their relation to manufacturing department………………………………………………………………10
2.3 Use of cost information…………………………………………………………………………………………………………………10
2.3.1 Cost for planning and control………………………………………………………………………………………………..10
2.3.2 Cost for analytical purpose……………………………………………………………………………………………………11
2.4 Costing system…………………………………………………………………………………………………………………………….11
2.4.1 Job order costing system……………………………………………………………………………………………………….12
2.4.2 Process costing system………………………………………………………………………………………………………….12
2.5 purpose of product costing for the company………………………………………………………………………………..14
2.6 Roles, responsibility, duties and accountability of cost accountant………………………………………………15
2.7 Purchase procedure………………………………………………………………………………………………………………………15
CHAPTOR THREE……………………………………………………………………………………………………………………………………17
Data presentation, analysis, and interpretation……………………………………………………………………………………17
3.1 Analysis of the characteristics of the study participants………………………………………………………………..18
3.2 Analysis of the study findings…………………………………………………………………………………………………………20
3.2.1 Organization of costing staff department…………………………………………………………………………….20
3.2.2 Purchase of raw material and inventory management………………………………………………………..22
3.2.3 Accounting system and production………………………………………………………………………………………25
3.2.4 Manufacturing overhead allocation……………………………………………………………………………………..31
3.2.5 Byproduct costing, spoilage and process costing………………………………………………………………….34
3.2.6 Costing system effectiveness and convenience…………………………………………………………………..36
CHAPTOR FOUR…………………………………………………………………………………………………………………………………….38
Summary, conclusion, and recommendation ………………………………………………………………………………………38
4.1 Summary………………………………………………………………………..…………………………………………………………….38
4.2 Conclusion……………………………………………………………………………………………………………………………………40
4.3 Recommendation………………………………………………………………………………………………………………………...41
 BIBLIOGRAPHY
Bryman, A. & Bell, E. (2011). Business research methods, Oxford University

Press, New York.

Cherrington, (1998). Cost Accounting A Managerial Approach (2nd Edition).

West publishing Company, New York

Fess Waren, (1999). Accounting Principles (18th edition), West publishing

Company, New York.

Frig mark. L,(1986). Cost accounting, Har Court Barece Jovanovich,

Publisher.

Horngren C.T. (2003). Cost accounting a Managerial Emphasis (11th Edition),

West publishing company, New York.

Horngren C.T, (1991). Cost accounting, a managerial emphasis (9th edition),

U.S.A, Person prentc hall.

Mahar, Michal (1997). Cost Accounting (5th edition), Chicago, Craw Hill.

Mosich A, (1989). Intermediate Accounting (6th edition). West publishing

Company, New York.

St. Mary’s university

CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Cost accounting is an accounting system that provides financial and non

financial cost related information. Product costing is the cost of direct
labor, direct materials, and manufacturing overhead that are used to
create a product. And the purposes are for preparing financial statement,
setting price and for control purpose (Horngren C.T, 2003).Thus cost
accounting provides information for both management and financial
accounting.

Technological advancement and growing need of mankind has been the

prime cause for today’s dynamic business environment. So the need for
consistent recording in business enterprises arose (firgomark.L, 1986).
Cost accounting especially for manufacturing companies is the key factor
for achieving the desired profit since cost of raw materials is the major
expense.

For this reason we are attracted to study the topic to assessment of Cost
accounting practice in Kality Food Share Company.

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1.2 BACKGROUND OF THE ORGANIZATION

Kallti Food Share Company was established in 1938. It is located at the

heart of Kality situated 17km from metropolitan Addis Ababa along the
artery motor ways stretched through the resort of Debrezeit. Currently
the factory runs seven production lines with annual production capacity
of 921, 625 Kilograms of different food products and the factory mange's
a total of 520 employee labor. The working forces are composed of
professionals and non professionals. The professionals are engineers,
mechanics, administrators, and accountants and so on ranging from first
degree to second degree. (Company’s policy and procedure manual)

It occupies a pioneering status signaling a breakthrough in the onset of

industrialization in Ethiopia. Over the last seven decade of its existence,
this giant industry had been consistently running a wealth of experience
industrial production and marketing mix of food products. The present
Kaliti food share company has grown into far reaching reputation. For
mounting quality test of its product among the consumer all over the
country. (Company’s policy and procedure manual)

The company purchase the raw materials form government agricultural

organization, private agricultural organization and other industries.
Kaliti food Share Company has five major departments and one service
namely; finance, commercial, production and technique, human resource
development and administration audit department and production, and
service quality improvement and assurance service. Four departments
and the services are directly responsible to the general manger as it can
be observed from the organizational structure audit department is
responsible to audit committee which turns responsible to the
privatization and public enterprise supervising agency. The general
manger is responsible to the board of directors which is responsible to
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the privatization and public enterprise supervising agency. (Company’s

policy and procedure manual)

1.3 STATEMENT OF THE PROBLEM

As it is stated in the background section, product costing is the cost of

direct labor, direct materials, and manufacturing overhead that are used
to create a product. And the purposes are for preparing financial
statement, setting price and for control purpose. Even if product costing
has the above listed benefits for firms, the company under this study
(Kaliti Food Share Company) has a problem to entertain such benefits
from its costing department. The student research team had identified
the existence of this problem, during observation of the company, by
interviewing the company’s manager. The manager explained that the
company has a problem of price setting for its products because the
production cost of products is not properly and clearly determined.
Based on this information the research team had been initiated to asses
and examine the company’s costing system for the purpose of identifying
the causes of the company’s managerial problem and proposing the
possible solution of overcoming such causes.

1.4 Research questions

The student research team had raised and answered the following
specific researchable questions based on the possible causes of the main
research problem.

1. How is the company costing staff organized?

2. How is the company determining the production cost of its
products?

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3. How is the company’s product costing system effective and

convenient?

1.5 OBJECTIVES OF THE STUDY

1.5.1 General Objective

The general objective of this study was assessing and examining the
product costing system of the company under study to identify the real
causes of why the main research problem is occurring and existing in the
company; and finding possible solution to overcome the identified real
causes.

1.5.2 Specific objectives

The student research team had planned some specific activities to be

performed to answer (find the solution ) of each specific questions to find
out the point where the real causes of the main problem are located as
specific objective of the study; and were started as follows:

1. To examine whether the company has well organized costing staff

or not?
2. To examine the company’s system of product cost determination?
3. To evaluate whether the company’s product costing system is
effective and convenient or not?

1.6 SIGNIFICANCE OF THE STUDY

Doing a research has its own reason or significance in which it

contributes for the improvement of resolving problems of the company.
This study would be significance to inform the corporation about its
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strength and weakness on the existing system and the possible

suggestions may contribute to the company (Kaliti Food Share Company)
to manage its resources properly and correct its problems using the
outputs of this paper. It also helps the student research team to develop
research skills and, also the research paper can be used as base for
further research.

1.7 SCOPE OF THE STUDY

The study would cover as much as possible all cost accounting practice
which is focused on Kaliti food Share Company. This research paper is
specifically designed to assess the cost department of the company. This
Study would be delimited in the head office of the company, finance
administration department, purchasing department and cost accounting
department only.

1.8 LIMITATION OF THE STUDY

The limitations that could occur during the time of research study are:-
1. Time and financial constraint to go every day and collected the
data in detail.

2. The interviewees and our time may not be one and the same.
3. Some staff members might not be willing to give the required
information because of carelessness or personal reasons.

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1.9 RESEARCH DESIGN AND METHODOLOGY

1.9.1 RESEARCH DESIGN

To solve the main research problem and answer the research questions
the student research team has used descriptive research design. The
team used descriptive design to describe the real facts in which are
collected about the characteristics of the company’s costing staff and the
company’s procedures of production cost determination.

1.9.2 TYPE OF DATA COLLECTION

The student research team had collected the needed data from both
primary and secondary sources. Primary data sources are: - the
production staff members, the finance staff members, store personnel’s,
and from cost accounting division. And the secondary data collected from
procedure manuals for purchasing, recording, production and reporting
activities and reports.

1.9.3 POPULATION AND SAMPLING TECHNIQUE

The study target population consist members of the company’s

production staff, material store staff, finance staff, purchasing staff, cost
accounting staff and the general manager in total 30 individuals in
number among this 5 taken from management group and the rest from
the staff group, who would be selected by using purposive sampling
technique.

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1.9.4 METHODS OF DATA COLLECTION

The research team had collected the primary data by using the
questionnaire which was prepared by both open ended and close ended
questions. 30 copies of the questionnaires were distributed and 28 copies
returned with full responses. The team members had some primary data
through observation. Secondary data are observed from the company’s
procedural manuals and reports.

1.9.5 METHODE OF DATA ANALYSIS

The collected data are presented, analyzed and interpreted in chapter

three. The team has implemented descriptive method of analysis. The
team has classified the collected data in to different categories based on
the measurement scale used by each question of the questionnaire and
present in table form. The frequency and percentage distributions of the
respondents’ responses are identified, for each question; and such
tabulated data are analyzed and interpreted under each table.

1.10 ORGANIZATION OF THE STUDY

The paper was organized in to four chapters. The first chapter was
covered general background of the study, statement of the problem,
objectives of the study, significance of the study, delimitation, limitation,
and what method applied for the development of the study. While
chapter two would cover over view of related literatures. Chapter three is
going to show the practical aspect of the paper which is conducted in
Kaliti food Share Company so we are going to explain what the action
taken by the corporation to among and safeguard its cost accounting
system. Chapter four includes finding summary, conclusion, and
recommendation of the study regarding to product costing system.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Definition of cost Accounting
Cost accounting is the process of accumulating the costs of
manufacturing, and other functional processes and identifying these
costs with units produced or some other object. It is a unique sub filed of
managerial and financial accounting. Cost accounting is applied
primarily to manufacturing. Organization that combine and process raw
material in to finished products (Cherrington, 1998).

Management accounting is the process of identification measurement,

accumulation, analysis, preparation, interpretation, and communication
of financial information used by managements of plane, evaluate, and
control within an organization to assure appropriate use of and
accountability for its resources (Cherrington, 1998).

Cost accounting provides information for management accounting and

financial accounting management accounting measures and reports
about financial and non financial information that helps managers make
decisions to fulfill the goal of the organization and financial accounting
focus on reporting to external parties. (Horngren, 2003)

Cost accounting provides mangers with relevant cost data to assist them
in operating the business effectively. The management process includes
developing an operating plan, implementing the plan, and evaluating the
result of operation (Cherrington, 1998).

2.2 Classification of costs

Classification are needed for development of cost data that are useful
management with regard to the following five purposes or aims these are
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1. Planning profit by means of budget.

2. Controlling cost via responsibility accounting
3. Measuring annual or periodic profit including inventory costing
4. Assisting in establishing selling price and pricing policy
5. Furnishing relevant cost data for analytical processes for decision
making. There for cost is classified in to broad category and some of
them are listed below (Frigo, 1986).
2.2.1 Cost in their relation to the production.
The elements of manufacturing cost are direct material, direct labor and
factory overhead (indirect manufacturing). Direct material and direct
labor costs are combined in to another classification called primary cost,
and direct labor and factory over head can be combined in to a classified
called conversion cost. Representing the cost of converting direct
material in to finished products (Frigo, 1986).

Direct material are all materials that forms and integral part of finished
product and that can be included directly in calculating the cost of
product clued all to make automobile bodies. The case and feasibility
with which the material item can be traced to the final product are major
consideration in their designation as direct material. Give and facts to
build furniture from part of the finished product but for costing purposes
such item may be classified as in direct materials for manufacturing cost
(Frigo 1986).

Direct labor: is labor applied directly to the materials, comprising the

finished product. The cost of wedge paid to skilled or unskilled workers
and assignable to the particular unit produced is termed direct labor
(Frigo, 1986).
Factory over head: - Defined as the cost of indirect material, indirect
labor and all other manufacturing cost that can not conveniently by
charged to specific unit, job or products (Frigo, 1986) Indirect materials
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are those needed for the competition of the product but whose
consumption with regard to the product is either so small or so complex
that is would be futile to treat them as direct material.
Indirect labor:- may be defined in contrast to direct labor as that labor
which does not directly affect the constitution or the composition of the
finished product. The term include the labor cost of supervisor shop
clerks, general helper cleaner and those employees engaged on
maintenance work or other service work. Not directly related to
production (Cherrington, 1998).

2.2.2 Cost in their relation to manufacturing department

Factory is generally organized along departmental lines for production
purpose .This factory department allegation is the basis for the important
classification and subsequent accumulation of cost by departments,
Products and service department.
Product department: - is one in which manual and machine operation is
performed directly upon any part of product manufactured, more
specifically, producing department are those whose cost may be charged
to the product because they have contributed directly to its production.
weather two or more different type of machine perform operation on
product with in the same department a break down into cost center
increase the accuracy of product cost (cherrington,1998).

Service department: - one that is not directly engaged in production but

tenders a particular type of service for the benefit of others department.
in some instance these service benefit of others service department as
well as producing department represents a part of the total factory over
head and must be observed the cost of the product by means of the
factory over head cost ( cherrington , 1996).

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2.3 Use of cost information

2.3.1 Cost for planning and control
A company of information system provides the data required for the
preparation and operation of budget and for establishing standard costs.

Budget is a quantitative expression of a proposed plan of action by

management for a specific period and an aid to coordinating what need
to be done to implement that plan. A budget can cover both financial and
non financial aspects of the plan and serve a blue print for the company
to flow in an upcoming period. A budget that covers financial aspects
quantities management expectation regarding income, cash flow, and
financial position. Just as financial statements are prepared for past
period. So can financial statements be prepared for future period for
example a budgeted income statement, statement of cash flow and
budgeted balance sheet (Mahar and Michal, 1997).

Standard cost: - Closely allied with the budget are standard cost
which is predetermined cost for direct material, direct labor, and
factory over head. They are established by using information
accumulated from past experience and data secured form research
studies and it helps the management to form the foundation for the
budget (Frigo, 1986).

2.3.2. Cost for analytical purpose

Different type of involve varying kind of consideration in managerial
analysis for decision making for example different analysis for decision
making.

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2.4 Costing system

The two basic types of costing systems are used to assign cost to product
or service. Which of them are as follow?
2.4.1 Job order costing system
In this system the cost object is a unit or multiple unit of a distinct
product or service called a job. Job order costing system is a type of cost
system that provides for a separate record of the cost of each particular
quantity of product that passes through the factory. Job order costing
system is commonly used by companies with product that are unique
and divisible. In this system costs are assigned to a distinct unit, batch
or lot of product, or service. Job is task for which resources expended in
bringing a distinct product or services to market (Cherington,1998).
2.4.2 Process costing system
In this costing system is used for manufacturing process which produce
a single product or single mix of products continuously for an extended
period of time. In this system the cost of a product or service is obtained
by using broad averages to assign cost to mass of similar unites
produced for general sale and not for any specific customers. Average
cost over large number of nearly identical product companies that use
process costing system are as follow (Mahar and Michal, 1998).
 Cement factories

 Petroleum refineries

 Flour companies

 Beer factories

 Textile factories

 Beverage companies

 Characteristics of process costing system The products

manufactured are homogenous

 The cost are accumulated in departments or cost centers

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 Each unit produced will receive the same amount of direct

material, direct labor, and MOH cost.

 Average Unit cost is obtained by dividing total cost to unit

produced in a given department (cost center)

 Costs are divided in to two based on when the costs are incurred
in to the production process.

Table 2.1 the difference between job order costing and process costing

JOB COSTING PROCESS COSTING

1 Types of product Diversified product line Homogenous
in which products are products produced
produced in batches continuously
with each batch
representing a unique
product
2 Cost accumulation By job for a specified By department or
number of unit cost center for a
specified period of
time
3 Cost per unit costs accumulated by Cost accumulated by
job dividing when job is cost center divided by
complete equivalent units of
production during a
period of time
4 Reporting By job By cost center or
department

(Cherington, 1998).

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2.5. Roles, responsibility, duties and accountability of cost

accountant

Roles of Cost Accountant: A cost accountant plays an important role in

Kaliti food Share Company. He/she is responsible to provide the right
information about cost and budget at the right time to management to
help them for their decision making particularly for planning and
controlling.

Responsibilities of Cost Accountant:

- The cost accountant is responsible to build cost that is
the preparation of the master budget.
- He/she is required to revise the selling price.
- He is responsible to make annual inventory of finished
goods and fixed assets.
- Cost accountant is responsible for cost flow process
starting from procurement up to distribution.
- Cost accountant shows whether cost is properly classified
or not (Interview with the cost accountant).

Duties of cost accountant

 Cost accountant has the duty to provide information whether
costs is placed for the required purpose or not.
 Cost accountant has the duty to record and formalize
transactions in a formal manner and also preparing yearend
adjustments.
 To follow up tax for payments
 To prepare corporate budget of the company.
 To compute manufacturing costs each year.

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Accountabilities of cost accountant

Cost accountant is also responsible for exclusion as incursion of costs in
building up of costs at the proper amount, time and place. He is
accountable to provide proper information about the flow process.
Eg. What actually occurs and exists
Procurement  production  warehouse  selling
(Company policy and procedure manual)
2.6. Purchase procedure
KFSC purchase department is usually engaged in purchasing a number
of materials and services falling in different categories. The activities are
performed regularly by purchase professionals with the objective of
fulfilling organization’s materials and services needs.

The purchasing department follows this procedure:-

 Recognition and description of need

 Transmission of need
 Selection of Source to satisfy the need
 Contracting with the accepted source
 Following up with the source
 Receiving and inspecting material
 Payment and closure of the case

(Company policy and procedure manual)

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CHAPTER THREE

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

Introduction

This chapter consists of the findings of the study. To get firsthand

information, questionnaire and observation were the data collection
instruments used. To this end, a total of 30 copies of questionnaire were
distributed to employees who are in charge of cost accounting. In
addition out of the planned 3 manager’s interviewee and presented their
responses with secondary data gathered from the records and manuals
of Kaliti Food Share Company.
The result of the questionnaire is presented, analyzed and interpreted
with the help of table in percentage technique.

Purposive sampling technique was used to select the respondents and

accordingly existing employees are drawn from different department,
Finance, Central warehouse, Purchase, Production, and cost accounting
division.
Therefore, the first table focuses on the introductory questions like
department, gender, age, educational background and work experience.
The rest tables focus on the different issues that means based on the
different questionnaires.

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3.1 Analysis of the characteristics of the study participants

Table 3.1.1: presentation of the characteristics of the study

participants

No Background of respondents No. of respondents Percentage

1 Department
Finance 2 7
Central warehouse 3 10
Purchase 3 10
Production 4 13
Cost accounting division 18 60
Total 30 100
2 Gender
Male 21 70
Female 9 30
Total 30 100
3. Age
Below 30 6 20
30-50 18 60
Above 50 6 20
Total 30 100
4. Education level
Under grade 12 - -
Diploma level 18 60
Degree level 9 30
Above degree 3 10
Total 30 100
5 Work experience
1-10 years 6 20
10-20 years 18 60
Above 20 years 6 20
Total 30 100

The above table illustrates number and percentage of the characteristics

respondents’ response on department, gender, age, education level, and
work experience. Response on department shows 60% of the respondents

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are in the cost accounting division the rest 40% are distributed in the
other departments which is 7% finance, 10% from central warehouse,
10% from purchase department, and the rest 13% from the production
department. Sex ratio prevail in the final study of 30 respondents show
that 21(70%) of male respondents and 9(30%) of female respondents as
indicate in the above table. Response on age show that 20% of the
sample employees below 30, 60% is between 30-50 age intervals, and the
rest 20% above 50 ages. From the sample employee above 60% are
diploma holders, 30% are at degree level, and the rest 10% are above
degree level. According to the above table employees work experience
show that 20% of the sample employees are 1-10 years, from 10-20 years
60%, and the rest are above 20 years which is 20% of the sample
employees.

3.2 Analysis of the study findings

To solve the main research problem and answer the research questions
the student research team has used descriptive research design. The
team used descriptive design to describe the real facts in which are
collected about the characteristics of the company’s costing staff and the
company’s procedures of production cost determination.

The team has classified the collected data in to different categories based
on the measurement scale used by each question of the questionnaire
and present in table form. The frequency and percentage distributions of
the respondents’ responses are identified, for each question; and such
tabulated data are analyzed and interpreted under each table.

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3.2.1 Organization of costing staff department

Table 3.2.1 Strength and weakness of costing staff

No Types of No of Percen
Questions response respon tage
dents
1. Does the company have a separate cost Yes 30 100
accounting department? No - -
I don’t - -
know
Total 30 100
2. If your answer is yes for question one does it Yes 30 100
has adequate staff members and are they
efficient? No - -
I don’t - -
know
Total 30 100
3. Are the cost accounting staff members Yes 18 60
professionally qualified in accounting?
No 12 40

I don’t - -
know
Total 30 100
4. Do you think this staff is discharging its Yes 18 60
responsibility?
No - -
I don’t 12 40
know
Total 30 100
5. If your answer is no for question1; is there Yes 21 70
other party who records cost data? No 9 30
I don’t - -
know
Total 30 100
6. Do you think this responsible party can discharge its Yes 21 70
responsibility properly? No - -
I don’t 9 30
know
Total 30 100

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Based on the respondents on the above table we can understand that

the companies have a separate cost accounting department with
adequate staff members which are fairly efficient in their work which
is confirmed by 100% of the respondents answer. We are observed
that in our study KFSC have a separate cost accounting department
with dependent duties which are:-
 Cost accountant has the duty to provide information whether
costs is placed for the required purpose or not.
 Cost accountant has the duty to record and formalize
transactions in a formal manner and also preparing yearend
adjustments.
 To follow up tax for payments
 To prepare corporate budget of the company.
 To compute manufacturing costs each year.
From response we get 60% of the respondents agreed on the fact that
the accounting staff members are professionally qualified in cost
accounting. Costing staff members have sufficient knowledge and skill
i.e he/she is responsible to provide the right information about cost
and budget at the right time for management to help them for their
decision making practically for planning and controlling. Cost
accountant has the duty to provide information whether costs is
placed for the required purpose or not; to follow up tax for payments;
prepare corporate budget of the company and many other
responsibilities.

60% of the respondents believe that the employees satisfy

responsibilities and skills heeded for the costing department. The
respondents also answered that the costing department have
adequate staff members which are efficient discharging their
responsibility properly. The rest 40% of the respondents answered
that they have no information on the subject matter.
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3.2.2 Purchase of raw material and Inventory management

Table 3.2.2: Respondents answer in connection with purchase of raw

material and inventory management

No Types of No of Percen
Questions response respon tage
dents
1. Does the firm purchase raw materials for Yes 30 100
stock?
No - -
I don’t - -
know
Total 30 100
2. Does the firm use just in time inventory Yes 21 70
management?
No - -
I don’t 9 30
know
Total 30 100
3. Does the company have proper purchasing Yes 18 60
procedures? No 12 40
I don’t - -
know
Total 30 100
4. If your answer is yes for question 3 does it Yes 18 60
follow properly? No - -
I don’t 12 40
know
Total 30 100
5. Do you think this staff is discharging its Yes 15 50
responsibility? No 15 50
I don’t - -
know
Total 30 100
6. If you said yes for question 6 does it submit the Yes 15 50
receiving report to submit to the costing No 15 50
department for record?
I don’t - -
know
Total 30 100

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From the answers collected about the purchase of raw materials and
inventory management 100% of the respondents confirm that the
company purchase raw materials for stock. KFSC purchase department
is usually engaged in purchasing a number of materials and services
falling in different categories. The activities are performed regularly by
purchase professionals with the objective of fulfilling organization’s
materials and service’s needs.
70% of the respondents agree on the point that the company use just in
time inventory management. The rest of the respondent’s i.e 30% does
not have information about the company’s inventory management
system. KFSC conducted physical inventory once a year. In addition it is
clear to see from the respondents answer who participated in physical
inventory has observed:
 During physical count some custodians were not willing to
show all the properties under their control due to lack of
knowledge or understanding the purpose of physical inventory.
 During physical count from year to year some disposed asset
are counted
 Responses on missing number of assets show the existence of
assets without identification number.

The company has proper purchasing procedures and 60% of the

respondents confirm on this fact and it is followed by proper method. The
purchasing department also provides accurate supplier costs and
accurate transportation costs. None of the respondents have information
if purchasing department submits the proper documents to the cost
accounting department for record of the time of delivery.

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According to the responses collected from the staff 50% of the

respondents agree on the point that the purchasing management staff is
discharging their responsibilities; like receiving report to submit to the
costing department for record. In KFSC usually checked against a
purchase order (PO) before payment. As we observed they also provides
vital information to the product costing effort. For example: input
transaction data in a timely and accurate manner and identify any
discrepancies in the bills of material and routing. The rest 50% of the
respondents disagree on the point that the purchasing management staff
is discharging their responsibility.
.
Table 3.2.3: Issue related with store keeper and costing department

No Types of No of Percen
Questions response respon tage
se
1. Does the store keeper send and copy material Yes 30 100
receiving voucher to the costing department on
No - -
time?
I don’t - -
know
Total 30 100
2. Does the costing department record the Yes 21 70
purchaser transaction immediately when it gets
the proper source documents? No - -
I don’t 9 30
know
Total 30 100

Based on respondents on the above table we can understand that 100%

of the respondents agree on the fact that the storekeeper send and copy
material receiving voucher to the costing department on time. In KFSC
Storekeeper is responsible for safeguarding the materials and supplies in
proper place until they are required for production activities. The
storekeeper have responsibilities such as maintaining the proper record

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of materials relating to the receipt and issue of materials; Arranging for

physical verification of store items periodically; Supplying information of
materials, stock position and so on whenever needed; Checking the
physical quantity of materials and verify with a bin card; and Preventing
unauthorized entrance into the store room.

The respondents which are 70% point that the costing department
records the purchaser transaction immediately when it gets the proper
source document. The rest 30% of the respondents doesn’t have
sufficient information on the subject matter.

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3.2.3 Product costing system

Table 3.2.4: presentation of accounting system and production

No Types of No of Percen
Questions response respon tage
dents
1. Does the firm use double entry accounting Yes 21 70
system?
No - -
I don’t 9 30
know
Total 30 100
2. Does the firm use accrual basis of accounting? Yes 21 70
No - -
I don’t 9 30
know
Total 30 100
3. Does the company produce distinct products Yes 18 60
for a time basis? No 12 40
I don’t - -
know
Total 30 100
4. If you said yes for question 3 does it record Yes 21 70
their production cost separately on a cost
No - -
sheet?
I don’t 9 30
know
Total 30 100
5. If your answer is no for question 3, does it Yes 18 60
produce massive similar units of products for a
long period of time? No - -
I don’t 12 40
know
Total 30 100

For the question presented on presentation of accounting system and

production the company uses double entry accounting system and 70%
of the respondents confirm this and the rest 30% did not have

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information about the question. KFSC use double entry accounting

system. Double entry accounting is based on the fact that every financial
transaction has equal and opposite effects in at least two different
accounts. It is used to satisfy the equation Assets = Liabilities + Equity,
whereby each entry is recorded so as to maintain the relationship. In the
double entry system, transactions are recorded in terms of debits and
credits. Since a debit in one account will be offset by a credit in another
account, the sum of all debits must therefore be exactly equal to the sum
of all credits.

70% of the respondents approve that the firm uses accrual basis of
accounting which provides a better view of the company’s current result
and the future earning potential of the company. KFSC produces distinct
product for a time basis with recording their production cost separately
on a cost sheet and 70% of the staffs agree with the point. 60% of the
respondents stated that it produces massive similar units of products for
a long period of time.

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Table 3.2.5: presentation of product costing system

No Types of No of Percen
Questions response respon tage
dent
1. Does it have more than one product? Yes 21 70
No - -
I don’t 9 30
know
Total 30 100
2. If your answer is yes for question 1, are they Yes 21 70
preceded jointly to their splitting point? No - -
I don’t 9 30
know
Total 30 100
3. Are the production costs accumulated in Yes 18 60
department basis? No 12 40
I don’t - -
know
Total 30 100
4. Does the production department use material Yes 21 70
requisition form to receive raw materials from No - -
the store? I don’t 9 30
know
Total 30 100
5. Does the production department have material Yes 15 50
specification? No 15 50
I don’t - -
know
Total 30 100
6. If you answered question 5 yes does it request Yes 18 60
material based on such specification? No - -
I don’t 12 40
know
Total 30 100
7. Does the production department return back to Yes 15 50
store and inform the costing department when No - -
it has excess raw materials? I don’t 15 50
know
Total 30 100

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The firm produces more than one product which is following in more
than one processing unit which is preceded jointly to their splitting point.
70% of the respondents have confirmed these stages of production and
the rest 30% of the respondents did not have enough information about
the question. KFSC attempts to achieve the primary objective of
satisfying the society demand by producing a Varity of products. The
main products of this company are varies grades of wheat flour, bread,
sweet biscuits, high energy biscuits, varied types of spaghetti (long
pasta), varied types of macaroni, and positing, on the other hand the
company also supplies industrial by products derived from wheat flour in
the form of animal feeds.

The respondents which are 60% stated that the production cost is
accumulated in department basis. Kalti food Share Company designed
its cost centers in three main departments based on the function and
operation of the machineries, the type of products. The activities of the
department engaged in products identified based on these cost structure
and pricing derivate after accumulating the prime cost under each cost
centers.

These production cost centers are wheat flour line department, spaghetti
(long pasta) line department and various types of Macaroni line
departments. This product costing systems of the factory employee
several manufacturing accounts. As production take place, all
manufacturing costs are added to the work in process inventory. As soon
as products are completed their product costs are transferred from work
in process inventory to finished goods inventory during the time period
when products are sold.

The product cost of inventory sold is removed from finished goods and
added to cost of goods sold which is an expense of the period in which
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the sale occurred. Cost of goods sold is closed in to the income summary
account at the end of the accounting period. In process costing, labor,
material and overhead costs offer are incurred at different rates in
production process. Direct material is usually placed in to production at
one or more discrete points in the process. In contrast, direct labor and
manufacturing overhead, called conversion costs, and usually are
incurred continuously throughout the process when an accounting
period ends, the partially completed with respect to material and
conversion activity. And the rest 40% disagree.

70% of the respondents point that the production department use

material requisition form to receive raw materials from the store. Half of
the respondents (50%) agreed that the production department have
material specification while the other half does not agree on the subject
matter. The company uses process costing for products that are
produced in mass production of the like units which usually pass in
continuous flow through a series of uniform production stage called
process or operations. The basic approach to this costing system is to
accumulate costs in a particular operation or processing department for
the entire and then divided the total accumulated cost by the total
number of units completed during the period to determine the unit cost
of the product.

Based on the answer collected from the staff 50% said that the firm
requests material based specification. Half of the respondents point
production department return back to store and inform the costing
department when it has excess raw materials. On this subject the rest
50% does not have adequate information.

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Purpose of product costing for the company

Kaliti food Share Company use product costing for three purposes.
According to the respondents costing has three purposes mainly at Kaliti
food Share Company. Each of them is listed below.
1. For financial statement: reporting papoose Kaliti food share
company product costing is also used for purpose financial
statements. Its importance is to prepare a schedule of cost of goods
manufactured a schedule of cost of goods sold, and an income
statement.
2. For setting price purpose: Pricing a product is one of the
important ingredients in profitability decision and major
determinant for the factory to share the market. The pricing
approach adapted by Kalliti food Share Company is cost plus
pricing approach. The reason to choose cost for product pricing
are:-
- Because of practical simplicity: there is not sufficient time to
price a product through demand and marginal cost analysis
and so the manger of this factory must rely on a quick and
straight forward method for selling price. As a good starting
point, product cost gives the factory’s manger the place to
start product pricing.
- To maintain the margin in order not to price product below
their cost and then by minimizing the degree of loss.
3. For control purpose: The cost estimate embodies the standard
against which actual costs incurred during production can be measured.
The data can be used to correct adverse situations.

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3.2.4 Manufacturing overhead allocation

Table 3.2.6: issue related with manufacturing overhead allocation

No Types of No of Percen
Questions response respon tage
se
1. Do you think the firm use proper predetermine Yes 30 100
rate for allocating manufacturing overhead No - -
costs?
I don’t - -
know
Total 30 100
2. Does the firm have a proper time keeping Yes 30 100
mechanism to identify the labor hour
consumption? No - -
I don’t - -
know
Total 30 100
3. Does the cost allocating department use more Yes 18 60
than one pool for accumulating indirect costs?
No 12 40

I don’t - -
know
Total 30 100
4. If yes, for question 3, does it properly allocate Yes 18 60
all of them to the cost object?
No - -
I don’t 12 40
know
Total 30 100
5. Does the accounting department prepare Yes 18 60
interim production reports to management? No - -
I don’t 12 40
know
Total 30 100

based on the respondents about issues related with manufacturing over

head allocation on the above table 100% of the respondents agreed that

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the firm uses proper predetermined rate for allocating manufacturing

costs; and also that the firm have proper time keeping mechanism to
identify the labor hour consumption. KFSC have two types of overhead,
which are administrative overhead and manufacturing overhead.
Administrative overhead includes those costs not involved in the
development or production of goods or services, such as the costs of front
office administration and sales; this is essentially all overhead that is not
included in manufacturing overhead. Manufacturing overhead is all of
the costs that a factory incurs, other than direct costs.

60% of the respondents stated that the cost allocating department uses
more than one pool for accumulating indirect costs i.e costs that are
related to the cost object but that cannot be traced to it an economically
feasible way incurred in the practices of manufacturing a product and
are not charged as direct material or direct labor costs as particular cost
centers. Such costs like indirect labor cost, indirect materials cost,
depreciation, electricity and water, repair and maintenance, fuel,
stationary, insurance and others.

The factory also use actual over head rate which is the rate at which
overhead cost are actually incurred during an accounting period. Cost
allocation base that should be used when allocating the indirect cost
pools.

APOHR= AOH Cost for the accounting period where: Actual product
Actual amount of the cost driver APOHR= overhead

The typical procedure for allocating overhead is to accumulate all

manufacturing overhead costs into one or more cost pools, and to then

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use an activity measure to apportion the overhead costs in the cost pools
to inventory. Thus, the overhead allocation formula is:

Cost pool / Total activity measure = Overhead allocation per unit

They also allocate overhead costs by any reasonable measure, as long as

it is consistently applied across reporting periods. Common bases of
allocation are direct labor hours charged against a product, or the
amount of machine hours used during the production of a product.
The respondents also point that the firm allocates all of the indirect costs
to the cost object properly. But the rest 40% does not agree on the above
fact.

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3.2.5 by product costing, spoilage and process costing

Table 3.2.7: presentation of byproduct, spoilage, and process costing

No Types of No of Percen
Questions response respon tage
se
1. Does the firm have supervisors for product Yes 21 70
quality inspection? No - -
I don’t 9 -30
know
Total 30 100
2. Does the firm production department produces Yes 30 100
spoiled outputs? No - -
I don’t - -
know
Total 30 100
3. Does the firm have by products? Yes 18 60
No 12 40
I don’t - -
know
Total 30 100
4. If your answer is yes for question 3, do you Yes 21 70
think the value of by products are treated well No - -
through allocating? I don’t 9 30
know
Total 30 100
5. If your answer is yes for question 2, do you Yes 18 60
think that the production cost of good products No - -
consider the cost of spoilage? I don’t 12 40
know
Total 30 100

As seen in the above table about presentation of byproduct 70% of the

respondents have stated that the company has supervisors for product
quality inspection and the rest 30% does not have enough information
about the production quality inspection.

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All of the respondents confirm that the production department produces

spoiled outputs and also on the fact that the firm have byproducts.
The respondents which is 70% point that the value of byproducts are
treated well through allocating while the other 30% of the respondents
does not have information about the byproducts allocation. The factory
supplies industrial By Products derived from wheat flour in the form of
animal feeds. The cost of By Product accounting methods is normally
used. As we observed the production method recognized the By Product
at the time of production. The sales method delays recognition of By
Product until the time of sale.

We have observed 60% of the respondents agreed that the production

cost of goods product consider the cost of spoilage. In product costing,
the cost of direct materials includes cost of scrape, waste and normally
anticipated spoilage that occur in ordinary course of production process.
Unanticipated or abnormal amount of scrape, west and spoilage should
be expressed in the period incurred or, in some situation, may be
included in the factory overhead. Then the company use directly this
type of costing system for the treatment of allocation of the cost. The rest
40% of the respondents challenge the above fact.

In cost accounting, process costing assumes that all units produced are
identical. When spoilage creates costs in a process-costing environment,
the company applies the following methods to account for them.

Cost accounting for abnormal spoilage

Accountants post the cost of abnormal spoilage to a “loss for abnormal

spoilage” account. The loss isn’t related to cost of goods manufactured.
Instead, abnormal spoilage is a separate cost that you can’t recover.

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As a result, abnormal spoilage isn’t included as a product cost. So they

break it out first. The company accountant will put the cost in a loss
account separate from costs of manufacturing.

Cost accounting for normal spoilage

Costing normal spoilage takes a little math. The company adds spoilage
costs to cost of goods manufactured. Now consider how costs are
assigned using process costing.

As units move from one production department to another, the costs

move along with them. Process costing uses equivalent units to account
for units that are partially complete. The percentage of completion for
material cost might be different from conversion costs, and vice versa.
Equivalent units even things out. The goal is for each equivalent unit to
have the same amount of costs attached to it.

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. 3.2.6 Costing system effectiveness and convenience

Table 3.2.8: presentation of costing system effectiveness and convenience

No Types of No of Percen
Questions response respon tage
se
1. Do you think the company’s current costing Yes 21 70
system is proper according to its setting?
No 9 40
I don’t - -
know
Total 30 100
2. Do you thing the costing department is properly Yes 18 60
discharging its responsibility?
No 12 40
I don’t - -
know
Total 30 100
3. Do you think the current costing system Yes 18 60
enables the department to assign fair
production cost to products? No 12 40

I don’t - -
know
Total 30 100
4. If your answer is yes for question 3 does it Yes 18 60
follow properly?
No - -

I don’t 12 40
know
Total 30 100
5. Is the current costing system convenient for Yes 18 60
cost effective production cost assignment? No - -
I don’t 12 40
know
Total 30 100

Based on the respondents on the above table we can understand that

70% of them agreed that the company’s current costing system is proper
according to its setting and the rest 30% disagree that the firm does not

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have proper costing system. Kaliti food Share Company prepares cost of
goods manufacturing statements monthly, then the total amount for the
year is added for the preparation of financial statements i.e. income
statements. It is this measurement that shows profitability of the
company. Therefore, the need for reduced production costs is given great
attention in attaining the organizational objectives.

The respondents which is 60% stated that the costing department is

properly discharging its responsibility and also the current costing
system enables the department to assign fair production cost to products
and convenient for cost effective production cost assignment while the
rest 40% disagree on the above point. Mangers expect the cost data as
much useful as required so that various usable economic decisions can
be drawn from it. As a result the cost accountant has the highest
responsibility of presenting the cost data in a way that makes decision
makers understand easily, interpret and make decision based on it.
Selling prices of manufactured goods in Kaliti food Share Company are
set based on two important factors. The production cost of which is
directly related to input price. As cost of production increase selling price
accordingly will increase to retain the profit margin at its original
amount. The other is the demand factor.

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CHAPTER FOUR

SUMMARY, CONCLUSION AND RECOMMENDATION

4.1 Summary
As it is stated in the background section, product costing is the cost of
direct labor, direct material, and manufacturing overhead that are used
to create a product. And the purposes are for preparing financial
statement, setting price, and for control purpose. Even if product costing
has the above listed benefits for firms the company has a problem of
price setting for its products because the production cost of products is
not properly and clearly determined. The objective of this study was
assessing the product costing system of the company. To solve the main
research problem the student research team has used descriptive
research design and primary and secondary data sources are used.
From Kality Food Share company cost accounting manual and from the
respondents answer we have observed the following:-
 Kality food Share Company has no updated manual.
 The company uses cost accounting for their product pricing purpose
and for preparation of their financial statements.
 It uses cost plus pricing approach to price their product by
computing the material cost.
 The preparation of financial statement also used to know its net
income and net loss.
 The current costing practice of product costing used for preparing
financial statement, for setting price purpose and for control
purpose.
 The company uses both process costing and job order costing
system.
 Costing system for products that are produced in mass production
which usually pass in continuous fashion is process costing system.

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These costing systems accumulate costs in a particular costing

center.
 The company use job order costing system for some of its products
that are manufactured in identical lots of groups or that are
produced according to customer order specifications. In job order,
cost is accumulated in which it occurred.
 KFSC purchase raw material from different suppliers who sell their
materials at different price.
 Most of the productive department employees found at lower position
is not qualified as their position require, even though they acquired
the position by long experience.

4.2 Conclusions

Based on the data presentation, analysis and interpretation of the

previous chapter, the following conclusions are forwarded.

 Kality food Share Company is vast organization that spends huge

amount of budget on cost.
 KFSC producing a variety of products to satisfying the society
demand.
 KFSC have a separate cost accounting department with adequate
staff members which are fairly efficient.
 KFSC use proper controlling mechanism for handling and keeping
of cost related transactions.
 The current product costing system, cost center allocation, and
cost allocation base are found at good level with the existence of
some problem.
 At the time of production KFSC recognize byproducts which are
derived from wheat floor in the form of animal feed.

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 KFSC have a problem of price differentiation for the same product

these is due to purchase of raw material from different supplier.
 We are positively looking KFSC have to take proper action on the
point we describe in our finding the company has to plan in order
to reduce poor productivity of labor.
 We have tried to reconcile the theoretical and practical
accomplishment on the practice of cost accounting in the analysis
part of our study and we have given our conclusion on the findings
of the company cost accounting practice that have to be more of as
corrected.

4.3 Recommendation

As concluding remark, we would like to forward some recommendations

on the Kaliti food share company product costing practices.

 Buying raw materials from one reliable supplier to eliminate the

different cost of products. Rather than buying supplies from
different supplier.
 KFSC attract highly qualified professionals for its supportive
departments with good pay and employee benefit in order to
improve their poor labor productivity.
 KFSC purchasing department must follow the company
purchasing procedure in order to make input transaction data in
timely and accurate manner.
 In order to implement product costing efficiently and effectively
and run KFSC business by controlling costs and increase its profit
timely, modern costing method has to be implemented.
 As much as possible teach the organization employee about
product costing and its purpose.

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 Delegation of authorities with accountability should be directed

down to each level of organization units as well as to each
individual who possess KFSC property.

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 ST.MARY’S UNIVERSITY
Department of Accounting
Questionnaire
On cost accounting practice

Dear respondent,

The aim of this study is for the partial fulfillment of degree program in St.mary,s University.

The issue of questionnaire is to obtain your perceptions, opinion and views on cost accounting
practice in your corporation. It forms major parts of the project and the information you give will
enable us to establish a clear picture of cost accounting in certain organization. Your cooperation
to respond is very important to this research survey because it represents hundreds of others who
are not included in our sample. Please answer every question. Space is provided at some parts of
the section for you to add.

Further we would like to stress that all information you provide will be treated in strictest
confidence.

We thank you very much for your cooperation.

RESEARCH QUESTION TO DEPARTMENTS OF KALITY FOOD SHARE COMPANY

ON COST ACCOUNTING.

Guideline:- Please read each question and put (√) mark of your response on the box provided.

No need of writing your name

Department

□Finance □ Purchases □Production □ Cost accounting divition

a
□ Other Specify ________________________________________
Gender

□Male □ Female
Age

□ Below 25 □ 26-30 □ 31-40 □ 40-50 □ above 50

Educational Background Work Experience

□ 10 th
complete □1-8
□ Certificate □9-15
□Diploma Holder □16-20
□ BA Holder □20-25
□ Other Specify _________________________ □above 25

A. Question about the cost accounting department

artme

1. Does the company have a separate cost accounting department?

□yes □No □I don’t know

2. If your answer is yes for question one does it has adequate staff members?

□yes □No □I don’t know

3. If the department has adequate staff members in number, are they efficient?

□yes □No □I don’t know

4. Are the cost accounting staff members professionally qualified in accounting?

□yes □No □I don’t know

5. Do you think such employees have sufficient knowledge and skill for their job responsibility?
b
 □yes □No □I don’t know
6. Do you think this staff is discharging its responsibility?

□yes □No □I don’t know

7. If your answer is no for question1; is there other party who records cost data?

□yes □No □I don’t know

8. Do you think this responsible party can discharge its responsibility properly?

□yes □No □I don’t know

B. Question about product costing system

1 Does the firm purchase raw materials for stock?

□yes □No □I don’t know

2 Does the firm use just in time inventory management?

□yes □No □I don’t know

3 Does the company have proper purchasing procedures?

□yes □No □I don’t know

4 If your answer is yes for question 3 does it follow properly?

□yes □No □I don’t know

5 Does the purchasing department submit the proper documents to the cost accounting
department for record at the time of delivery?

□yes □No □I don’t know

6 Does the company have receiving committee?

□yes □No □I don’t know

7 If you said yes for question 6 does it submit the receiving report to submit to the costing
department for record?

□yes □No □I don’t know

8 Does the store keeper send and copy material receiving voucher to the costing department on
time?

□yes □No □I don’t know

9 Does the costing department record the purchaser transaction immediately when it gets the
proper source documents?

□yes □No □I don’t know c

10 Does the firm use double entry accounting system?

□yes □No □I don’t know

11 Does the firm use accrual basis of accounting?

□yes □No □I don’t know

12 Does the company produce distinct products for a time basis?

□yes □No □I don’t know

13 If you said yes for question 12 does it record their production cost separately on a cost sheet?

□yes □No □I don’t know

14 If your answer is no for question 12, does it produce massive similar units of products for a long
period of time?

□yes □No □I don’t know

15 Does it have more than one product?

□yes □No □I don’t know

16 If your answer is yes for question 15, are they following in more than one processing unit?

□yes □No □I don’t know

17 If your answer is yes for question 16, are they preceded jointly to their splitting point?

□yes □No □I don’t know

18 If your answer is no for question 16, are they proceeded separately?

□yes □No □I don’t know

19 Are the production costs accumulated in department basis?

□yes □No □I don’t know

20 Does the production department use material requisition form to receive raw materials from
the store?

□yes □No □I don’t know

21 Does the production department have material specification?

□yes □No □I don’t know

22 If you answered question 21 yes does it request material based on such specification?

□yes □No □I don’t know

23 Does the production department return back to store and inform the costing department when
it has excess raw materials?

□yes □No □I don’t know d

24 Do you think the firm use proper predetermine rate for allocating manufacturing overhead
costs?

□yes □No □I don’t know

25 Does the firm have a proper time keeping mechanism to identify the labor hour consumption?

□yes □No □I don’t know

26 Does the cost allocating department use more than one pool for accumulating indirect costs?

□yes □No □I don’t know

27 If yes, for question 26, does it properly allocate all of them to the cost object?

□yes □No □I don’t know

28 Does the accounting department prepare interim production reports to management?

□yes □No □I don’t know

29 Does the firm have supervisors for product quality inspection?

□yes □No □I don’t know

30 Does the firm production department produces spoiled outputs?

□yes □No □I don’t know

31 Does the firm have by products?

□yes □No □I don’t know

32 If your answer is yes for question 31, do you think the value of by products are treated well
through allocating?

□yes □No □I don’t know

33 If your answer is yes for question 32, do you think that the production cost of good products
consider the cost of spoilage?

□yes □No □I don’t know

C. Question related with costing system effectiveness and convenience

1. Do you think the company’s current costing system is proper according to its setting?

□yes □No □I don’t know

2. Do you thing the costing department is properly discharging its responsibility?

□yes □No □I don’t know

3. Do you think the current costing system enables the department to assign fair production
cost to products? e
 □yes □No □I don’t know
4. If your answer is yes for question 3 does it follow properly?

□yes □No □I don’t know

5. Is the current costing system convenient for cost effective production cost assignment?

□yes □No □I don’t know

6. What is your opinion about the effectiveness of the current costing system?
………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………
…………………………………………
7. What is your comment for improving the current system of product cost determination?
………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………
………………………………………..

f
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