The document provides instructions for a cost accounting exam consisting of two sections. Section A contains 30 multiple choice questions testing knowledge of cost accounting concepts. Section B contains 3 long-form questions asking students to describe concepts, perform calculations related to inventory management, and prepare a cost of production report using weighted average methods. The exam is worth 60 marks total and tests students' understanding of key cost accounting principles and calculations.
The document provides instructions for a cost accounting exam consisting of two sections. Section A contains 30 multiple choice questions testing knowledge of cost accounting concepts. Section B contains 3 long-form questions asking students to describe concepts, perform calculations related to inventory management, and prepare a cost of production report using weighted average methods. The exam is worth 60 marks total and tests students' understanding of key cost accounting principles and calculations.
The document provides instructions for a cost accounting exam consisting of two sections. Section A contains 30 multiple choice questions testing knowledge of cost accounting concepts. Section B contains 3 long-form questions asking students to describe concepts, perform calculations related to inventory management, and prepare a cost of production report using weighted average methods. The exam is worth 60 marks total and tests students' understanding of key cost accounting principles and calculations.
The document provides instructions for a cost accounting exam consisting of two sections. Section A contains 30 multiple choice questions testing knowledge of cost accounting concepts. Section B contains 3 long-form questions asking students to describe concepts, perform calculations related to inventory management, and prepare a cost of production report using weighted average methods. The exam is worth 60 marks total and tests students' understanding of key cost accounting principles and calculations.
GENERAL INSTRUCTIONS: 1. There are two sections in this paper. Attempt ALL questions in Section A, and any three (3) questions from Section B. 2. This exam carries 60 marks. All questions carry equal marks. 3. Show all your workings. 4. Your answer should be relevant and to the point. 5. You are reminded to adhere to ALL Institute’s Examination Regulations. SECTION A: ANSWER ALL QUESTIONS IN THIS SECTION
The following are descriptions and examples of cost accounting concepts. Identify the type of cost that best fit the description from 1-30 below. Write in your answer booklet.
QUESTION ONE (TOTAL 15 MARKS)
1. ……………………implies the entire distribution of the overhead item to the
departments on a logical basis or is the direct allotment of cost to the traceable cost object. It is the process of associating the expenses incurred, to different departments of the organization.
2. …………………….refers to distribution of various overhead items, in proportion, to
the department on a logical basis. When the cost items cannot be out rightly charged to or accurately traceable to a particular cost center, then such items of cost are prorated amongst various cost objects, on an equitable basis.
3. If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period, the difference is known as ……….
4. If the manufacturing overhead cost applied to work in process is less than the manufacturing overhead cost actually incurred during a period, the difference is known as………….
5. ………….. associated with preventing defects such as Training, early reviews, quality planning, tools, process improvement initiatives.
6. ……………associated with analyzing and testing the product to ensure it conforms to
specifications. Such as Inspections, testing, audits, quality control
7. ……………. associated with fixing defects found prior to release.Such as Repair,
retesting, updating documentation
8. …………… associated with fixing defects found after release such as Technical support, defect reporting and tracking, field updates, loss of future sales
9. It is an activity or item or operation for which a separate measurement of costs is
desired E.g. the cost of operating the personnel department of a company, the cost of a repair fob, and the cost for control 10. It is a location or function of an organization in respect of which costs are ascertained in other words smallest segment of activity or area of responsibility for which cost is accumulated
1 11. It is location or function where managers are accountable for sales revenues and expenses E.g. division of a company that is responsible for the sales of products 12. is the Cost that can be identified specifically with or traced to a given cost object but the unit cost remains constant 13. remains constant over a relevant range of activity level but unit cost falls with an increase in activity volume 14. this cost increases or decreases with activity level but not in direct proportion with the level of activity 15. this cost remains constant for a range of activity levels, then, on further increase in activity, the cost jumps to a new level and remains constant over a certain range until the next jump occurs. 16. salaries of factory supervision and office staff, stationery, consumable supplies, spare parts for machine that assist to the production of final products 17. In a garment industry the cost of fabrics in garments plus the cost of remuneration for working time such as tailors’ wages plus the cost of hiring a machine for producing buttons for the garment are regarded as ………. 18. are the resources that have been acquired and are expected to contribute to the future revenue They will be recorded as assets in current period. They will be charged as expenses when they have been consumed in the generation of revenue 19. are the expenses attributable to the generation of revenue in the current period 20. Provides information to users who are external to the business. It reports on past transactions and its format are governed by law and standards. 21. Is concerned with internal users of accounting information, such as operation managers. The generated reports are specific to the requirement of the management to ascertain and control cost and the reporting can be in any format which suits the users 22. These are costs of resources already acquired. They are costs that have been created by a decision made in the past. 23. If labour is diverted from product A to product B, the relevant cost is not the amount paid to the worker but the Contribution lost if the product A cannot be made. The contribution lost for not producing product A is…….. 24. ………is when at a particular level of management, a manager can exercise significant influence over the cost and if a manager at a particular level of management can authorize the cost 25. ………A range of business activity within which the assumptions made about cost behavior are valid 26. are incurred in the event of temporary cessation of activities. Can be saved if activities are allowed to continue 27. Are those costs that result from a permanent cessation of business activities e.g. costs connected with disposal of a non-current assets 28. Cost that is considered to be part of the cost of merchandise. For a retailer, cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g. freight-in. For a manufacturer the product costs include direct material, direct labor, and the manufacturing overhead (fixed and variable).
2 29. These costs are treated as expenses of the accounting period in which they are incurred because they are expected not to benefit future periods 30. Occur when an organization runs out of a particular item for which there is a customer demand
SECTION B: ATTEMPT ANY THREE QUESTIONS
QUESTION TWO (TOTAL 15 MARKS)
(a) Describe the following concepts i. Just-In-Time (JIT) ii. Bullwhip Effect iii. Buffer Stock (4.5 marks)
(b) RAHISI LTD has provided you with the following information relating to its stock: -
Average usage 12,000 units per week
Minimum usage 8,800 units per week Maximum usage 15,800 units per week Lead time (the time between ordering and 3-5 weeks replenishment of goods) Ordering cost per order TZS18,000 Annual cost of carrying a unit in stock TZS780
Required: Calculate (10.5 marks)
i. Economic Order Quantity (EOQ) ii. Reorder level iii. Reorder quantity iv. Minimum level v. Maximum level
QUESTION THREE (TOTAL 15 MARKS)
(a) Explain the following terms i. Normal loss ii. Abnormal loss iii. Scrap value (4.5 marks)
(b) The KD Leather produces a single product –Belts and passes through three process Cutting, Tanning and Packaging. At the beginning of March 2019, KD Leather had 20,500 partially completed belts of KD Leather in the tanning department and its associated cost were as follows:-
Material TZS. 12,955,000
3 Conversion cost TZS 35,050,000
It has received 50,600 belts from the Cutting department in March. The manufacturing cycle takes three months- one month for each department. The company started its manufacturing operation on 1st March, 2019 and the costs of production for the Tanning department for this month were as follows: Material TZS. 61,700,000 Conversion cost TZS 75,900,000
The production statistics for the month were as follow:
Units completed and transfer to finished goods store 60,500 belts Unit in Process on March 31, 2019 (Material 100%, Conversion cost 30%)
Required: Using weighted average method, prepare the Cost of Production Report on 31st of March, 2019 (10.5 marks)
QUESTION FOUR (TOTAL 15 MARKS)
With example explain the following i. Production volume variance A production-volume variance arises when the actual production volume achieved does not coincide with the expected volume of production used as a denominator for computing the fixed-overhead rate for product-costing purposes ii. Overhead Application Rates - Overhead rates are budgeted; they are estimates. The budgeted rates are used to apply overhead based on actual events (5 marks) st (c) Kacha business commenced business on 1 January 2017. It manufactures a special type of chair designed to alleviate back pain. Information on the first two year’s trading is as follows:
2017 2018 Opening stock (chairs) - 1,000 Number of chairs manufactured 5,500 6,500 Number of chairs sold 4,500 5,000 Closing stock (chairs) 1,000 1,500 Budgeted production (chairs) 5,000 5,000 Selling price TZS130,000 per chair Direct materials TZS30,000 per chair Direct labour TZS40,000 per chair Variable production overheads TZS15,000 per chair Annual fixed production overheads TZS100,000,000 Fixed Administrative Expenses TZS 40,000,000 Sales commission TZS 3000 per chair
4 The standard variable production and selling and administrative costs remain the same in both years. The actual fixed manufacturing overhead incurred is TZS100,000,000 each year, and the actual fixed administrative cost is TZS40,000,000 each year
Required: i. The directors ask for your help in producing profit statements using the marginal costing and absorption costing methods for 2017 and 2018. They say that they will use ‘the one that shows the higher profit’ to the company’s bank manager (9 marks) ii. Write a note to the directors explaining the reason for different profit figures and commenting on their statement. (1 mark)
QUESTION FIVE (TOTAL 15 MARKS)
(a) Name any five suitability conditions for the use of time rate system of payment (5 marks) (b) The management of PRIDE LTD wants to formulate an incentive plan for the workers with a view to increase productivity. The following particulars have been extracted from the books of company:
Piece Wage rate TZS. 10,000 per unit
Weekly working hours 40 hours Hourly wages rate TZS. 40,000 (guaranteed) Standard/normal time per unit 15 minutes. Worker A 176 units Actual output for a week Worker B 140 units
Required: From the following information calculate total remuneration for both workers (Worker A and worker B) using (i) Halsey (50%) bonus scheme (ii) Rowan incentive plan (Total 10 marks)
