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Cost and Management Accounting Test 2023 Solutions

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81 views4 pages

Cost and Management Accounting Test 2023 Solutions

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victorlusibam
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Cost and Management Accounting Test 2023

BCOM and BBA


Solutions
Question One
Part a:
(i):
Let Shs. X per hour be the normal wage rate. Wage rate at location A will be Shs. 36x and at
location B - it will be Shs. 48x, on the basis of actual time taken, as against 60 hours
permitted. For time saved, bonus will be payable as under: √
Location A:
𝑇𝑖𝑚𝑒 𝑆𝑎𝑣𝑒𝑑
Bonus under Rowan system= 𝑇𝑖𝑚𝑒 𝐴𝑙𝑙𝑜𝑤𝑒𝑑 × 𝑇𝑖𝑚𝑒 𝑇𝑎𝑘𝑒𝑑 × 𝑅𝑎𝑡𝑒 𝑝𝑒𝑟 ℎ𝑜𝑢𝑟 √
24
Bonus under Rowan system = 60 × 36 × 𝑋 = 14.4𝑋√

Total wages = Shs. 36x + Shs.14.4x = 50.4x√


Overheads @Shs. 20 per hour worked = 36 hrs. × Shs. 20 = Shs. 720
Therefore, total conversion cost is (50.4x+ Shs. 720) = Shs. 1,224 or 50.4x =Shs. 504
Or x = Shs.504/50.4 = Shs. 10√
So, Bonus = 14.4x =14.4 × Shs. 10 = Shs. 144
Location B:
Bonus under Halsey plan = 50% of time saved × rate per hour√
= 50% of Shs. 12x = Shs.6x√
Total wages = Shs. 48x + Shs. 6x = Shs. 54x√
Overheads @ Shs. 20 per hour = 48 hrs. × Shs. 20 = Shs. 960
Total conversion cost is (54x + Shs. 960) = Shs. 1,500 or 54x = Shs. 540
Hence, x= Shs. 540/54 = Shs. 10√
Bonus= 6x = 6 × Shs.10 =Shs. 60
(ii): Comparison
Location A(Rowan) B(Halsey)
Amount Shs Shs
Wages (Shs. 10 per hour) 360√ 480√
Bonus 144√ 60√
Overheads 720√ 960√
Total 1,224 1,500
Each tick 1 mark = 15 Marks
Part b:
(i) Simultaneous Equation Method:
Let Total Cost of Service Department X be Shs. “x” and
Let Total Cost of Service Department Y be Shs “y”
X = Shs. 46,250 + 10% Y
Y = Shs. 15,750 + 10%x
By multiplying both Equations by 100, we get

1
100x = Shs. 46,25,000 + 10y or 100x- 10y = Shs. 4,625,000 (1)
100y = Shs. 15,75,000 + 10x or -10x +100y =Shs. 1,575,000 (2)
By Multiplying Equation (2) by 10, we get
Equation (1) 100x – 10y = Shs. 4,625,000
Equation (2) -100x +1,000y = Shs. 15,750,000
By adding we get 990y =Shs. 203,75,000 ∴ y = Shs. 20,581√
Substituting the value of “y” in Equation (1), we get
100x – (10 × Shs. 20,581) = Shs. 46,25,000 or
100x = Shs. 4,625,000 + Shs. 205,810 or 100x = Shs. 4,830,810
∴ x= Shs. 48,308√

Calculation of Total Overheads of Production Departments:


Cost Element Amount P Q R X Y
Overheads 306,000 75,500√ 72,000√ 96,500√ 46,250 √ 15,750√
Re-apportion X (2:3:4:1) - 9,662√ 14,492√ 19,323√ (48,308) √ 4,831√
Re-apportion Y (4:2:3:1) - 8,232√ 4,116√ 6,174√ 2,058√ (20,581) √
Total Overheads 306,000 93,394 90,609 121,997 0 -

(ii) Calculation of Overhead Rate per Hour:


P Q R
Total Overheads 93,394 90,609 121,997
Working Hours 6,226 4,028 4,066
OAR in Shs 15.00√ 22.49√ 30.00√
20 ticks, ½ mark each = 10 marks
Question Two
a) Distinction between management and financial accounting
Financial Accounting Management Accounting
Primary users of information: Mainly external to the companies Internal to the company like
like investors management
Time dimension/span Reports on past events/or Reports on predetermined
occurrences information i.e. future oriented
Unit of measurement: Addresses financial performance Addresses financial and non-
measures (i.e. matters that can be financial performance measures
(i.e. issues that cannot be
expressed in monetary terms) and quantified) because planning and
therefore supports money decision- making cannot be
enhanced by using quantitative
measurement concept.
information only.
Reporting frequency: Annually/semi-annually Daily/weekly/monthly basis
Legal requirement: Statutory for all public companies optional
Reporting requirements: IAS, IFRS, GAAPS, etc Not an issue/or they are incidental
Audit requirement Must be subjected to external audit Not a requirement
Accounting system Double entry accounting is followed Not necessarily a must
Level of detail: summarised Detailed

2
Measurement of items: Monetary terms Both monetary and non-monetary
terms
Level of standardization Highly standardised with pre-set No standard formats
formats
[Any 10 points @ 1 mark = 10 marks

b) I a UnitsCosts
£
High Level 2,000 188,000
Lower Level 1,800 180,000
Difference 200 8,000
Variable cost per unit = £8,000 /200 = £40 per unit √√ (4mks)

b) I Costs
£
Total production cost for 2,000 units 188,000√
Less: Total variable cost (2,000 x £40) 80,000 √
Total Fixed costs 108,000√
(each tick, 2 marks = 6 marks)
b) ii five ways that can be employed to distinguish the various costing methods
(i) Nature of the products; Homogeneous or differentiated products.
(ii) Volume of production or level of activity
(iii)Stages or processes a product goes through to completion
(iv) Time taken to completion.
(v) Installation and maintenance required.
[any five points@ 1marks = 5 marks]

Question Three
Part a)
𝑪𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝑪𝒐𝒔𝒕𝒔 𝟒,𝟓𝟔𝟎,𝟎𝟎𝟎−𝟑,𝟒𝟒𝟎,𝟎𝟎𝟎
i. Variable cost per unit = 𝑪𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝑶𝒖𝒕𝒑𝒖𝒕 = 𝟏𝟐𝟎,𝟎𝟎𝟎−𝟖𝟎,𝟎𝟎𝟎
= 𝒔𝒉𝒔 𝟐𝟖 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕 √√
𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝟒𝟎−𝟐𝟖 𝟏𝟐
ii. Profit Volume Ratio = 𝑺𝒂𝒍𝒆𝒔
= 𝟒𝟎 = 𝟒𝟎 = 𝟎. 𝟑𝟎 𝒐𝒓 𝟑𝟎%√√
𝑻𝒐𝒕𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝒄𝒐𝒔𝒕𝒔 𝟒,𝟓𝟔𝟎,𝟎𝟎𝟎−(𝟐𝟖×𝟏𝟐𝟎,𝟎𝟎𝟎)
iii. Breakeven quantity = 𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝒑𝒆𝒓 𝒖𝒏𝒊𝒕 = 𝟏𝟐
= 𝟏𝟎𝟎, 𝟎𝟎𝟎 𝒖𝒏𝒊𝒕𝒔√√
iv. Profit at 75% level of Capacity

Shs
Sales Revenue (200,000x40x75%) 6,000,000√
Variable costs (200,000x28x75%) 4,200,000√
Contribution 1,800,000
Fixed Costs 1,368,000√
Profit 432,000√
10 ticks each 1 mark = 10 marks

3
Part b)
𝑻𝒐𝒕𝒂𝒍 𝑭𝒊𝒙𝒆𝒅 𝑪𝒐𝒔𝒕𝒔 𝟕𝟖,𝟎𝟎𝟎
Break even Quantity = 𝑪𝒐𝒏𝒕𝒓𝒊𝒃𝒖𝒕𝒊𝒐𝒏 𝑷𝒆𝒓 𝑼𝒏𝒊𝒕 = 𝟏𝟑
= 𝟔, 𝟎𝟎𝟎 𝒖𝒏𝒊𝒕𝒔 √√√√√√√√

Break even sales = 𝟔, 𝟎𝟎𝟎 𝒙 𝟑𝟐 = 𝑺𝒉𝒔 𝟏𝟗𝟐, 𝟎𝟎𝟎 √√√√√√√

15 ticks each 1 mark = 15 marks

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