UNIVERSITY EXAMINATIONS: 2019/2020 EXAMINATION FOR THE DIPLOMA IN BUSINESS INFORMATION TECHNOLOGY DBIT 402: COST ACCOUNTING FULL TIME DATE: MAY 2020 TIME: 6 HOURS INSTRUCTIONS: Answer ALL QUESTIONS. SECTION B: (20 MARKS) Horizon Ltd is a manufacturing company which products a single product. The following standard unit costs relate to the product: Fixed manufacturing costs per unit are based on a predetermined absorption rate established at a normal activity level of 45,000 production units per period. Fixed selling and administration costs are absorbed into the cost of sales at 20% of selling price. Under/over absorbed overheads are transferred to the profit and loss account at the end of the period. The following information is available for two consecutive periods: Required: a) Prepare income statements using marginal and absorption costing (13 Marks) b) Prepare a reconciliation statement of profits in (a) above (3 Marks) c) Outline two strengths and two weaknesses of marginal costing. (4 Marks) SECTION C: (20 MARKS) Tindo ltd buys and sells product Q-3. It values stock on the basis of last in first out (LIFO). On 1 June 2018, stock in hand consisted of 4,500 units which were acquired at ksh. 50 per unit. The operations for the month were as follows: The company incurred operating cost of ksh. 450,000 during the month. Required: a) Prepare the stores ledger card. (14 Marks) b) Determine the closing stock valuation. (2 Marks) c) Prepare the trading account for the month. (4 Marks)