BUSS106 INTRODUCTION TO COST ACCOUNTING.
UNIVERSITY EXAMINATIONS: 2018/2019 EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS IN INFORMATION TECHNOLOGY BUSS 106: INTRODUCTION TO COST ACCOUNTING FULL TIME/PART TIME/DISTANCE LEARNING DATE: AUGUST, 2019 TIME: 2 HOURS INSTRUCTIONS: Answer ALL Questions. QUESTION ONE (20 MARKS) a) Distinguish between period costs and irrelevant costs. 2 Marks b) Jennifer has a weekly demand of 1600 units of product zed. the unit cost of product zed is sh. 55 while fixed costs per order is 440 sh. Jennifer is financed sat a cost of 20% per annum. Her business works for 50 weeks in a year. Required: i) Economic order quantity. 2 Marks ii) Number of orders in a year. 2 Marks iii) Time interval between orders. 2 Marks iv) Total holding costs. 2 Marks v) Total ordering costs. 2 Marks c) Discuss three main differences between financial accounting and cost accounting. 3 Marks d) Discuss three methods used in the reapportionment of overheads. 3 Marks e) Do you think service costing is any more relevant in the field of cost accounting? Discuss 2 Marks QUESTION TWO (15 MARKS) a) The following information relates to Nyanduma business limited. Budgeted data Annual sales units 2000 Annual production 1600 Opening stock 700 Closing stock ? Cost per unit Selling price per unit 70 sh. Material cost 20 Labour cost 15 Variable overheads 7 Fixed production overheads per annum 20000 shs Fixed administration costs 5000 shs Variable administration costs sh. 6 per unit produced Fixed selling costs 10,000 shs Variable selling cost sh 2 per unit Required i) Profit statement based on marginal costing. 7 Marks ii) Profit statement based absorption costing. 7 Marks b) Should marginal costing be more applicable than absorption costing? Explain. 1 Mark QUESTION THREE (20 MARKS) a) Explain three key factors considered when setting stock levels. 3 Marks b) Consider the following details for kcau limited Annual demand 12000 units Ordering cost per batch sh 200 Holding cost per unit per year 10% of purchase price Purchase cost 100 sh per unit Reorder quantity current 400 units Maximum lead time 3 weeks Minimum lead time 1 week Maximum demand per week 1200 Normal demand per week 1000 Minimum demand per week 600 Required: i) EOQ. 2 Marks ii) Reorder level. 3 Marks iii) Maximum stock level. 3 Marks iv) Minimum stock level. 3 Marks v) Number of orders in a year. 2 Marks vi) Total ordering costs. 2 Marks c) Show two uses of EOQ. 2 Marks QUESTION FOUR (15 MARKS) a) The following details are given of wakalala enterprises Additional information: i) Opening stock was 1200 units purchased at sh. 36 per unit ii) The business uses FIFO method to value stock Required: i) Stores ledger card. 10 Marks ii) Explain six main functions of stores department. 5 Marks
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