Cost Accounting Questions
Questions on Methods of Costing
QUESTION ONE
The Blank Manufacturing Company Ltd. Consists of four production departments and two service departments. For the month of September the direct departmental expenses were as follows:
-
Production Departments - A, Shs.800; B, Shs.5,600; C, Shs.800; D,Shs.400 Service Department- X, Shs1,800 Y, Shs2,400
The cost of service departments X and Y are allocated to the other departments on a percentage basis viz:
-
A B C D X Y X 30 20 25 15 - 10 Y 20 30 10 25 15 -
Required
Prepare a statement showing the distribution of the service department expenses.
QUESTION TWO
One of your clients, a jobbing engineer, has hither to based his quotation on cost of material and labour plus a percentage to cover overheads and profit. He has now accepted your advice to relate costs to the departments (A, B, and C) through which the work passes and in pursuance of this policy, to charge overhead to Jobs on the basis of departmental direct labour hours. With your assistance he has produced the following data for the coming year:
Expenses | Proposed basis of departmental apportionment | |
Rent, Rates and Insurance | 6,200 | Floor area |
Indirect Labour | 3,900 | Direct labour hours |
Depreciation | 2,200 | Plant valuation |
Repairs and Maintenance | 1,200 | Technical estimate viz: A,Shs.540; B, Shs378; C,Shs.282 |
Consumable stores | 900 | Direct labour hours |
Canteen | 2,000 | Number of employees |
Work Manager’s salary | 2,600 | Allocation viz: A,Shs.700; B, Shs.1,100; C, Shs.800 |
National Insurance | 400 | Number of employees |
General Administration | 6,000 | Ratio of quotations based on past experience viz: A, 5/12; B, 4/12, C, 3/12 |
Your client estimates that Department A will work 6,000 direct labour hours in the year; Department B: 4,000; and Department C: 2,000 hours. Wages rates are Department A: Shs.0.5; Department B: Shs.0.45 and Department C: Shs.0.4. The number of employees in each department is: A: 40; Department B: 25; and Department C: 15.
Departmental floor areas are: Department A 15,000 sq.ft; Department B 18,000 and Department C 17,000 sq.ft. The value of plant and machinery used in each department is: Department A Shs.20,000; Department B Shs.18,000 Department C Shs.6,000.
Required
- Calculate the hourly overheads rates to be charged for work in each department.
- Prepare a quotation for a Job to which the following data relates:
-
Direct material Shs.774.81 Direct labour: Department A 20 hours Department B 12 hours Department C 4 hours Profit 20|% on selling price
QUESTION THREE
- Explain four reasons why costs of operations need to be allocated to various users.(8 marks)
- Discuss three main methods used to allocate costs to the various users. (12 marks)
(Total: 20 marks)
QUESTION FOUR
In the context of process costing, define and distinguish between joint products and by-products. (Total: 20 marks)
QUESTION FIVE
- Explain four requirements that have to be met for uniform costing to be
appropriately applied: (4 marks)
- A company produces three joint products, Yi, Y2 and Y3. The data below reflects average monthly results:
Y1 | Y2 | Y3 | |
Monthly output (kg) | 40,000 | 20,000 | 20,000 |
Sales Value at split off (shs.) | 0 | 30,000 | 105,000 |
Sales Value after Split off | 45,000 | 100,000 | 155,000 |
Costs of further processing | 20,000 | 40,000 | 65,000 |
The joint costs were Shs.100,000
Required:
Allocate the joint cost using the three methods used to allocate joint costs. (16 marks) (Total: 20 marks)