Assignment: COST ACCOUNTING

Question 1

1. Explain the advantages of centralized system of maintaining stores.
2. Explain the assumptions behind the determination of Economic Order Quantity (EOQ).
3. The following information is given for material Y-20.

Consumption:

Required:

1. Re-order level.
2. Minimum stock level.

• Maximum stock level

QUESTION 2

The following information relates to item Q002 stocked by Mutaka products Ltd for the month of April 2004:

The closing balance for March 2004 was a batch of 2,900 units received at a unit price of Sh 21.

Required:

1. Stores perpetual inventory record for item Q002 for April 2004 under LIFO and FIFO systems of stores issues.
2. Closing stock valuation under the two systems.

Question 3

The following balances remained in the books of Kingi Ltd and manufacturing co for the year ended 30th November 2009.

Stock 1st December 2008             (000 shs)
Raw materials                                 400
Working in progress                        200
Finished goods                               1400

Purchase of raw materials                4500
Return outwards raw materials         60
Repairs to factory building               150
Salaries & wages                            120
Factory workers                             800
Salesmen                                      180
Administration staff                        420
Insurance                                      500
Depreciation on plant                      120
Depreciation on buildings                 400
Advertising expenses                      40
Discount allowed                             10
Cleaning expenses of the building     15
Bank charges                                 19
Depreciation delivery van                 30

Stocks on 30th November 2009
Raw materials                                 470
Work in progress                            290
Finished goods                               1300

Rent                                              2000
Direct expenses                              230
Sales                                             13500
Sales returns                                  700

Additional information

1. The company building occupies an area of 10,000m2 of this area the factory occupies 4000m2 warehouse occupies 2500m2 and the rest is occupied by administration office

2. Prepaid insurance amounted to shs 50,000 at the end of the year. Insurance is apportioned in the ration 2:2:1 to the factory, warehouse and offices respectively.

• A provision of shs 50,000 needs to be made for a bonus payable to the factory supervisors

Required

1. a) Manufacturing cost statement.
2. b) Trading profit and loss account for the year ended 30th November 2009.

Question 4

Tom ltd has two production departments, A and B, and two service departments, stores and General Services.

The company has budgeted the following costs for the forthcoming period.

                                                                  Shs
Maintenance                                                                   100
Depreciation of plant                                  60
Plant insurance                                                                   60
Heat and light                                                                   75
Canteen cost                                                                   30
Rent                                                                   50
Supervision                                                                   120

The following information is also available
                                           A                     B                    Stores          General
Floor Area Square meters   15,000              8,000                 3,500            3,500
Employees                            50                   25                      15              10
Plant book value                 200,000            100,000             50,000          40,000
Machine hours                    80,000              60,000
Direct material usage           300,000            400,000

Overheads are absorbed in both production departments on a machine Hour basis.

Required:

1. a) Prepare an overhead analysis sheet for the period, using suitable bases apportionment.
2. b) Calculate the Overhead absorption rates for each department.

QUESTION 5

Timau Ltd produces a detergent which passes through two processes namely mixing and refining to completion. The following data relate to the refining process for the month of June 2000.

During the month 20,000 units were passed from the mixing to the refining process. Costs incurred during the month were:

                              Shs.
Labour                  125,000
Overheads             108,100
Other materials      45,300

At the end of the month 21,000 units had been completed and passed to finished goods while 4,000 were still in process having reached the following stages:

Materials - 100%
Labour - 40%
Overheads - 60%

Required:
Refining Process Account.

QUESTION 6

On 4 May 1999, Watamu Construction Company was contracted by Makoha Ltd. to construct a leisure park in Nairobi at a contract price of Sh. 950,000,000. Work commenced on the contract on 28 July 1999. Retention money was agreed at 10% of work certified. At the end of the first year, no profits were declared as the contract was considered to be in its infancy

The following details relate to the contract for the year ended 31 December 2000:

Transactions during the year.

Materials delivered to site:

Plants have been purchased for use on this contract. Watamu Construction Company provides for depreciation on plant at 12 1/2% per annum on cost.

Required:

• (i) Contract account for the year to 31 December 2000, clearly showing the profits/ (losses) on contract for the year.

• (ii) Valuation of work-in-progress.