KABARAK UNIVERSITY

UNIVERSITY EXAMINATIONS
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FIRST SEMESTER, 2018/2019 ACADEMIC YEAR

EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

ACCT 314: COST ACCOUNTING

STREAM: Y3S1 TIME: 9.00-11.00 AM

EXAMINATION SESSION: DECEMBER DATE: 14/12/2018

INSTRUCTIONS
1. Answer question ONE and any other TWO questions
2. Marks allocated for each question is indicated at the end of the question
3. Show all your workings
4. Each question must start on a fresh page

QUESTION ONE
i).Outline any five limitations of Financial accounting (5 marks)
ii).Describe any five classification of cost in each case giving examples of costs (5 marks)
iii).Highlight three advantages of Cost accounting (3 marks)
iv).Outline four differences between bin card and stores ledger card (4 marks)
v).The following information relates to Able Limited for the year ended 31 December 2017
Sh.
Prime cost 122,000
Factory/production overheads 185,000
Opening Work-in-progress 40,000
Factory cost of goods completed 300,000
You are required to calculate the closing work-in progress. (3 marks)
vi).Outline any five objectives of material control (5 Marks)
vii).Explain five Differences between piece rate and time rate system in relation to labour
costing
(5 Marks)
(TOTAL 30 MARKS)

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 1 of 4
QUESTION TWO
i). Highlight four advantages of first in first out (FIFO) basis of stock valuation (4 marks)
ii).Kimani shah. Industries has supplied you the following information for the month January,
2018:
Particulars sh. 000
Materials (Raw) purchased 25,900
Stock of Materials at 1st January 18,700
Stock of incomplete work at 1st January 8,000
Stock of Finished goods at 1st January 12,500
Bad Debts 1,000
Sales rep. Salary and Commission 1,100
Depreciation on Office Furniture 100
Factory Rent 1,200
Productive Wages (Direct) 17,600
Director’s Fees 800
General Expenses 500
Gas and Water (Production) 200
Travelling Expenses of Sales Staff 300
Sales 75,000
Manager’s Salary (2/3 factory, 1/3 office) 1,500
Depreciation on Plant and Machinery 1,800
Discount allowed 400
Repairs to Plant and Machinery 600
Carriage Outward 400
Direct Expenses 1,000
Rent, Rates, Taxes (Office) 300
Gas and Water (Office) 50
Stock of Material (Raw) on 31 January 800
Stock of incomplete work at 31st January 6,500
Stock of Finished goods at 31st January 8,500
You are required to prepare a cost statement showing the following cost headings
a) Prime Cost (5 marks)
b) Factory overheads (3 marks)
c) Cost of Production (4 marks)
d) Total Cost (4 marks)
(TOTAL 20 MARKS)
QUESTION THREE
i).Duncaro. Co. Ltd., has supplied you the following information:
Year 2017
1st half 2nd half
Sh. Sh.
Sales 810,000 1,026,000
Profit 21,600 64,800
Total Fixed Cost is sh. 35,000.for each half
Calculate for each half:
(a) P/V Ratio (2 marks)

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 2 of 4
(b) B.E.P. (Sales) (2 marks)
(c) Profit at Sale Volume of sh. 648,000 (3marks)
(d) Sales to earn a profit of sh. 108,000 (4 marks)

ii).The following are the particulars of standard and actual production of product ‘AZ’
(1) Standard Quality per unit 10 kg
(2) Standard Price per kg sh. 18
(3) Actual Units produced 500 units
(4) Actual Price per kg sh. 19
(5) Actual Material used 4,400 kgs
Calculate:
(a) Material Cost Variance (3marks)
(b) Material Price Variance (3marks)
(c) Material Usage Variance (3marks)
(TOTAL 20 MARKS)
QUESTION FOUR
i).ElbeckyCo. Ltd. has presently been producing 2,000 units per month using 100% of its
capacity. It is estimated that in the coming months it will have to operate at 50% and 75% of its
capacity.
Items shs. (Per unit)
Raw Materials 75
Direct Labour 20
Direct Expenses 25
Variable Factory Expenses (Overheads) 15
Fixed Factory Overheads 20
Fixed Administrative Overheads 10
Selling Expenses (10% Fixed) 15
Distribution Expenses (75% Variable) 20
Total Cost 200
a).Prepare a flexible budget for these two production levels from the above information.
(16 Marks)
b).Calculate the sales value to earn profit at 50% on cost. (4 Marks)
(TOTAL 20 MARKS)
QUESTION FIVE
Moto LIMITED manufactures its product through three processes. The following data relates to
Process 2 and Process 3 for the month of October 2018.100,000 units at sh.10 each were
transferred from Process 1 to Process 2.
PROCESS COSTS
Process 2 Process 3
Sh. Sh.
Direct Materials 100,000 114,000
Direct Labour 135,000 100,000
Variable Expenses 30,000 53,500
Production Overhead 250,000 200,000
Normal Output 90% 80%
Actual Output (Units) 85,000 70,000
Scrap value of loss sh.3 per unit sh.2 per unit

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 3 of 4
You are required to prepare:
a. Process 2 and Process 3 accounts (16 Marks)
b. Normal loss account (2 Marks)
c. Abnormal gain account (2 Marks)
(TOTAL 20 MARKS)

As members of Kabarak University family, we purpose at all times and in all places, to set apart in one’s heart,
Jesus as Lord. (1 Peter 3:15)
Kabarak University is ISO 9001:2015 Certified
Page 4 of 4