Cost Accounting Questions
AC Limited is a small company that undertakes a variety of jobs for its customers.
Budgeted Profit and Loss statement For the year ending 31st December 2003
|Fixed production overhead||300,000|
|Selling, distribution and|
|Labour hours for the year||25,000|
|Machine hours for the year||15,000|
|Number of jobs for the year||300|
An enquiry has been received and the production department has produced estimates of the prime cost involved and of the hours required to complete job A57.
|Labour hours required||80|
|Machine hours required||50|
You are required to
- Calculate by different methods six overhead absorption rates:
- Comment briefly on the suitability of each method calculated in (a).
- Calculate cost estimates for job A57 using in turn each six overhead absorption rates calculated in (a). (Total:20 marks)
Majengo Builders has been engaged to construct a building to serve as the head office for Ushirika Co-operative Society. Construction work commenced on 1 June 2004 and the following information was extracted from Majengo Builders accounting records on 30 November 2004.
|Payment for direct wages||240,000|
|Accrued wages, 30 November||10,000|
|Materials returned to store||2,500|
|Plant and equipment at cost on 1 June||150,000|
|Payment for direct expenses||75,000|
|Direct expenses accrued, 30 November||5,000|
|Value of plant and equipment 30 November||100,000|
|Materials on site, 30 November||27,500|
|Value of work not yet certified||800,000|
|Cost of work not yet certified||50,000|
|Cash received from Ushirika Co-operative Society||750,000|
- Prepare the Contract Account for the building for the six months to 30 November 2004, as it would appear in the records of Majengo Builders.
- Determine the amount to be shown as work-in-progress in the records of Majengo Builders at 30 November 2004. (Total: 20 marks)
The following information relates to contract No.C74 being undertaken by Oceanic Construction Company for the year ended 30 September 1989.
|Materials on hand at site 1 October 1988||900|
|Payment for direct wages||4,800|
|Accrued wages not yet paid 30 September 1989||400|
|Materials on hand at site 30 September 1989||2,600|
|Payment for direct expenses||6,400|
|Depreciation expenses on equipment at site||800|
|Cost of material purchased||37,650|
|Machinery installation and service costs||2,400|
|Accrued expenses not yet paid 30 September 1989||600|
|Detective materials returned to stores||350|
|Value of work certified||40,000|
|Cash received from contractee||38,000|
|Cost of work not yet certified||24,000|
|Estimated total contract cost||125,000|
The contract has been in progress since 1st October 1988.
It is estimated that the contract will be completed within 9 months from 30 September 1989.
- Prepare a Contract Account for the year ended 30 September 1989 as it would appear in the records of Oceanic Construction Company.
- (Contract profit, if any, is to be credited in the ratio of work certified to work not certified)
- Compute the value of work-in-progress at 30 September 1989
(Total: 20 Marks)
Deluxe Paints Limited manufactures a special industrial pain known as “DX3” which undergoes two processes before completion. The following information relates to production undertaken during October 1991.
|Added costs (Sh. ‘000’)|
|Normal loss||10% of input||5% of input|
|Scrap value||Sh.15 per litre||Sh.34 per litre|
|To process 2:||16,000 litres|
|To Finished Goods:||13,000 litres|
|To work in Progress c/f:||2,000 liters|
|Previous Process Costs||100%|
There was no opening work-in-progress in either of the two processes. Losses in process 2 had the following degree of completion: previous process costs 100%, Added material 70%, Labour 50%, Overheads 40%.
Draw a Process Accounts for both Processes for the month of October. (Total:20 Marks)
Company XYZ Ltd. manufactures a product, which passes through three processes. Given below is data relating to the financial process in the month of November:
|Transfer from process 2||10,000 units||300,000|
The normal process loss is estimates at 2%. During the month of November 7,200 units were completed and transferred to finished goods. In addition, 2,000 units remained as work-in-progress whose degree of completion was 60% for materials, labour and overheads. The selling price of normal loss units its estimated at shs.30 per unit.
- Calculate the cost of completed units transferred to finished goods.
- Calculate the value of work-in-progress at end of November.
- Assuming that any units or normal or abnormal loss were sold at a price of SH.30 per unit, show the Abnormal Loss Account, as it would appear after the units are sold. Assume that abnormal loss units are complete in all respects. (Total: 20 Marks)