EXAMINATION FOR THE DEGREEs BACHELOR OF BUSINESS INFORMATION TECHNOLOGY

BUSS 106: COST ACCOUNTING

FULL-TIME/PART-TIME/DISTANCE LEARNING

ORDINARY EXAMINATIONTIME: 3 HOURS

INSTRUCTIONS:Answer ALL Questions

QUESTION ONE: (20 MARKS)

i)Many firms are currently experiencing high employee turnover. Explain three most current reasons for employee turnover in the country.(6 Marks)

ii)Twelve production employees at the Mash Biscuit Ltd (MBL) are paid a basic wage of Sh8.00 per hour plus overtime, as follows:

Monday to Friday up to 37 hours - Sh8.00 per hour (basic rate)

Monday to Friday over 37 hours - Time plus a quarter

Saturdays -Time plus a half

Sundays and Public Holidays - Double time

In addition to this they each receive a fixed bonus of Sh10 each time weekly production exceeds 400,000 units. MBL company policy is to treat all bonuses and overtime premium as indirect labour costs.

During the year ended 31 March 2021:

21,200 hours were worked at basic rate.

820 hours were worked overtime during weekday.

Every Saturday morning four people worked from 8am until 12 noon (assume a 52-week year).

6 employees came in one Sunday and worked from 10am until 4pm, cleaning up after a flood.

The weekly bonus target was exceeded on seven occasions.

Required:

Calculate each of the following payroll costs for MBC for the year ended 31 March 2021:

a)Total basic pays (4 Marks)

b)Total overtime(6 Marks)

c)Total production bonuses paid(4 Marks)

QUESTION TWO: (20 MARKS)

a)Briefly explain any five benefits of material control system.(5 Marks)

b)Rocky Engineering Company has two production departments: Accessories and Fitting and two service departments the Stores department and the Maintenance department. The following information is provided to you with respect to these departments:

Production departments

Service departments

Accessories

Fitting

Stores

Maintenance

Power used (Kilowatt hours )

15,000

12,000

4,500

37,500

Number of employees

144

120

18

18

Square meters occupied

25,500

12,000

3,450

48,000

Number of material requisitions

4,200

3,000

-

675

Number of maintenance orders issued

750

300

-

-

The budget is as follows:

Budgeted overheads:

Sh.

Sh.

Sh.

Production departments:

Accessories

136,980

Fitting

118,800

255,780

Service departments:

Stores

37,260

Maintenance

25,560

62,820

318,600

Other expenses:

Work supervision

90,000

Power

37,500

Rent and rates

86,400

213,900

Total

532,500

Other information:

Product X

Product Y

Production (units)

40,000

50,000

Standard hours per unit:

Accessories

2.5

2.10

Fittings

-

2.00

Required:

i)Overhead distribution statement showing the overheads to be absorbed by the production departments. (10 marks)

ii)The budgeted overhead rates for each of the production departments on the labour hours basis. (5 marks)

QUESTION THREE: (10 MARKS)

a)Bidii Manufacturing Company Ltd manufactures a wide range of products. The following information relates to one of its products called "Santo".

Shs.

Selling price per unit 800

Variable cost per unit 380

Fixed manufacturing cost 1,000,000 per annum

In addition, the company incurs selling and administrative costs at a rate of 2.5% of the sales revenue and fixed selling costs at shs. 200,000 per annum.

Actual sales for the year ended 30 April 2005 were 4,800 units.

Required:

i)Breakeven point in units and shillings and the margin of safety for product "Santo". (2 marks)

ii)Number of units of product "Santo" to be sold to earn a net profit of sh. 560,000 after tax. (Assume a corporate tax rate of 30%).(2 marks)

b)Tembo ltd buys and sells product pick. It values stock on the basis of first in first out (FIFO). On 1^st June 2021, stock in hand consisted of 4,500 units that had been acquired at Kshs 50 per unit. The operations for the month were as follows:

Date

Purchases

Sales

2

5,000 @ Kshs 48

5

6,000 @ Kshs 80

8

5,500 @ Kshs 46

12

7,000@ Kshs 82

15

8,000@ Kshs 49

20

5,000@ Kshs 52

25

7,000@ Kshs 83

28

6,000@ Kshs 85

The company incurred operating costs of Kshs 450,000 during the month.

Required:

i)Prepare the stores ledger card using simple average price method.(4 marks)

ii)Trading, profit or loss account to determine the net profit for the month. (2 marks)