BUSS106  INTRODUCTION TO COST ACCOUNTING.

UNIVERSITY EXAMINATIONS: 2018/2019
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS IN
INFORMATION TECHNOLOGY
BUSS 106: INTRODUCTION TO COST ACCOUNTING
FULL TIME/PART TIME/DISTANCE LEARNING
DATE: AUGUST, 2019 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions.

QUESTION ONE (20 MARKS)
a) Distinguish between period costs and irrelevant costs. 2 Marks
b) Jennifer has a weekly demand of 1600 units of product zed. the unit cost of product zed is
sh. 55 while fixed costs per order is 440 sh.
Jennifer is financed sat a cost of 20% per annum. Her business works for 50 weeks in a
year.
Required:
i) Economic order quantity. 2 Marks
ii) Number of orders in a year. 2 Marks
iii) Time interval between orders. 2 Marks
iv) Total holding costs. 2 Marks
v) Total ordering costs. 2 Marks
c) Discuss three main differences between financial accounting and cost accounting.
3 Marks
d) Discuss three methods used in the reapportionment of overheads. 3 Marks
e) Do you think service costing is any more relevant in the field of cost accounting? Discuss
2 Marks
QUESTION TWO (15 MARKS)
a) The following information relates to Nyanduma business limited.
Budgeted data
Annual sales units 2000
Annual production 1600
Opening stock 700
Closing stock ?
Cost per unit
Selling price per unit 70 sh.
Material cost 20
Labour cost 15
Variable overheads 7
Fixed production overheads per annum 20000 shs
Fixed administration costs 5000 shs
Variable administration costs sh. 6 per unit produced
Fixed selling costs 10,000 shs
Variable selling cost sh 2 per unit
Required
i) Profit statement based on marginal costing. 7 Marks
ii) Profit statement based absorption costing. 7 Marks
b) Should marginal costing be more applicable than absorption costing? Explain.
1 Mark
QUESTION THREE (20 MARKS)
a) Explain three key factors considered when setting stock levels. 3 Marks
b) Consider the following details for kcau limited
Annual demand 12000 units
Ordering cost per batch sh 200
Holding cost per unit per year 10% of purchase price
Purchase cost 100 sh per unit
Reorder quantity current 400 units
Maximum lead time 3 weeks
Minimum lead time 1 week
Maximum demand per week 1200
Normal demand per week 1000
Minimum demand per week 600
Required:
i) EOQ. 2 Marks
ii) Reorder level. 3 Marks
iii) Maximum stock level. 3 Marks
iv) Minimum stock level. 3 Marks
v) Number of orders in a year. 2 Marks
vi) Total ordering costs. 2 Marks
c) Show two uses of EOQ. 2 Marks
QUESTION FOUR (15 MARKS)
a) The following details are given of wakalala enterprises

Additional information:
i) Opening stock was 1200 units purchased at sh. 36 per unit
ii) The business uses FIFO method to value stock
Required:
i) Stores ledger card. 10 Marks
ii) Explain six main functions of stores department. 5 Marks

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