# 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

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
Fixed production overheads per annum 20000 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 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

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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