UNIVERSITY EXAMINATIONS: 2017/2018
EXAMINATION FOR DIPLOMA IN BUSINESS INFORMATION
TECHNOLOGY
DBIT 402: COST ACCOUNTING
DATE: DECEMBER, 2017 TIME: 2 HOURS,
INSTRUCTIONS: Answer Question One and Any Other Two Questions.
QUESTION ONE (30 MARKS)
a) Distinguish between financial accounting and management accounting. (10 Marks)
b) Identify 5 classifications of costs giving 2 examples on each category. (10 Marks)
c) What are the essentials of a good Cost Accounting system (10 Marks)
QUESTION TWO: (20 MARKS)
a) Identify and explain any five benefits of material control system (5 Marks)
b) The following are the stock movements of stock item Q-3
Date Receipts Issues
The stock as at 31 August was 4,500 units valued at sh 5 each.
Required:
Prepare stock cards for stock item Q-3, using each of the following stock pricing methods:
i). FIFO (8 Marks)
ii). LIFO (7 Marks)
QUESTION THREE: (20 MARKS)
a. Define EOQ and state the limitations of the EOQ model (5Marks)
b. EOQ model has assumptions that enable it to function properly. Enumerate and explain
three of these assumptions. (3 Marks)
c. Keshi Enterprises has provided the following data in respect of its major raw materials.
Maximum consumption 2,400 units
Normal consumption 1,800 units
Minimum consumption 1,200 units
Lead time 8-12 weeks
Re-order quantity 12,000 units
Required:
i. Re-order level (3 Marks)
ii. Maximum stock level (3 Marks)
iii. Minimum stock level (3 Marks)
iv. Average stock level (3 Marks)
QUESTION FOUR: (20 MARKS)
a) Discuss the importance of cost accounting to a small enterprise. (8 Marks)
b) XY ltd has provided the following information with respect to their products
Estimated fixed costs kshs 1,200,000
Variable costs kshs 200 per unit
Selling price kshs 400 per unit
Required:
Calculate the number of units to be sold so as to break even (12 Marks)
QUESTION FIVE: (20 MARKS)
a) Name four ways in which a company could finance a cash deficit. (4 Marks)
b) Discuss the importance of budgetary control (8 Marks)
c) Explain the limitation of budgets (8 Marks)
