DBIT402  COST ACCOUNTING.

UNIVERSITY EXAMINATIONS: 2018/2019
EXAMINATION FOR THE DIPLOMA IN BUSINESS INFORMATION
TECHNOLOGY
DBIT402 COST ACCOUNTING
FULLTIME/PARTTIME
DATE: NOVEMBER 2018 TIME: 2 HOURS
INSTRUCTION: Answer Question ONE and any other TWO questions.

QUESTION ONE: (30 MARKS)
(a) Identify and explain FIVE main benefits of inventory management/ control system
(10 Marks)
(b) Briefly discuss FIVE limitations of Break even analysis (5 Marks)
c) ABC Ltd has an aggregate demand of 5000 units. Each time they place an order there is an
ordering cost of shs.400 the price per unit is sh.1,000 and holding cost is shs.100 per unit.
Required
Determine:
i. Economic Order Quantity (3 Marks)
ii. The number of orders to be made based Economic Order Quantity

(3Marks)
d) Give FIVE detailed differences between marginal and absorption costing (5 Marks)
i) Distinguish between Period costs and product costs (2 Marks)
ii) Semi fixed cost and semi-variable cost as used in cost accounting
(2 Marks)
QUESTION TWO: (20 MARKS)
A modern company (X ltd) has 4departments A, B, C and D. The actual cost for a given period
was extracted from their books as follows:

Required:
A) Apportion the above costs to the various departments on the basis of the most equitable basis.
(12Marks)
B) Define marginal costing and give its limitations. (5 Marks)
iii)C) Distinguish between Period costs, product costs and semi fixed cost as used in cost
accounting (3 Marks)
QUESTION THREE: (20 MARKS)
a) The following are the stock movements of stock item PX660

 

The stock as at 31 March was 800 units valued at sh 6 each.
Required:
b) Prepare stock cards for stock item PX660, showing the value of EACH of the two issues
and the value of closing stock using EACH of the following stock pricing methods:
i). FIFO (8 Marks)
ii). LIFO (8 Marks)
c) Elaborate TWO problems of overstocking and two problems of under stocking (4 Marks)
QUESTION FOUR: (20 MARKS)
a) Differentiate between Financial accounting and cost accounting (10 Marks)
b) 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
Re-Order Period 8-12 weeks
Re-order quantity 12,000 units
Required:
i. Re-order level (2 Marks)
ii. Maximum stock level (3 Marks)
iii. Minimum stock level (3 Marks)
iv. Average stock level (2 Marks)
QUESTION FIVE: (20 MARKS)
a) Nutristar is a manufacturer of peanut Butter and has spare productive capacity
which it is seeking to utilize with the introduction of a new product, NutriHoney
You have been provided with the following information which relates to the
product NutriHoney.
Sh
Selling Price per unit 200.00
Direct Material Cost per unit 65.00
Direct Labour Cost per unit 55.00
Fixed Overheads per month 168,000
Required:
i. Calculate the unit contribution for product NutriHoney. (4 Marks)
ii. (4 Marks)
Calculate the break-even point for product NutriHoney.iii.
Calculate the Break Even when the target profit is set at Ksh.
100,000. (4 Marks)
Iv Determine the profit when 1000 units are sold (4 Marks)
B) Distinguish the following types of costs and terminologies.
(i) Cost tracing and cost accumulation (2 Marks)
(ii) Sunk costs and standard costs (2 Marks)

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