CPA Management accounting Cost accumulation Questions & Answers (PDF)

August 2025

1 Questions

Question 4b

Brace Ltd. has been purchasing an item of inventory in lots of 900 units. This equates to a three months supply. The cost per unit of this item of inventory is Sh.1,680 and the ordering cost per unit per consignment is Sh.2,240. The carrying cost per unit per annum is 25% of the purchase price.

Required:

Advise the management of the Brace Ltd. on the most economical quantity to be purchased, clearly showing the total savings to the company as a result of purchasing at the most economical quantity.

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April 2025

1 Questions

Question 4a

Yusuf Enterprises uses the Economic Order Quantity (EOQ) to establish the optimal reorder quantity for purchasing the main raw material used in the production process.

The firm has been approached by an alternative supplier who would be willing to offer the following discounts:

Order.level............	Discount (%)
0 – 199	1
200 – 499	3
500 – 699	5
700 units or more	7

Information regarding the current inventory costs is as follows:

Holding cost per unit per year is approximated to be 10% of the purchase price

Order cost	Sh.2 per order
Annual.demand	15,000 units
Purchase price	Sh.15...............
Current EOQ	200 units

Required:

Determine the order quantity that would yield the lowest total cost.

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December 2024

2 Questions

Question 3b

Savanna Supermarket currently orders 1,000 units of stock item “Zedo” at a time. The management of Savanna Supermarket has decided that it may be better to use the Economic Order Quantity method to establish an optimal reorder quantity.

Information regarding stocks is given below:

o	Annual demand	12,000 units
o	Purchase price	Sh.15 per unit
o	Fixed cost per order	Sh.200

o	The cost of holding an item “Zedo” in stock for a year is made up of the following percentages:

o	Obsolescence	3%
	Perpetual audit	1.5%
	Opportunity cost	2%
	Insurance	1%
	Storage	0.5%

The current annual total inventory costs are Sh.183,000, being the total of the purchasing costs, ordering costs and holding costs of stock item “Zedo”.

Required:

(i) Using appropriate calculations, show how annual demand of stock item “Zedo” amounts to Sh.12,000 units.

(ii) Calculate the Economic Order Quantity.

(iii) Using your answer in (b) (ii) above, calculate the revised annual total inventory costs of stock item “Zedo” and establish any cost gap/cost saving from pursuing the optimal policy.

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Question 1b

Maroon Paints Ltd. makes and sells high quality paints. The company has two departments namely; Mixing and Blending and uses a single production overhead absorption rate based on direct labour hours. The budget and actual data for the month of October 2024 are given below:

Budget	Mixing	Blending	Total
Budgeted direct wages (Sh.)	2,400,000	7,000,000	9,400,000
Budgeted direct labour hours	40,000	100,000	140,000
Budgeted machine hours	120,000	10,000	130,000
Budgeted production overheads (Sh.)	18,000,000	10,000,000	28,000,000

During the month of October 2024, a batch of product “Cyan Paint” was made and had the following costs:

Direct material cost per batch is Sh.630,000

	Direct wages (Sh.)	Labour hours	Machine hours
Mixing	726,000	1,200	4,600
Blending	2,490,000	4,150	380
	3,216,000	5,350	4,980

The Management Accountant has proposed that appropriate departmental overhead absorption rates per department be applied, that is, machine hours in mixing department and labour hours in blending department.

Required:

(i)	The cost of the batch of Cyan Paint using a single company-wide overhead absorption rate.
(ii)	Departmental overhead absorption rates.
(iii)	The cost of the batch of Cyan Paint using management accountant proposal.
(iv)	During the month of October 2024, the actual overheads and other relevant data was as follows:

(iv)	Actual	Mixing	Blending	Total
	Actual direct wages (Sh.)	3,000,000	5,950,000	8,950,000
	Actual direct labour hours	50,000	85,000	135,000
	Actual machine hours	140,000	8,000	148,000
	Actual production overheads (Sh.)	20,000,000	9,500,000	29,500,000

(iv)	Using the management accounting proposal, calculate the over/under absorption of overhead per department.

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August 2024

1 Questions

Question 2c

Konya Ltd. had a weekly minimum and maximum consumption of material Q at 250 and 750 units respectively. The re-order quantity as fixed by the company is 3,000 units. The material is received within a period of 4 to 6 weeks from the date of issue of supply order.

Required:

Calculate the:

(i) Minimum stock level.

(ii) Maximum stock level.

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April 2024

3 Questions

Question 3c

Ufanisi Enterprises outsource one of its raw materials branded “Oxla” externally. The annual sales demand for material “Oxla” is 30,000 units. The company is planning to switch its purchasing system to a just-in-time (JIT) purchasing system to improve efficiency.

The following information is provided:

	Current system	Proposed system
Purchase cost per unit (Sh.)	400	400
Ordering cost per order (Sh.)	80,000	20,000
Inventory holding cost	12%	-

Additional information:

1. Inventory holding cost per annum is given as a percentage of purchases cost per unit.

2. Under the proposed JIT system, the company does not hold any inventory whatsoever.

3. The re-order quantity under the proposed JIT system is 4,000 units per order.

Required:

Advise the management of Ufanisi Enterprises on whether or not to switch to the proposed system.

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Question 4b

Vuna Ltd. are the manufacturers of chemicals for use in agricultural farms. One of their products passes through two processes; P and Q before it is completed and taken to a warehouse.

The following data relates to process Q for the month of march 2024:

1	Opening work-in-progress 4,000 units Degree of completion and cost:

			Sh.“000”
1	Materials	100%	240,000
	Labour	60%	144,000
	Overheads	60%	72,000

2	Units received from process P were 40,000 at a cost of Sh.1,700,550,000
3	Additional cost during the period in process Q: Sh.“000” Materials 759,000 Labour 1,355,760 Overheads 640,220
4	Closing work-in-progress was 3,000 units with the following degree of completion: Materials 100% Labour.and.overheads.50%.
5	Units scrapped were 4,000 having the following degree of completion: Materials 100% Labour.and.overheads.80%..
6	Normal process loss was 5% of the expected production.
7	Spoiled units realised Sh.15,000 for each unit.
8	The company uses FIFO method of valuation for the opening work-in-progress.

Required:

(i) Determine units abnormally lost in process Q.

(ii) Prepare a statement of equivalent units of production.

(iii) Prepare a statement of cost.

(iv) Prepare process Q account.

(v) Prepare abnormal loss account.

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Question 2b

Dynamok Ltd., manufactures bicycles. The company uses job costing to allocate costs to individual products provided to its customers.

The company has three production departments T, Q and M. The company has commenced the preparation of its fixed production overhead cost budget for the next financial year and has identified the following costs:

Overhead cost	Sh.“million”	Basis of apportionment
Depreciation	660	Net book value of equipment
Indirect labour	900	Direct labour hours
Repairs and maintenance	110	30% to T, 50% to Q and 20% to M
Heating and lightning	90	Floor area
Consumable supplies	30	Direct labour hours
General overheads		20% of direct wages cost of each department

The costs are apportioned to the individual production departments; T, Q and M as follows:

Production department	T	Q	M
Direct labour hours	5,000	3,000	2,000
Direct wages cost (Sh. Million)	150	210	100
Number of employees	25	15	10
Floor area in square metres (\(M^2\))	5,000	4,000	1,000
Net book value of equipment (Sh. Million)	80	50	90

Required:

(i)	The primary allocation of production overhead costs to the three departments.
(ii)	Calculate the overhead absorption rate (OAR) for each department based on direct labour hours.
(iii)	A quotation for a job made as batch BQ23 has the following estimated information:

(iii)	Direct material cost	Sh.140,000,000
	Direct labour hours	550 hours in department T
		890 hours in department Q
		160 hours in department M

(iii)

Required:
Using the OAR computed in (b) (ii) above, compute the total cost of job batch BQ23.

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December 2023

3 Questions

Question 1b

Godoro Ltd. supplies high quality mattresses. The company outsources these mattresses from a supplier in town. Godoro Ltd. estimates that the total inventory holding cost of one mattress per annum is as follows:

Cost	Percentage of purchase price per unit per annum (%)
Opportunity cost	5
Obsolescence cost	4
Storage charges	3
Handling cost	2
Insurance cost	..1..
	15

Additional information:

The annual sales demand of the mattresses is 480 mattresses.
Each mattress costs Sh.4,000 to purchase from the supplier.
The ordering cost is Sh.6,250 per order.
The supplier offers a 3% discount for orders of 120 mattresses and a discount of 5% for orders of 180 mattresses.

Required:

(i) The economic order quantity (EOQ) of the mattresses.

(ii) The cost minimising order size from the supplier.

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Question 3a

Differentiate between “overhead allocation” and “overhead absorption”.

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Question 3b

Maono Ltd. has a budgetary activity level of 50,000 direct hours and budgeted production overheads of Sh.10,000,000. The following information was obtained from its three departments namely; A, B and C.

Department A: 50,000 direct hours are worked and the actual overheads were Sh.9,400,000.
Department B: 43,000 direct hours are worked and the actual overheads were Sh.10,000,000.
Department C: 45,000 direct hours are worked and the actual overheads were Sh.9,600,000.

Required:

Determine over or under absorption of overheads of each department.

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August 2023

1 Questions

Question 4a

Explain THREE factors that might be considered before choosing a suitable method for labour remuneration.

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April 2023

4 Questions

Question 2b

Ezekiel Mutinda, a sole trader, prepares three types of cakes branded HBL1, HBL2 and HBL3 in two production cost centres and two service centres. The production centres are mixing cost centre and baking cost centre while the service centres are distribution department and canteen department.

The following is the budgeted production data and production cost for the year ending 31 December 2023:

Product
	HBL1	HBL2	HBL3
Production	3,300 unit	7,100 units	1,650 units
	Sh. per unit	Sh. per unit	Sh. per unit
Direct material cost	130	150	160
Direct labour:
Mixing cost centre	75	60	50
Baking cost centre	90	50	180
Mixing machine hours per unit	6	3	4

The budgeted overheads for the year are as follows:

Department	Mixing	Baking	Distribution	Canteen	Total Sh.
Allocated overheads (Sh.)	376,975	243,925	166,000	266,500	1,053,400
Rent and rates					170,000
Depreciation of machine					300,000

Additional information:

1	The budgeted overheads for the year are to be allocated on the following basis:

1	Department	Mixing	Baking	Distribution	Canteen
	Net book value of machine (Sh.)	1,500,000	750,000	300,000	450,000
	Floor space occupied (square metre)	3,600	1,400	1,000	800

2	Secondary reapportionment is allocated using step-wise method on the following basis:

2	Service department	Mixing	Baking	Distribution	Canteen
	Distribution	70%	30%	-	-
	Canteen	55%	45%	-	-

Required:

(i) An overhead analysis sheet (OAS) showing both primary and secondary apportionment.

(ii) Total machine hours for mixing cost centre.

(iii) A machine hour overhead absorption rate (OAR) for mixing cost centre.

(iv) A rate expressed as a percentage of direct labour cost for the baking cost centre.

(v) Calculate the budgeted total cost per unit of product HBL1

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Question 3a

Outline FOUR factors influencing stock levels in inventory management.

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Question 1c

Digital Television Ltd. manufactures digital televisions. The main component used in making digital televisions is the fluorescent bulbs. For each digital television manufactured, 12 bulbs are required. The company manufactures 15,000 digital televisions per year. It costs Sh.200 each time the bulbs are ordered and the carrying cost are Sh.8 per bulb per year.

Required:

(i) Determine the economic order quantity of bulbs.

(ii) Calculate the number of times per year the bulbs will be ordered assuming 360 days in a year

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Question 2a

In the context of labour remuneration, highlight FOUR causes of labour turnover.

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December 2022

4 Questions

Question 2a

Explain the meaning of the following types of inventory costs:

(i) Out of pocket costs.

(ii) Set-up costs.

(iii) Opportunity costs.

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Question 3b

Bingwa Ltd. operates a premium bonus system where workers receive a guaranteed basic hourly minimum rate of pay plus a bonus of 50% of the time saved.

The following data is provided for the last week of November 2022:

Particulars	Bella	Chali	Dan
Time rate (Sh. per hour)	300	280	320
Units produced	2,500 units	2,200 units	2,600 units
Time allowed for 100 units	2 hours 36 minutes	2 hours 30 minutes	2 hours 30 minutes
Time taken	55 hours	58 hours	54 hours
Rejected units	100 units	40 units	200 units

Additional information:

No payment is made beyond the time allowed.
The bonus which is paid at the basic hourly rate is applicable to the accepted output only.
No penalty is imposed on rejected output.

Required:

From the above information, calculate for each employee:

(i) Bonus hours and amount of bonus earned.

(ii) Labour cost for each good unit produced.

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Question 1c

Babu Ltd. places orders for one of the components used in its manufacturing process. The price of the component has been fluctuating thus affecting the production of the final product and hence eroding market confidence of the company’s clients. The company’s accountant has presented the following quantity ranges and respective price of the component which he believes would result in a cost saving to the company:

Range number	Quantity range Units	Prices per unit of the component
I	1 – 6,000	420
II	6,001 – 10,000	380
III	10,001 – 14,000	340
IV	14,001 – 18,000	310
V	18,001 and above	260

Additional information:

The company’s annual demand is 60,000 units.
The ordering cost per order is Sh.50,000.
The holding cost is 20% of the purchase price
The company practices continuous stock taking throughout the year.

Required:

Advise the company on the quantity range that would yield the highest cost savings.

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Question 1b

Highlight FOUR benefits of continuous stock taking to a company.

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August 2022

4 Questions

Question 1a

Explain the following terms as used in inventory management system:

(i) Perpetual inventory system.

(ii) Periodic inventory system.

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Question 1b

The following information relates to store receipts and issue of material R in a small manufacturing enterprise for the month of April 2022:

April	1	Opening inventory 4,000 units at Sh100 per unit.
	4	Issued 3,000 units
	5	Purchased 9,000 units at Sh.120 per unit.
	9	Issued 3,200 units.
	12	Returned to stores 2,000 units (from the issue of 4 April 2022).
	15	Purchased 4,800 units at Sh.130 per unit.
	18	Returned to supplier 400 units out of the quantity received on 5 April 2022.
	25	Purchased 2,000 units at Sh.140 each.
	28	Issued 4,200 units
	29	Purchased 2,400 units at Sh.150 per unit
	30	Issued 5,600 units.

It is the company’s policy to use the weighted average method when valuing the materials issued.

Required:

Store ledger account for the month of April 2022

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Question 1c

Turkwes Ltd. manufactures men suits for local market. Jobs are allocated to two operators; Njogu and Mabili with bonus paid for hours saved.

In the month of July 2022, Njogu made 100 units while Mabili made 105 units for which the time allowed of 60 standard minutes and 50 standard minutes per unit respectively was credited.

Additional information:

The basic wage rate was Sh.360 per hour for both employees.
For every hour saved, a bonus was paid at the rate of 25% of the basic wage rate.
Hours worked in excess were paid at the basic wage rate plus two thirds.
Njogu completed his job in 88 hours while Mabili completed his job in 78 hours.
A basic working week has 80 hours.

Required:

For each operator, determine:

(i) Amount of bonus payable.

(ii) Total gross wage payable.

(iii) Wage cost per unit.

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Question 4b

Zigzag Line Coaches Ltd. operates a fleet of executive coaches across the country.

The following information is provided:

	30 seater coaches	50 seater coaches
Number of coaches	5	10
Number of drivers	5	10
Weekly wage cost per driver	Sh.12,000	Sh.12,500
Cost of each coach	Sh.6,000,000	Sh.9,200,000
Fuel consumption-kilometres per litre	12.5	8.0
Annual licence per coach	Sh.35,000	Sh.50,000
Annual insurance per coach	Sh.34,000	Sh.40,000

Additional information:

Annual repairs and maintenance were budgeted at Sh.6,500,000 and are to be apportioned between the coaches in the ratio of their total mileage in kilometres covered.
Administrative expenses are budgeted at Sh.9,620,000 annually and are to be apportioned to each coach in the ratio of driver’s wage costs.
Each 30 seater coach is kept for 6 years at which it will have a resale value of Sh.2,400,000 while every 50 seater coach will be replaced after 7 years and have a resale value of Sh.2,900,000.
It is the policy of the company to depreciate the coaches on a straight line basis. Depreciation expense is charged annually.
It is envisaged that each 30 seater coach will travel 1,000 kilometres per week and each 50 seater coach will travel 800 kilometres per week.
The cost of the fuel is budgeted at Sh.120 per litre.
It is budgeted that each coach will be in operation for 50 weeks per year and the drivers will be paid for 52 weeks.

Required:

Cost per kilometer per passenger for:

(i) 30 seater coach.

(ii) 50 seater coach.

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April 2022

3 Questions

Question 2b

The following data relate to a particular stock item of Magala Ltd. The company's management is in the process of setting its stock levels as a way to address the escalating stock handling costs.

The following information is provided:

Normal usage per day	1,100 units
Minimum usage per day	500 units
Maximum usage per day	1,400 units
Lead time	25-30 days
Economic order quantity (previously calculated)	50,000 units

Required:

Compute the following:

(i) Re-order level.

(ii) Maximum stock level.

(iii) Minimum stock level.

(iv) Average stock level.

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Question 3b

The following information is provided in relation to Baridi Kuu Ltd. The annual demand of its product branded 'D' is 30,000 units. The ordering cost per order is Sh.2,500. The holding cost is expressed as a percentage of purchase price at 20%.

The following price ranges are given with their respective quantities:

Range	Quantities (Units)	Price (Sh.)
1	1-3,000	21
2	3,001-5,000	19
3	5,001-7,000	17
4	7,001-9,000	15.50
5	9,001-10,000	13

Required:

Advise the company on the quantity to purchase.

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Question 2a

Discuss four circumstances under which time-based labour remuneration system is deemed to be more appropriate than the output based system.

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Pilot December 2021

4 Questions

Question 1b

Explain the salient features of Economic Order Quantity approach.

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Question 1c

Sanitize Company Ltd. manufactures a product from raw materials which are purchased at Sh.54 per kg. The company incurs a handling cost of Sh.350 and transport cost of Sh.400 per order.

The carrying cost is Sh.0.50 per kg per month. The investment cost in the raw material is Sh.8. per kg. The annual production of the product is 94,500 units and each kilogramme of raw materials produces two (2) units of the final product.

Required:

(i) Calculate the economic order quantity.

(ii) Advise how frequently orders should be placed for procurement.

(iii) If the procurement manager proposes to order on quarterly basis, what discount should be negotiated if the company is not willing to incur extra costs.

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Question 3c

Explain the various risks associated with stock and inventory management in manufacturing during the COVID19 pandemic.

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Question 5a

Short Ltd. maintains separate cost and financial ledgers. The accountant has provided the following information from the trial balance.

Cost ledger opening trial balance:

	Sh.	Sh.
Financial ledger control account	-	250,000
Work in progress control account	120,000
Finished goods control account	110,000
Stores ledger control account	20,000
	250,000	250,000

Additional information:

Total sales during the period amounted to Sh.430,000.
Total purchases and other handling costs amounted to Sh.280,000.
The work in progress and stores ledger had the same values at the closing of the period.
The closing financial ledger balance was Sh.245,000.

Required:

(i) Profit for the period.

(ii) Closing trial balance for the period.

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December 2021

2 Questions

Question 1a

Blade Ltd. manufacturers a range of electronic products. The supplier of component X has informed Blade Ltd. that it will offer a quantity discount of 1% if Blade Ltd. places an order of 10,000 components or more at any time. Details of component X are as follows:

Cost per component before discount	Sh.20
Annual purchases	150,000 components
Ordering costs	Sh.360 per order
Holding costs	Sh.3 per component per annum

Required:

(i) Economic order quantity (EOQ).

(ii) Annual ordering cost and holding costs of inventory of component X using the economic order quantity (EOQ) computed in (a) (i) above.

(iii) Advise the management of Blade Ltd. whether the discount should be accepted.

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Question 1b

Usenge Products L.td. manufactures and retails products A. B and C.

The company has 120 workers who work under a group bonus scheme. The workers are categorised into three grades and are paid a bonus of the excess of time allowed over time taken.

The bonus paid is 80% of the workers' base rate and is shared by the workers in the proportion of time spent on the job. The foltowing production data has been extracted from the company's records for the month of November 2021.

Product	Units produced	Time allowed per unit (Minutes)
A	640	63
B	1,280	120
C	2,400	100

Grade of worker	Number of direct workers	Basic rate per hour	Hours worked per worker
1	40	300	30
2	16	270	64
3	64	240	50

Required:

(i) Percentage of hours saved to hours taken.

(ii) Bonus due to the group.

(iii) Gross earnings due to the group.

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September 2021

1 Questions

Question 3b

Fanaka Enterprises uses economic order quantity (EOQ) model to establish the re-order quantity of raw material "Y". The company hold no buffer stock.

The following information relates to raw material "Y":

Annual usage	48,000 units
Purchase price	Sh.80 per unit
Ordering costs	Sh.120 per order
Annual holding costs	10% of the purchase price

The company's supplier of raw material "Y" has offered a discount of 1% of the purchase price if each order placed is for 2,000 units.

Required:

(i) Economic order quantity (EOQ) of raw material "Y"

(ii) Advise the management of the company on whether to accept or decline the offer.

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May 2021

3 Questions

Question 5c

Explain three advantages and three disadvantages of implementing a Just-in-Time (JIT) system in an organisation.

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Question 3b

Bix Ltd. re-apportions the costs incurred in two service cost centres namely; materials handling and inspection to the three production cost centres of machining, finishing and assembly.

The following are the overhead costs which have been allocated and apportioned to the five cost centres:

	Sh. "Million".
Machining	400
Finishing	200
Assembly	100
Materials handling	100
Inspection	50

Estimates of the benefits received by each cost centre are as follows:

	Machining (%)	Finishing (%)	Assembly (%)	Materials Handling (%)	Inspection (%)
Materials Handling	30	25	35	-	10
Inspection	20	30	45	5	-

Required:

Calculate the charge for overhead to each of the three production cost centres, including the amounts reapportioned from the two service centres using:

(i) The continuous allotment (repeated distribution) method.

(ii) The algebraic method.

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Question 2a

Mzalendo Ltd. operates a differential piece rate remuneration scheme for its casual labourers.

The following schedule is applied to determine employees' remuneration:

Number of units	Wage rate per unit
1 - 250 251 - 500 501 - 1,000 Over 1.000	Sh. 500 550 600 650

Rhoda Bidii completed 1,650 units during the month of January 2021.

Required:

Determine the wages payable to Rhoda Bidii for the month of January 2021.

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November 2020

3 Questions

Question 5b

Suggest four reasons that would lead a cost accountant to prefer Just-in-Time (JIT) purchasing over conventional purchasing models:

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Question 2b

A company uses two methods to remunerate its casual workers as follows:

Piece rate with guaranteed time rate.

The company pays its casual workers Sh.25 for every good output produced by them. Any spoilt output is paid at the rate of Sh. 10 and a penalty of 8% is charged based on the rate of the good production. The employees are guaranteed a minimum monthly pay of Sh.8,000.

Differential piece rate

An employee is compensated on piece rate basis and the following schedule is applied to determine his or her remuneration.

Number of units.	Rate of wages per unit Sh.
1 - 250 251 - 500 501 - 1,000 over1,000	15 20 25 30

Spoilt units are deducted from the first production, paid at the rate of Sh. 10 per unit and a penalty of 8% applied at the differential rate of the first production.

Three employees of the company produced the following number of units during the month of March 2020:

Employee	Number of units produced	Spoilt Unit
Amboga Banyala Charlie	2,000 1,800 1,650	200 100 50

Required:

(i). Determine the wages payable to each employee under the two labour remuneration methods.

(ii). Advise each employee on the best labour remuneration method to accept based on your computations in b (1)

above

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Question 1a

Mejwa Ltd. is a manufacturing firm operating in the textile industry The company recorded the following transactions in relation to product BT during the month of January 2020:

Date	Purchases		Sales
	Quantity (Units)	Unit price Sh.	Quantity (Units)	Unit price Sh.
January: 1	12,000	150
3	8,000	160
7			12,000	200
8	10,000	155
13			5,000	210
17			8,000	205
20	12,000	140
23	7,000	152.5
25			11,000	200
27			10,000	202.5
31			200	212

Additional information:

1. The opening inventory of product BT on 1 January 2020 comprised of 9,500 units purchased at a cost of Sh. 135 per unit

2. On 9 January 2020, the company reported a shortage of 300 units.

3. On 19 January 2020, 600 units of the units sold on 17 January 2020 were returned by the customer

Required.

(i) A store ledger account for the month of January 2020 using first in first out (FIFO) method of inventory valuation.

(ii) The value of the closing stock

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November 2019

4 Questions

Question 2b

The following information has been provided to you by the cost accountant of Lela Ltd. for the month of September 2019:

Balances at the beginning of the month:		Sh.
Stores ledger control account		241,750
Work-in-progress control account		192,100
Finished goods control account		341,640
Prepayments of production overheads brought forward		21,000
Transactions during the month:
Materials purchased		761,500
Materials issued:	To Production	263,500
	For Factory maintenance	32,800
Total wages paid:	Direct	220,100
	Indirect	42,320
Direct wages charged to production		141,100
Recorded non-productive time of direct wages		52,300
Direct wages incurred in production of capital equipment		26,700
Selling and distribution overheads incurred		52,400
Other production overheads incurred		122,000
Sales		754,000
Cost of finished goods sold		598,300
Cost of goods completed transferred to finished goods account		621,300
Value of work-in-progress at the end of the month		243,600

Additional information:

Production overheads absorption rate is 150% of direct wages and it is the policy of the company to include a share of production overheads in the cost of capital equipment constructed in the factory.

Required:

Prepare the following accounts for the month of September 2019:

(i) Stores ledger control account.

(ii) Wages control account.

(iii) Work-in-progress control account.

(iv) Finished goods control account.

(v) Production overhead control account.

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Question 3b

Supreme Ltd. is a company that specialises in making high quality furniture to customers orders. The company has three production departments and two service departments.

Budgeted overhead costs for the year ending 30 April 2020 are as follows:

	Sh. "000"
Rent and rates	12,800
Machine insurance	6,000
Telephone charges	32,000
Depreciation	18,000
Production supervisor's salary	24,000
Heating and lighting	6,400
	70,400

The three production departments A, B and C and the two service departments X and Y are housed in new premises, the details of which, together with other statistics and information are provided below:

	Department
	A	B	C	X	Y
Floor area occupied (square metres)	3,000	1,800	600	600	400
Machine value (Sh. "000")	240	100	80	40	20
Direct labour hours ("000")	3,200	1,800	1,000	-	-
Labour rate per hour (Sh.)	380	350	340	300	200
Allocated overheads specific to each department (Sh. "000")	2,800	1,700	1,200	800	600
Service department X costs apportioned	50%	25%	25%
Service department Y costs apportioned	20%	30%	50%

Required:

(i) Overheads analysis sheet showing the overhead costs budgeted for each department and the basis of apportionment used.

(ii) Two pieces of furniture are to be manufactured for customers. The following information relates to the two pieces of furniture:

		Job 123	Job 124
Direct materials (Sh.)		15,400	10,800
		Hours	Hours
Direct labour - Department:	A	20	16
	B	12	10
	C	10	14

Required:
The total production cost for each job.

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Question 4b

Granite City Works (GCW) Ltd. is a manufacturer of cemetery headstones and architectural granite slabs. The company excavates blocks of granite from its joint processes of Quarry and Cutting. Two joint products; Cemetery monuments and Architectural granite are produced along with a by-product called "grit".

Cemetery monuments are cut, polished and engraved in a variety of standard shapes, sizes and patterns and sold to funeral homes. Architectural granite slabs are special-ordered by contractors for office buildings. These slabs are cut and polished to the exact customer's specifications. The small pieces of granite resulting from the cutting process are crushed and sold to farm-supply outlets as poultry grit.

Additional information:

1	GCW Ltd. has provided the following output and cost information:

Process	Output (Tons)	Cost (Sh. "000")
Quarry	100,000	350,000
Cutting	90,000	250,000
Monuments	25,000	300,000
Granite slabs	60,000	400,000
Grit	5,000	10,000

2	A local distributor purchases all of the grit that is produced at a price of Sh.40,000 per ton.
3	Assume that the company uses the physical units method to allocate joint costs.

Required:

The cost per ton of monuments and granite slabs, assuming that the grit is accounted for as:

(i) Other income.

(ii) By-product revenue deducted from the main product cost.

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Question 5a

Summarise four disadvantages associated with Just-In-Time (JIT) inventory management system.

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May 2019

2 Questions

Question 3a

The choice of an overhead absorption base is a matter of personal judgement.

Explain the extent to which you agree or disagree with the above statement.

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Question 2a

Baraka Distributors Ltd. purchases and sells a single product branded "M".

The following information is provided for product M:

1. Annual demand for the product is 30,000 units.

2. The ordering cost per order is Sh.2,500.

3. The holding cost is expressed as 20% of the purchase price.

4. A new supplier in the market has presented Baraka Distributors Ltd. with a proposal for the following range of quantities and respective price per unit:

Range of quantities	Price (Sh.)
1 - 3,000 3,001 - 5,000 5,001 - 7,000 7,001 - 9,000 9,001 - 10,000	21 19 17 15.50 13

Required:

Advise the management of Baraka Distributors Ltd. on the range of quantities to purchase.

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November 2018

3 Questions

Question 1b

Nduro Ltd. has two production departments; MM and NN and two service departments; PP and QQ. For the month of August 2018, the budgeted hours and costs were as follows:

Department	Hours	Cost (Sh.)
MM	1,800	45,000
NN	5,400	54,000

Additional information:

1	The service department costs are apportioned to the production departments as follows:

		Department
	PP QQ	MM 50% 40%	NN 20% 40%	PP - 20%	QQ 30% -

2	The overheads of the production departments are absorbed into product cost using a rate per hour.
3	During the month of August 2018, the actual activity levels and costs were as follows:

Department
MM
NN
PP
QQ

Hours
1,980
6,120
-
-

Costs (Sh.)
43,200
52,200
10,800
7,200

Required:

(i). The overheads to be charged to the production departments.

(ii). The amount of under or over absorption in each production department.

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Question 3

Kiz Ltd. manufactures a single product branded "zuri" whose standard cost card is given below:

		Sh.
Selling price per unit		100
Direct materials	7 kilogrammes at Sh.2 per kilogramme	14
Direct labour	2 hours at Sh.8 per hour	16
Fixed overheads	2 hours at Sh.16 per hour	32
Total cost		62

Additional information:

1	As at I October 2018, the opening balances for the cost ledgers were as follows:

		Sh.
	Direct materials	15,000
	Work-in-progress	120,000
	Finished goods	72,000

2	The following transactions took place during the month of October 2018:

		Sh.
	Direct material purchases	89,000
	Materials issued to production	90,000
	Direct labour paid	102,000
	Indirect labour paid	56,000
	Production overhead cost incurred	159,000
	Sales (6,500 units)	650,000
	Goods transferred to finished goods stock	385,000

3	As at 31 October 2018, closing stock balances were as follows:

		Sh.
	Direct materials	14,000
	Work-in-progress	135.000
	Finished goods	54,000

Required:

(a) Direct materials control account.

(b) Work-in-progress control account.

(c) Finished goods control account.

(d) Production overheads control account.

(e) A statement showing profit or loss.

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Question 5d

Production overhead is also known as factory overhead or manufacturing overhead.

With reference to the above statement, outline six examples of production overheads.

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May 2018

3 Questions

Question 5a

Distinguish between "interlocking accounting systems" and "integrated accounting systems" as used in cost bookkeeping.

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Question 3a

Savanah Company is highly automated and uses computers to control manufacturing operations. The company uses job order costing system and applies manufacturing overhead costs to products on the basis of computer hours.

The following estimates were used in preparing predetermined overhead rates at the beginning of the financial year ended 31 March 2018.

Computer hours	85,000
Fixed manufacturing overhead costs	Sh. 1,275.000
Variable manufacturing overhead per computer-hour	Sh.3.0

During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company's warehouse. The company's cost records disclosed the following actual costs and operating data for the year ended 31 March 2018:

Computer hours	60,000
	sh.
Manufacturing overhead costs	1,350,000
Cost of goods sold	2,800,000
Inventories at the year-end:
Raw materials	400,000
Work-in-progress	160,000
Finished goods	1.040.000

Required:

(i)	Compute the company's predetermined overhead absorption rate for the year.
(ii)	Compute under-applied or over-applied overhead cost for the year.
(iii)	It is the policy of the company to allocate any under or over-applied overheads to cost of goods sold. Determine the cost of goods sold to be charged to the income statement.

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Question 1b

XYZ Ltd, manufactures a component branded "zed" at the rate of 4,000 units per week. Demand for the component is 2,000 units per week while the production set up cost is Sh.50 per batch. The accountant has provided the holding cost per unit per annum as Sh.0.001

Assume a 50-week year.

Required:
(i) Economic Batch Quantity (EBQ) for the company

(ii) Determine the relevant costs for the EBQ in (b) (i) above

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November 2017

4 Questions

Question 3c

Jundi Ltd. maintains separate cost and financial ledgers. The Accountant has provided the following opening trial balance in the cost ledger:

Cost ledger opening trial balance
	Sh.	Sh.
Financial ledger control account		249,520
Work-In-Progress (WIP) control account	125,210
Finished goods control account	85,150
Stores ledger control account	39,160
	249,520	249,520

Additional information:

1. During the period, total sales amounted to Sh.375,290.

2. Total purchases, wages and overheads amounted to Sh.292,860.

3. At the end of the period, the stores ledger and Work-In-Progress (WIP) control accounts had the same values as in the opening trial balance above.

4. The closing balance on the financial ledger control account was Sh.212,420.

Required:

(i) The profit for the period.

(ii) Closing trial balance for the period.

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Question 3a

Mitambani Manufacturers Ltd. are in the initial process of adopting a Just-in-Time (JIT) inventory control system:

Required:

(i) Highlight four objectives of a JIT inventory control system.

(ii) Describe four benefits that would accrue to the company from using JIT inventory control system.

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Question 2b

BRK Ltd. orders a raw material graded "Exe" for its manufacturing purpose. The following information is available from the production manager:

Annual consumption of Exe (units)	200,000
Ordering cost per order (Sh.)	18,750
Carrying cost per unit (Sh.)	3

Required:

(i) The Economic Order Quantity (EOQ) for material "Exe".

(ii) The number of orders to be placed per year.

(iii) The production manager has proposed to increase the current Economic Order Quantity (EOQ) to 100,000 units. Justify how this would increase the total cost of inventory thus not profitable.

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Question 1b

Mazuri Ltd., a manufacturing company, has three production departments and two service departments. Overheads for the departments fora specific period were as follows:

	Sh. "000"
Production departments
X	2,500
Y	2,000
Z	1,500
Service departments
A	1,000
B	780
Total	7,780

Additional information:

1	A technical assessment for the apportionment of the service department costs were as follows:

Department	X	Y	Z	A	B
A	30%	30%	20%	-	20%
B	40%	30%	20%	10%

2	Output for the production departments during the period are provided below:

	Department	Units of outputs
	X	200,000
	Y	100,000
	Z	50,000

Required:

The total overheads chargeable to the production departments using:

(i) Continuous allotment method.

(ii) Simultaneous equation method.

(iii) Overhead cost per unit for each department.

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November 2016

1 Questions

Question 3a

Outline four causes of labour turnover in an organisation.

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May 2016

1 Questions

Question 5c

Discuss four requirements for the proper operation of Just-in-time (JIT) system in an organisation.

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November 2015

2 Questions

Question 4a

Respor Ltd. manufactures three products namely; A, B and C. The company has four departments namely: W, X, Y and Z. The following information relates to Respor Ltd. for the year ended 30 June 2014:

Rates
Depreciation: Buildings
Depreciation: Machinery
Maintenance of buildings
Insurance. Buildings
Insurance. Machinery
Insurance. Inventory
Insurance..Workman's.compensation
Electricity: Lighting
Electricity: Power
Supervision
Personnel, time keeping and payroll
Canteen expenses

Sh."000"
25,000
45,000
20,000
15,000
5,000
4,000
12,000
4,000
20,000
24,000
60,000
40,000
12,000
286,000

Departmental information:

........................................................
Area (square metres)
Value of machines (Sh."000")
Running of machines
Average.inventory.value.(Sh."000")
Wages paid (Sh."000")
Number of employees

W
4,000
80,000
15,000
20,000
120,000
15

X
2,000
60,000
7,000
15,000
170,000
20

Y
3,000
60,000
8,000
15,000
80,000
10

Z
1,000
-
-
10,000
30,000
5

Required:

Overhead analysis sheet.

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Question 3b

Kena Stores provided the following information in respect of their operations for the month of July 2015:

Date
3 July
7 July
18.July

Receipts

600 units at Sh.60
1,000 units at Sh.70
2,400.units.at.Sh.80

Date
5 Julv
12 July
20 July
29 July
31.July

Issues

1,600.units
400 units
1,200 units
600 units
200 units

Additional information:

Materials in store as at 30 June 2015 were 2,000 units at Sh.50.
On 9 July 2015, part of the materials issued on 5 July 2015 amounting to 200 units were returned.
On 15 July 2015, 100 units were returned to Kena Stores.
On 21 July 2015, there was materials wastage of 500 units.
Returns from a June 2015 issue of 100 units at Sh.45 was received on 25 July 2015.
On 28 July 2015, there was shortage of stock of 20 units.
Kena Stores uses the first in first out (FIFO) method to value its inventory.

Required:

A stores ledger card for Kena Stores for the month of July 2015.

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Pilot September 2015

2 Questions

Question 4b

The finishing department of a factory has the following payroll data for the month of August 2015:

...................................................
Total attendance time
Normal working hours
Productive time
Non productive time
- Due to poor supervision
- Normal machine repairs
Basic hourly rate per hour

Direct.employees
19800 hours
18000 hours
18850 hours

400 hours
550 hours
Sh.150

Indirect.employees
7050 hours
6400 hours
-
-
-
-
Sh.150

Overtime is paid at a premium of 40% of base rate. 40% of the overtime for both categories was worked to meet specific request of a customer. A general bonus of Sh.625,000 was paid to all the employees.

Required:
Wages control account to show the wages allocation for the period.

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Question 4a

Alpha Limited manufactures three products in two production departments; machining and finishing. It also has two service departments, a canteen and machine maintenance departments. The following are the budgeted cost data for the coming year:

Department

Allocated overheads (Sh.)
No. of employees
Maintenance orders

Products
Production (units)

Direct material cost per unit (Sh.)
Direct labour hours per unit:
Machining (Sh.60 per hour)
Finishing (Sh.50 per hour)

Machine hour per unit:
Machining
......................................................

Machining

3,502,000
15
52

Benta
3,000

120

3
4

2

Finishing

1,748,000
9
13

Centa
4,500

150

2
2

4

Canteen

800,000
2
-

Denta
2,000

170

1.5
2

3

Maintenance

400,000
6
-

Overheads are absorbed on machine hours in machining and labour hour in finishing.

Required:

Calculate the budgeted cost per unit for each product.

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Cost accumulation

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