Unit: Management accounting
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| Cost element | Total cost (Y) | Cost behaviour |
| Sh. | ||
| Direct material | 420,000 | |
| Direct labour | 150,000 | |
| Depreciation | 80,000 | Fixed period cost |
| Telephone charges | 6,000 | 100% fixed |
| Production overheads | 40,000 | Y = 8,000 + 3.2x |
| Supervisor’s salary | 200,000 | Y = 160,000 + 4x |
| Machine repairs | 60,000 | Y = 6,000 + 5.4x |
| Packaging cost | 4,000 | 100% direct cost |
| Cleaning expenses | 60,000 | 1/3 variable |
| Month | Number of computers assembled | Total cost incurred Sh."000" |
| January | 1,600 | 164,000 |
| February | 900 | 112,000 |
| March | 1,100 | 100,000 |
| April | 820 | 96,000 |
| May | 1,160 | 120,000 |
| June | 1,200 | 124,000 |
| July | 1,300 | 128,000 |
| August | 1,360 | 130,000 |
| September | 1,400 | 140,000 |
| Ovtober | 1,500 | 148,000 |
| November | 1,700 | 180,000 |
| Sh. | Sh. | |
| Sales (1,200 units at Sh.18,000 per unit) | 21,600,000 | |
| Less: Cost of sales: | ||
| Less:.Production (1,800 units at Sh.10,000 per unit) | 18,000,000 | |
| Less: Closing inventory (600 units at Sh.10,000 per unit) | (6,000,000) | (12,000,000) |
| Gross profit | 9,600,000 | |
| Less: Variable selling expenses (10% of sales) | (2,160,000) | |
| Less:.Fixed selling and distribution costs | (1,705,000) | |
| Net profit | 5,735,000 |
Required:
Using high-low method, calculate:
(i) The variable production cost per unit.
(ii) The total monthly fixed production cost.
| Month | Machine Hours (“000”) | Electricity expense (Sh.“000”) |
| June | 78 | 1,800 |
| July | 78 | 1,500 |
| August | 93 | 1,590 |
| September | 105 | 1,650 |
| October | 129 | 1,740 |
| November | 144 | 2,040 |
| Month | Machine hours | Maintenance Cost (Sh.“000”) | Month | Machine hours | Maintenance Cost (Sh.“000”) |
| September 2022 | 400 | 960 | February 2023 | 240 | 640 |
| October 2022 | 240 | 880 | March 2023 | 160 | 560 |
| November 2022 | 80 | 280 | April 2023 | 480 | 1,350 |
| December 2022 | 400 | 1,200 | May 2023 | 320 | 660 |
| January 2023 | 320 | 800 | June 2023 | 160 | 440 |
| Month | Advertising expenditure Sh."000" | Sales revenue Sh. "000" |
| 1 2 3 4 5 6 | 1.5 2 1.75 3 2.5 2.75 | 30 27 25 40 32 38 |
| Σ(Advertising expenditure) | = Sh.13,500 |
| Σ(Sales revenue) | = Sh.192,000 |
| Σ(Advertising expenditure × Sales revenue) | = Sh.447,250,000 |
| Σ(Sales revenue²) | = Sh.6,322,000,000 |
| Σ(Advertising expenditure²) | = Sh.32,125,000 |
| Month | No. of masks (000) | Total cost (Sh.”000”) |
| 1 | 5 | 50 |
| 2 | 6 | 53 |
| 3 | 6.5 | 55 |
| 4 | 6.7 | 59 |
| 5 | 7 | 62 |
| 6 | 7.5 | 64 |
| 7 | 8 | 66 |
| 8 | 9 | 72 |
| Period | Total production cost (Sh."000") | Level of activity (Units produced) |
| January February March April May June July August September October November December | 460 300 480 550 570 310 410 455 530 250 700 490 | 30 22 33 39 41 24 29 32 38 15 45 35 |
| Month | Output (Units) | Cost (Sh.) |
| January Febraury March | 8,240 8,750 8,100 | 167,590 173,260 165,772 |
| Overheads | Amount |
| Sh. "000" | |
| Indirect materials | 5,700 (all variable) |
| Indirect labour | 4,100 (all variable) |
| Rent and rates | 2,800 (all fixed) |
| Machinery depreciation | 1,700 (all fixed) |
| Maintenance | 5,200 (3,100 variable) |
| Technical support | 1,620 (all fixed) |
| Storage cost | 4,300 (4,100 variable) |
| Heat and light | 3,100 1,000 fixed) |
| Water bill | 1,700 (650 fixed) |
| Transport | 2,900 (900 fixed) |
| Supplies | 4,000 (all variable) |
| Week | Number of cars repaired | Total costs incurred Sh. "000" |
| 1 2 3 4 5 6 7 8 | 90 100 120 150 160 220 300 340 | 5,200 6,000 6,200 3,530 3,850 4,300 5,870 7,150 |
| Month May June July August September October November December | Number of patients admitted 1,800 1,900 1,700 1,600 1,500 1,300 1,100 1,500 | Admission department's Cost "Sh." 14,700 15,200 13,700 14,000 14,300 13,100 12,800 14,600 |
| (i) | Using the high-low method, estimate the fixed and variable components of admission costs. |
| (ii) | Using the least squares method, estimate the relationship between number of patients admitted and the admission costs in the form of Y = a + bx |
| (iii) | Using the relationship obtained in (b) (ii) above, estimate the admission costs incurred in January 2018 if admission was 2,000 patients |
| Sh. | |
| Direct materials | 70,000 |
| Direct labour | 60,000 |
| Rent (Fixed) | 35,000 |
| Electricity (30% Fixed) | 25,000 |
| Property taxes and rates (70% variable) | 60,000 |
| Technical support (Fixed) | 35,000 |
| 285,000 |
| Week 1 2 3 4 5 6 7 8 9 10 11 12 | Machine.hours 68 88 62 72 60 96 78 46 82 94 68 48 | Indirect.labour.cost Sh. 1,190 1,211 1,004 917 770 1,456 1,180 710 1,316 1,032 752 963 |
| Details of cost Direct materials Direct labour Depreciation Telephone Other utilities Supervisors salary Equipment repairs Indirect materials Factory.maintenance | Cost(Sh.) 420.000 150.000 80,000 2.000 40,000 200.000 60,000 4,000 60,000 | Cost.behaviour Variable Variable Fixed Fixed 20% fixed 80% fixed 10% fixed Variable 90% fixed |