SCHOOL OF BUSINESS, ECONOMICS AND MANAGEMENT

AFIN210: COST AND MANAGEMENT ACCOUNTING

MID SEMESTER EXAMINATION

APRIL , 2017

09:00 – 12:00 HOURS

Time allowed: 3 HOURS plus 5 minutes reading time

Instructions to Candidates:

1. Read the instructions very carefully.

2. Check that you have the correct test paper in front of you.
3. There are three Sections in this paper A, B & C. Section A has ONE
Question. Section B has TWO questions. Section C has THREE
questions.
Answer all questions in Section A AND B and choose any TWO
questions from Section C.
4. All questions must be answered in the answer booklet provided only.
5. Write down the number of questions that you have answered on the
cover of the examination answer booklet.
6. Begin answering each question on a new page in the answer booklet
provided only.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

SECTION A

1. Nitram Manufacturing Zambia limited has three different Departments -

Manufacturing, Inspecting and Packing. For the year ended 2016 the following are the
budgeted costs.

Total Manufacturing Inspecting Packing

K K K K

Indirect materials 320,000 200,000 80,000 40,000

Indirect labour 440,000 240,000 120,000 80,000

Rent/Rates 90,000

Light/heat 52,000

Machine maintenance 36,000

Plant depreciation 160,000

Factory canteen 72,000

The following information relates to the three Departments.

Total Manufacturing Inspecting Packing

Floor space in square metres 18,000 8,000 6,000 4,000

Volume in cubic metres 60,000 32,000 20,000 8,000

Plant valuation in € at book value 500,000 270,000 130,000 100,000

Machine hours 60,000 30,000 15,000 15,000

Number of employees 90 40 30 20

Labour hours 120,000 60,000 40,000 20,000

Job No. 811 has been completed. The details are:

Direct Direct Machine Labour

Materials Labour Hours Hours

K K

Manufacturing 6,200 920 50 20

Inspecting 2,400 2,600 20 80

Packing 1,400 8 27

The company budgets for a profit margin of 25%

You are required to:

(a) Calculate the overhead to be absorbed by each Department stating clearly the basis of
apportionment used. 15 marks

(b) Calculate a suitable overhead absorption rate for each Department. 9marks

(c) Compute the selling price of Job No 811 10marks

(d) Name three overhead absorption rates and state why they are based on budgeted
rather than actual figures. 6marks
Total = 40 marks

SECTION B

1. A company manufactures a single product which is sold for K140 per unit. Unit
costs are:

Variable material and labour K59.00

Fixed production K42.00

Variable production overhead K9.60

Fixed selling & distribution overheads K18.00

20,000 units of the product were manufactured in a period during which 19,700
units were sold.

Prepare an operating statement using

a) Marginal costing and 4 Marks

b) Absorption costing 6 Marks
Total = 10 marks

2. Differentiate between the following terms:

a) Product costs and Period cost 2.5 marks
b) Cost allocation and cost absorption 2.5 marks
c) Variable costs and Fixed costs 2.5 Marks
d) Cost accounting and financial accounting 2.5 Marks
Total = 10 Marks
 SECTION C

Answer any TWO questions

1. Trade Kings had 800 units of inventory on hand at 1 April 2016, costing K20 each.
Purchases and sales of inventory during the month of April were as follows:

Date Purchases Sales

April 4 400 units @ K44 each 600 units
April 10 400 units @ K48 each
April 16 400 units
April 25 300 units @ K50 each
April 28 400 units

Determine the cost of sales and closing inventory under each of the following
methods:

i. FIFO 6 Marks
ii. LIFO 6 Marks
iii. Weighted average cost 8 Marks

(Total = 20 Marks)

2. The ABC Co. is planning to stock a new product. The Company has developed
the following information: Annual usage is 60,000 units (in 360 days), Cost of the
product is K1 /unit, Ordering cost = K6 /order and Carrying cost is 50% /year of
inventory value held. Normal lead time is 30 days and safety stock is 60 days.

Find out each time

a) How much should be ordered 5 marks

b) When the order should be placed 7 marks
c) How many orders should be placed in a year 3 marks
d). what should be the ideal inventory level immediately before the delivery of
material ordered is received 5 marks

Total =20 marks

3. Ficht Limited has provided the following costing data for your analysis:

Production depts. Service depts.

Total A B Canteen Stores
K K K K K
Allocated costs 70,022 21 328 29,928 8,437 10, 329
Other overheads:
Rent and rates 4,641
Building insurance 3,713
Electricity and gas 6,800
Plant depreciation 28,390
========
TOTAL 113,566
========

Area occupied (m2) 7,735 6,188 1,547 3,094

Plant Cost (K’000) 1,845 852 - 142

Number of employees 600 300 30 70

Machine Hours 27,200 800 - -

Direct labour hours 6,800 18,000 - -

No. of stores requisitions 27,400 3,400 - -

Required:

Using the information given

(i) Prepare an overhead analysis sheet to show the total overhead cost under
each production cost centre. 17
Marks
(ii) Calculate an overhead absorption rate for the production departments.
3 Marks

(Total = 20 Marks)

THE END