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COLLEGE OF BUSINESS EDUCATION

DAR ES SALAAM CAMPUS


TNC/TFC OCTOBER 2016 BACC II

SUPPLEMENTARY EXAMINATIONS

SUBJECT: ADVANCED COST ACCOUNTING

PAPER CODE: ACB 07203

DATE: 17.09.2018

Time Allowed: 3 HOURS

Instructions:

a) This paper consists of FIVE questions, attempt all questions


b) Do not write or draw on the question paper
c) Cellular phones are not allowed in the examination room
d) All questions carry equal mark

1
Question One
You have been approached for assistance by a new client, Rainbow Limited, which have recently
commenced manufacturing operations in Dar es Salaam. The company produces a specialized range of
paint. The managing director Joe Masanja, is aware that other paint manufacturers use process costing
and has asked you to provide information about this method of assigning costs to production and
inventory.

Required
Prepare a report for Joe which:
a) Differentiates process costing from job costing (5 marks)
b) Describe how a process costing system operates and provide examples of other industries where
process costing is appropriate. (5 marks)
c) Outline the meaning of the following terms:
i. Equivalent units
ii. Normal loss
iii. Abnormal loss (5 marks)

d) Explain two different approaches that may be used where a company has opening work in progress
as part of its inventory. (5 marks)

Question Two
The following information relates to Mkonge plc a manufacturing company that has two manufacturing
departments and two service departments:

Manufacturing Manufacturing Service Service


Dept. 1 Dept. 2 Dept. 1 Dept. 2 Total
Tshs. Tshs. Tshs. Tshs. Tshs.
Allocated overheads 83,100 90,500 14,000 15,400 203,000

General Overheads:
Indirect labour 55,000
Factory repairs & maintanance 63,000
Heat & light 84,000
Staff canteen costs 9,000
Machine depreciation 32,000
Rent of building 42,000
285,000
Total overheads 488,000

The following additional information was extracted from the company’s management accounting records:

2
Manufacturing Manufacturing Service Service
Dept. 1 Dept. 2 Dept. 1 Dept. 2 Total
Floor space sq. m 7,000 9,000 3,000 2,000 21,000
Direct labour hours 80,000 40,000 - - 120,000
Indirect labour hours 35,000 20,000 - - 55,000
Direct labour rate per hour (Tshs.) 20 15 - - 35
Number of staff 120 60 - - 180
Machine hours 12,000 40,000 - - 52,000
Machine value (Tshs.) 180,000 420,000 40,000 - 262,000

Re-apportion Service dept.


as follows:
Service Dept.1 overheads 35% 65%
Service Dept.2 overheads 55% 45%

Data on two jobs being undertaken by the company is as follows:

DG 10 EH20
Direct materials cost (Tshs.) 410 720
Machine hours 15 35
Direct labour hours
Manufacturing Dept. 1 90 70
Manufacturing Dept. 2 20 35
Required:
a) Prepare a statement showing the total overhead cost for each manufacturing department and
service department. (6 marks)

b) Re-apportion each service department overhead between manufacturing departments(4 marks)

c) Calculate a suitable overhead absorption rate for each manufacturing department. (4 marks)

d) Show the total cost of jobs DG 10 and EH 20 (6 marks)

Question Three
Rosee Co Ltd. is drafting a budget on the basis of the following data:

Direct materials Tshs. 10 per unit


Direct Labour Tshs. 5 per unit
Variable production overheads Tshs. 8 per unit
Fixed production overheads Tshs. 27,000 per month
Normal output 9,000 units per month
Sales price Tshs. 30 per unit

In order to build up inventory in anticipation of an increase in demand that is expected later in the year
production is to exceed sales in the first three months of the year as follows:

3
Month 1 Month 2 Month 3
Production 6,500 9,000 10,000
Sales 5,000 8,500 9,500

Selling and administrative expenses were as follows:


Variable - 5% of sales revenue
Fixed - Tshs. 5,000 per month

Required
a) Prepare two profit statements in columnar form covering each of the three months
i. On full absorption costing basis (8 marks)
ii. On marginal costing basis (8 marks)
b) Reconcile the two profit figures (4 marks)

Question Four
Roselyne Promotions limited is planning a concert at Dar Live Hall in Dar es Salaam. The following are
estimated costs for the proposed concert.

Tshs.
Rent of premises 1,300,000
Advertising 1,000,000
Printing of tickets 250,000
Ticket sellers & security 400,000
Wages of promotional personnel 600,000
Fee of Artists 1,000,000

Dar Live does not have enough packing space for attendees but Roselyne Ltd. has made arrangement with
Zakheem Company limited to accommodate patrons’ vehicles at a fee of Tshs. 500 per vehicle.

It is estimated that half of the attendees will board daladala commuter buses (public transport) and half
will come with private vehicles which will accommodate 3 persons in each car.

The selling price of a ticket is Tshs. 2500.

Required:
a) Calculate the number of tickets which must be sold to break even. (10 marks)

b) Recalculate the number of tickets which must be sold to break even if the artist agrees to
change from fixed fee of Tshs. 1,000,000 to fee equal to 25% of the gross sales proceeds.
(10 marks)

Question Five:
From the following information relating to MKSS co. Ltd. Prepare Process Cost Account for Process III for
the year 2015.

Opening Stock in Process III 5000 units of Tshs.36,000


Transfer from Process II 213,000 units of Tshs. 827,000
Direct Material added in Process III Tshs. 401,000
Direct Wages Tshs. 198,100
4
Production Overheads Tshs. 99,050
Units Scrapped 11,000 units
Transferred to Process IV 189,000 units
Closing Stock 18,000 units

Degree of completion:
Opening Closing
Stock Stock Scrap
Material 70% 80% 100%
Labour 50% 60% 80%
Overheads 50% 60% 80%

There was a normal loss of 5% of production and


units scrapped were sold for Tshs. 1.50

You are required to:


a) Prepare the statement of equivalent units using FIFO approach. (10 marks)
b) Prepare Process III a/c and all other supporting accounts for Process III (10 marks)