Date: 20/06/2015 Time: three hours

Batch (10) All Specializations

Final Semester (6) Examinations
Exam Paper: Cost Accounting II
Name:-------------------------------------------Index No.-----------------------
Answer All Questions.
Question (1): (5 marks)
between the brackets write (T) if the statement is TRUE or (F) if the statement is
FALSE.
1. ( ) The standard cost of a product is the average unit cost of products produced during a
particular period.

2. ( ) A standard that represents the most likely scenario can be referred to as the attainable
standard cost.

3. ( ) Standard costs may not be used in a service business.

4. ( ) When using cost estimation the first step is to define the cost driver.

5. ( ) Hamid Company has the following information for the years 2012 and 2013:

2012 2013

Utilities cost SDG 30000 SDG 60000

Units produced 1000 2000

Accordingly Utilities cost should be classified as a variable cost.

6. ( ) The magnitude of the variable would not be a criterion when determining cost driver.

7. ( ) Standard costs can simplify the costing of inventory.

8. ( )If the standard number of hours that should have been worked for the output attained is
8000 direct labor hours, and the actual number of direct labor hours worked was 8400. If the
direct labor price variance was SDG4200 unfavorable and the standard rate of pay was
SDG9.00 per direct labor hour. Thus the actual rate of pay for direct labor was SDG8.50 per
hour.

9. ( ) Properly set standard costs should promote efficiency.

10. ( ) The ABC systems could be used only in manufacturing companies.

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Question (2): (15 marks)
Bushra Chemical Laboratory operates a single chemical process to convert a single raw
material into three separate products, referred to as A, B and C. All three end products are
separated simultaneously at a single split-off point. All three products are not ready for sale
immediately upon split-off. There is no available market price for these products at the split-off
point. A summary of operating data for 2014 is presented below. The production costs identified
with the individual products are only the separate costs incurred after the split-off point:

Product: A B C Total for year

Output in pounds 90000 60000 30000 180000

Selling price per pound SDG 1.10 2.20 3.30

Production costs:

Direct Material SDG 100000

Direct Labor SDG 8000 12000 10000 80000

Variable Overhead 4000 6000 4000 30000

Fixed Overhead 6000 10000 8000 56000

Required
(a) Allocate the common production costs among the three joint products using the most
appropriate method.

(b) Calculate per unit cost for each product.

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Question (3): (marks 10)
A manufacturing company has three support departments and two production departments.
Departmental costs and allocation base data for 2014 were as follows:

Manufacturing Personnel Facilities Kilowatt

Overhead Investment Hours

Service Departments:

Health and Safety SDG 200000 50 SDG 400000 2000

Maintenance 600000 100 1800000 7500

Power and Light 400000 60 2500000 5000

Manufacturing Processes:

Assembly 500000 80 4700000 22500

Packaging 300000 160 2400000 18000

2000000 450 11800000 55000

Allocation bases for the service departments are as follows:

Health and Safety Number of personnel

Maintenance Investment in facilities

Power and Light Kilowatt hours

Required:
Allocate the service departments’ costs using the step-down method.

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Question (4): (10 marks)
You are a financial analyst at El-Sinaat Corporation, and you are examining the behavior of
quarterly maintenance costs for budgeting purposes. You collected the following data on
machine-hours worked and maintenance costs for the past 12 quarters:

Quarter Machine- Hours Maintenance Costs

1 90,000 SDG 185,000

2 110,000 220,000

3 100,000 200,000

4 120,000 240,000

5 85,000 170, 000

6 105,000 215,000

7 95,000 195,000

8 115,000 235,000

9 95,000 190,000

10 115,000 225,000

11 105,000 180,000

12 125,000 250,000

Required:-
Estimate the cost function for the quarterly data using the high-low method.

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Question (5): (20 marks)
Kamil Metals Company’s main product is a copper water pipe, which is made in a single
department. The standard variable costs for one unit of finished pipe are as follows:

Direct Materials (3 sq. meters @ SDG 12.50 per sq. meter) SDG 37.50

Direct Labor (1.2 hours @ SDG9.00 per hour) 10.80

Variable overhead (1.2 hours @ SDG5.00 per direct labor hour) 6.00

Standard variable cost per unit 54.30

The company’s normal capacity is 15000 direct labor hours. Its budgeted fixed overhead costs
for the year were SDG54000. During the year, it produced and sold 12200 units, and it
purchased and used 37500 square meters of direct materials; the purchase cost was SDG12.40
per square meter. The average labor rate was SDG9.20 per hour, and 15250 direct labor hours
were worked. The company’s actual variable overhead costs for the year were SDG73200, and
its fixed overhead costs were SDG55000.

Required: Compute the:

a. Material variances.
b. Labor variances.
c. Overhead variances.

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