ZCAS UNIVERSITY

COST ACCOUNTING

ASSIGNMENT

INSTRUCTIONS:
• ALL QUESTIONS are Compulsory and MUST attempted.

• Clearly Type all your work in WORD showing clearly all necessary workings

in order to score maximum marks.

• Evidence of plagiarism (Copying) will result in zero marks.

• Due date (Deadline) for submission 8th March.

• PLEASE strictly observe submission dates to avoid losing marks.

• SUBMIT YOUR WORK THROUGH THE SUBMISSION LINK ON THE

PORTAL.
QUESTION ONE

Dabwiso Limited uses a standard costing system. The standard cost per unit of
Product D is as follows:
K
Direct material 2 500
Direct labour 1 200
Production overheads: Variable 600
Fixed 500
Standard production cost 4 800
Standard selling price 7 500

The standard fixed production overhead absorption rate was based on a budgeted
activity of 10,000 units.
During Period 4, Production was 10,000 units as planned but sales were only 8,000
units. There was a total fixed production overhead variance of K500 000 adverse. All
units were sold at K7,500 each.
There were no opening inventory at the beginning of the period.
Other costs incurred during the period were in relation to selling and distribution, and
administration. These were as follows:
Variable Fixed
Selling and distribution 20% of sales K3 000 000
Administration – K5 000 000

Required:
(a) Prepare operating Profit statement for Period 4 using:
(i) Absorption costing
(ii) Marginal
(b) Prepare a reconciliation of the difference between the Profit/Loss under absorption
costing and under marginal costing and explain the reason for the difference.

[25 Marks]
QUESTION TWO
At beginning of July 2021, Idah & Faith (IF) Co had 25 microwave ovens in
inventory costing of K750 per unit. Over the next three months, the company made
the following purchases.

Date Quantity Unit cost K

6 July 5 770
5 August 4 800
1 September 8 850
14 September 6 880
During that period, there were sales of 35 units, generating a total sales revenue of
K38,500.

REQUIRED:
a) Prepare the stores ledger card for the materials in stock that records all material
movements using:

(i) FIFO method

(ii) LIFO method

b) Based on the work done in (a) above, determine the cost of sales and profit for
three months to 30 September using FIFO and also based on LIFO.
c) Compare the reported profit of the company in (b) above over the three months to
30 September based on the two methods (FIFO and LIFO) and comment on the
results

Explain each of these cost classifications below, with examples of the types of costs
that may be included:
(i) Fixed costs.
(ii) Period costs.
(iii) Variable costs.
(iv) Prime costs.

(b) List the four characteristics of service costing

(c) Explain the differences between product costing and service costing

[25 Marks]
QUESTION THREE

MM has prepared the following standard cost information for one unit of a product:
Production 12 000 units
Direct materials: 3 metres at K12 000 per metre
Direct labour: 6 hours at K6 250 per hour
Fixed Production overheads: 6 hours at K5 500 per hour

Actual results in the month of May 2012 were recorded as follows:

Actual output: 10 000 units
Direct materials purchased and used: 32 000 metres with a total value of K377 600
000
Direct labour: 70 000 hours with a total cost of K422 800 000
Fixed overheads: K330 000 000

Required:
(a) Use the budget data to determine the standard cost of one unit.
(b) Calculate the following variances.
(i) Material usage and Price variances.
(ii) Labour Efficiency and Rate variances.
(iii) Fixed overhead Expenditure and Volume variances.
(c) Draw up a statement reconciling the standard cost with the actual cost.
[25 Marks]
QUESTION FOUR

ERS ltd is a company engaged in the manufacture of sports shoes. The last financial
year to 31 January has seen the company produce its lowest profit for five years.
The summary profit and loss account for the year to 31st January is set out
below :
K K
Sales revenue (50,000 shoes @ K70) 3,500,000
Cost of sales
Direct materials 1,400,000
Direct labour 1,150,000
Variable manufacturing overheads 200,000
Fixed manufacturing overheads 410,000
Total manufacturing costs 3,160,000
Gross profit 340,000
Selling and distribution overheads (Fixed) 134,000
Administration cost 148,400
Net profit 57,600
REQUIRED:
Compute the break-even level of activity and revenue to break-even on the basis of
last year’s results.

[25 Marks]