REVISION PARTNER 1
QUESTIONS
TOPIC 1
NATURE AND PURPOSE OF COST ACCOUNTING
QUESTION 1
a) Describe four shortcomings of cost accounting.
December 2014 Question Four A
QUESTION 2
a) The success of an organisation in cost control and cost reduction depends largely on the
installation of an ideal cost accounting system which identifies, classifies and records all costs
accurately and promptly.
Required;
With reference to the above statement, explain four conditions for an effective costing system.
December 2014 Question Three A
QUESTION 3
a) Describe five ways in which cost accounting complements financial accounting in terms of
providing information to managers for better decision making.
May 2014 Question One A
QUESTION 4
a) Daniel Mutiso, the Cost Accountant of Abra Ltd. feels that he is getting overworked and has
recommended that a management accountant be employed to take up other responsibilities in the
organization.
However, the management of the company equally argues that the work is the same and that a
decision to hire a management accountant is against their cost reduction policy.
Required:
In the light of the above statement, explain to the management three differences between management
accounting and cost accounting to help them make a fair decision.
December 2013 Question One A
QUESTION 5
(a) Cost accounting is often described as the provision of information required by management for
specific purposes"
Required:
State six of these specific purposes.
June 2013 Question Five A
COST ACCOUNTING
,REVISION PARTNER 2
TOPIC 2
COST CLASSIFICATION
QUESTION 1
(b) Afya Bora Health Centre has a capacity of 20 beds. The following information relates to the
centre's operations for the year ended 30 June 2014:
Sh.
Repairs and maintenance (Fixed) 150,000
Rent per month 225,000
Food supplied to patients (variable) 1,080,000
Laundry charges (variable) 540,000
Medicines (variable) 900,000
Other expenses (Fixed) 1,080,000
Salaries per month: Supervisors 30,000
Nurses 30,000
Ward assistants 15,000
Additional information:
1. The health centre operated for 300 days during the year. For 200 days, the bed occupancy
accounted for 100% while the rest of the period accounted for 80% occupancy.
2. The health centre engaged external doctors to attend to the patients at an average fee of Sh.300,
000 per month. The doctors' fees were paid on the basis of number of patients attended by them.
3. During the year, 2 supervisors, 4 nurses and 2 ward assistants were engaged throughout.
4. Profit is loaded at a margin of 50%.
Required;-
i) Charge per day per patient.
ii) Number of patient days required to break even.
December 2014 Question One B
QUESTION 2
a) Understanding of cost behaviour patterns is important in making financial planning and cost
control decisions.
Required:
In relation to the above statement, describe three ways in which costs might be classified
according to behaviour.
December 2013 Question Two A
QUESTION 3
b)Explain the meaning of the following terms in the context of cost accounting:
ii) Cost centre.
May 2012 Question Five C (II)
QUESTION 4
b) Distinguish between the following sets of terms:
i) Direct labour cost and indirect labour cost.
May 2012 Question Five B (I)
COST ACCOUNTING
,REVISION PARTNER 3
QUESTION 5
Distinguish between "committed fixed costs" and "discretionary fixed costs".
May 2012 Question Four A
QUESTION 6
b) Distinguish between the following terminologies as used in cost accounting:
i) Relevant range and relevant costs.
ii) Opportunity costs and discretionary costs.
iii) By-products and joint products.
May 2011 Question Five B
QUESTION 7
(a) Fair Price Limited produces a single product "Zed': The store‟s manager has provided the
following information relating to the month of August 2010:
Sales for the month of august 2010:
Date Quantity (Kg) Unit cost (Sh.)
13 600 10
20 720 8
25 960 7
30 300 11
Purchase for the month of August 2010:
Date Quantity (Kg) Unit cost (Sh.)
3 210 20
4 300 18
9 240 21
16 1,540 17
24 700 19
26 345 21
Additional information
1. The closing balance for the month of July 2010 was a batch of 1,500 units received at a unit
price of Sh. 16.
2. On August 14, a customer returned 45 units had been sold on 13 August 2010.
3. On August 22, the stores assistant found a shortage of 30 units.
4. The company uses the first-in-first-out (FIFO) system of stores issues.
Required:
A stores ledger card
b) Zalea Timber Company Limited manufactures hard fiber boards.
The following information relates to the period ended 30 September 2010:
1. Opening stock included 5,500 boards which were bought at Sh. 5,200 per unit
2. Sales during the period were 52,000 boards
3. The company produced 53,000 boards during the period and incurred the following costs:
Direct materials (Sh.) 77,720,000
Direct labour (Sh.) 160,000,000
Factory overheads 25% of direct labour costs
Selling and distribution expenses 25% of sales
Administration expenses 10% of total production cost
COST ACCOUNTING
, REVISION PARTNER 4
4. The selling price per board is Sh. 10,000
5. The company uses the last-in-first-out (LIFO) method of inventory costing
Required:
(i) Value of costing inventory
(ii) Income statement for the period ended 30 September 2010
November 2010 Question Three
QUESTION 8
The Luxury Hotels Ltd is used for conference bookings and private bookings. The conference
bookings include bookings for rooms each week while the remaining rooms are used for private guest
bookings.
The following data relate to private guest bookings for a ten-week period:
Week Rooms available for Number of guests Average stay per guest
private guest bookings (in nights)
1 55 198 2.1
2 60 170 2.6
3 72 462 1.4
4 80 381 3.2
5 44 83 5.6
6 62 164 3.4
7 80 348 2.6
8 54 205 1.7
9 80 442 1.8
10 24 84 3.2
Additional information:
1. Variable cost of accommodating each guest is Sh. 1,750
2. Variable cost per week per room available is Sh. 5,600
3. The general fixed cost for private bookings per week is Sh. 8,100
4. The hotel charges Sh. 3,000 per person per night for accommodation for private guest bookings.
5. The hotel has been experiencing a high rate of staff turnover over the last 12 months.
6. Some of the costs for private guest bookings vary with the number of guests, regardless of the
length of their stay, while others vary with the number of rooms available in any week.
Required:
a) Total cost per guest per night for private guest bookings over the ten week period
b) Contribution and profit for private guest bookings for the ten week period
c) Highlight four possible reasons for the high rate of staff turnover in the hotel
December 2009 Question Two
QUESTION 9
(a) Differentiate between the following sets of terms:
i) Sunk cost and opportunity cost
ii) Cost centres and profit centres
iii) Direct labour costs and indirect labour costs
iv) Prime cost and manufacturing overheads
August 2009 Question Four A
QUESTION 10
(a) Briefly explain the following terms as used in cost accounting:
(i). Mixed costs
COST ACCOUNTING
QUESTIONS
TOPIC 1
NATURE AND PURPOSE OF COST ACCOUNTING
QUESTION 1
a) Describe four shortcomings of cost accounting.
December 2014 Question Four A
QUESTION 2
a) The success of an organisation in cost control and cost reduction depends largely on the
installation of an ideal cost accounting system which identifies, classifies and records all costs
accurately and promptly.
Required;
With reference to the above statement, explain four conditions for an effective costing system.
December 2014 Question Three A
QUESTION 3
a) Describe five ways in which cost accounting complements financial accounting in terms of
providing information to managers for better decision making.
May 2014 Question One A
QUESTION 4
a) Daniel Mutiso, the Cost Accountant of Abra Ltd. feels that he is getting overworked and has
recommended that a management accountant be employed to take up other responsibilities in the
organization.
However, the management of the company equally argues that the work is the same and that a
decision to hire a management accountant is against their cost reduction policy.
Required:
In the light of the above statement, explain to the management three differences between management
accounting and cost accounting to help them make a fair decision.
December 2013 Question One A
QUESTION 5
(a) Cost accounting is often described as the provision of information required by management for
specific purposes"
Required:
State six of these specific purposes.
June 2013 Question Five A
COST ACCOUNTING
,REVISION PARTNER 2
TOPIC 2
COST CLASSIFICATION
QUESTION 1
(b) Afya Bora Health Centre has a capacity of 20 beds. The following information relates to the
centre's operations for the year ended 30 June 2014:
Sh.
Repairs and maintenance (Fixed) 150,000
Rent per month 225,000
Food supplied to patients (variable) 1,080,000
Laundry charges (variable) 540,000
Medicines (variable) 900,000
Other expenses (Fixed) 1,080,000
Salaries per month: Supervisors 30,000
Nurses 30,000
Ward assistants 15,000
Additional information:
1. The health centre operated for 300 days during the year. For 200 days, the bed occupancy
accounted for 100% while the rest of the period accounted for 80% occupancy.
2. The health centre engaged external doctors to attend to the patients at an average fee of Sh.300,
000 per month. The doctors' fees were paid on the basis of number of patients attended by them.
3. During the year, 2 supervisors, 4 nurses and 2 ward assistants were engaged throughout.
4. Profit is loaded at a margin of 50%.
Required;-
i) Charge per day per patient.
ii) Number of patient days required to break even.
December 2014 Question One B
QUESTION 2
a) Understanding of cost behaviour patterns is important in making financial planning and cost
control decisions.
Required:
In relation to the above statement, describe three ways in which costs might be classified
according to behaviour.
December 2013 Question Two A
QUESTION 3
b)Explain the meaning of the following terms in the context of cost accounting:
ii) Cost centre.
May 2012 Question Five C (II)
QUESTION 4
b) Distinguish between the following sets of terms:
i) Direct labour cost and indirect labour cost.
May 2012 Question Five B (I)
COST ACCOUNTING
,REVISION PARTNER 3
QUESTION 5
Distinguish between "committed fixed costs" and "discretionary fixed costs".
May 2012 Question Four A
QUESTION 6
b) Distinguish between the following terminologies as used in cost accounting:
i) Relevant range and relevant costs.
ii) Opportunity costs and discretionary costs.
iii) By-products and joint products.
May 2011 Question Five B
QUESTION 7
(a) Fair Price Limited produces a single product "Zed': The store‟s manager has provided the
following information relating to the month of August 2010:
Sales for the month of august 2010:
Date Quantity (Kg) Unit cost (Sh.)
13 600 10
20 720 8
25 960 7
30 300 11
Purchase for the month of August 2010:
Date Quantity (Kg) Unit cost (Sh.)
3 210 20
4 300 18
9 240 21
16 1,540 17
24 700 19
26 345 21
Additional information
1. The closing balance for the month of July 2010 was a batch of 1,500 units received at a unit
price of Sh. 16.
2. On August 14, a customer returned 45 units had been sold on 13 August 2010.
3. On August 22, the stores assistant found a shortage of 30 units.
4. The company uses the first-in-first-out (FIFO) system of stores issues.
Required:
A stores ledger card
b) Zalea Timber Company Limited manufactures hard fiber boards.
The following information relates to the period ended 30 September 2010:
1. Opening stock included 5,500 boards which were bought at Sh. 5,200 per unit
2. Sales during the period were 52,000 boards
3. The company produced 53,000 boards during the period and incurred the following costs:
Direct materials (Sh.) 77,720,000
Direct labour (Sh.) 160,000,000
Factory overheads 25% of direct labour costs
Selling and distribution expenses 25% of sales
Administration expenses 10% of total production cost
COST ACCOUNTING
, REVISION PARTNER 4
4. The selling price per board is Sh. 10,000
5. The company uses the last-in-first-out (LIFO) method of inventory costing
Required:
(i) Value of costing inventory
(ii) Income statement for the period ended 30 September 2010
November 2010 Question Three
QUESTION 8
The Luxury Hotels Ltd is used for conference bookings and private bookings. The conference
bookings include bookings for rooms each week while the remaining rooms are used for private guest
bookings.
The following data relate to private guest bookings for a ten-week period:
Week Rooms available for Number of guests Average stay per guest
private guest bookings (in nights)
1 55 198 2.1
2 60 170 2.6
3 72 462 1.4
4 80 381 3.2
5 44 83 5.6
6 62 164 3.4
7 80 348 2.6
8 54 205 1.7
9 80 442 1.8
10 24 84 3.2
Additional information:
1. Variable cost of accommodating each guest is Sh. 1,750
2. Variable cost per week per room available is Sh. 5,600
3. The general fixed cost for private bookings per week is Sh. 8,100
4. The hotel charges Sh. 3,000 per person per night for accommodation for private guest bookings.
5. The hotel has been experiencing a high rate of staff turnover over the last 12 months.
6. Some of the costs for private guest bookings vary with the number of guests, regardless of the
length of their stay, while others vary with the number of rooms available in any week.
Required:
a) Total cost per guest per night for private guest bookings over the ten week period
b) Contribution and profit for private guest bookings for the ten week period
c) Highlight four possible reasons for the high rate of staff turnover in the hotel
December 2009 Question Two
QUESTION 9
(a) Differentiate between the following sets of terms:
i) Sunk cost and opportunity cost
ii) Cost centres and profit centres
iii) Direct labour costs and indirect labour costs
iv) Prime cost and manufacturing overheads
August 2009 Question Four A
QUESTION 10
(a) Briefly explain the following terms as used in cost accounting:
(i). Mixed costs
COST ACCOUNTING
