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SUPPLEMENTARY EXAMINATIONS
DATE: 17.09.2018
Instructions:
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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:
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:
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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
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)
c) Calculate a suitable overhead absorption rate for each manufacturing department. (4 marks)
Question Three
Rosee Co Ltd. is drafting a budget on the basis of the following data:
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:
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Month 1 Month 2 Month 3
Production 6,500 9,000 10,000
Sales 5,000 8,500 9,500
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.
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.
Degree of completion:
Opening Closing
Stock Stock Scrap
Material 70% 80% 100%
Labour 50% 60% 80%
Overheads 50% 60% 80%