MOUNT KENYA UNIVERSITY

NAME: LENASEIYAN LAWRENCE

ADM NO. BCOM/2021/76644
UNIT C0DE: BAF2102
UNIT NAME: COST ACCOUNTING CAT I AND II DIBEL
QUESTION ONE

A manufacturing company has three department and two service department, overhead allocated to
each of this department are as follows:

Production

A 240,000

B 200,000

C 240,000 680,000

Service departments

X 68,000

Y 27,000 95000

670000

A technical assessment for the appointment of cost of service department show?

Department A B C X Y
X 35% 30% 30% - 5%
Y 40% 25% 20% 15% -
REQUIRED

i) Repeated distribution method 6mks

 service depts
A B C X Y
Overheads 240,000 200,000 240,000 68000 27000
Overhead “X” 23,800 20,400 20,400 (68000 3400
)
Overhead “Y” 12160 7600 6080 4560 (30400)
Overhead ”X” 1596 1368 1360 (4560) 236
Overhead “Y” 94.4 59 74.2 35.4 (236)
Overhead “X” 12.39 10.62 10.62 (35.4) 1.77
277663 229438 267898

ii. simultaneously or algebraic method 6mks

overhead “X” = 68000+0.15Y…. i

“Y” = 27000+0.05x

“X” = 68000+0.15y…. ii

“y” =27000+0.05x

X=68000+0.15(27000+0.05x)

X=68000+4050+0075x

X=72050+0.0075x

X=0.0075x=72050

72050=0.0075x-X 72050=0.0075-1 72050=0.9925

X= 72594.45

Y= 27000+(0.05x (72594.45)

27000+3629.72

Y= 30629.72
QUESTION TWO

Mao chemical ltd makes a chemical process that passes through three processes in production I,II and
III. In the month of January 2021 6000litres of basic raw materials priced at 240000 were introduced in
the process 1. Subsequently, the following costs were incurred

Element of cost Total I II III

Direct material (additional) 87500 30000 40000 17500

Direct labour 110000 40000 50000 20000

Direct expenses 16900 6000 1600 9300

Normal loss per process were estimated as follows process 1 10% process2 5% process 3 8%

Output of each process was; process1 5300 process 2 5000 process 3 4700

The loss in each process represented a scrap which could be sold for the following value process I shs 20
per unit, process II shs 44 per unit process III sh 65 per unit. There were no stocks of raw materials or
work in progress at the beginning or end of the month.

The output of each process passes directly to the next process and finally to finished goods inventory.
Production overheads is observed by each process on the basis of 50% of the cost of direct labor

Required

i. Separate process accounts for each of the 3 process 10 mks

Process I

units shs units Shs

Raw materials 6000 24,000 To process II 5300 106,000

Additional materials - 30,000 Normal loss 600 12,000

Direct labour - 40,000 Abnormal loss 100 2,000

Direct Expenses 6,000

Production overheads 20,000

6000 120,000 6000 120,000

 Process II

units shs units Shs

From Process I 5300 106,000 To process III 5000 209,500

Additional materials - 40,000 Normal loss 265 11,660

Direct labour - 50,000

Direct Expenses 1,600

Production overheads 25,000

Abnormal gain 35 1,460

5300 222,660 5300 222,600

Process III

units shs units Shs

From Process II 5000 209,500 To Finished goods 4700 246,084

Additional materials - 17,500 Normal loss 400 26000

Direct labour - 20,000

Direct Expenses 9,300

Production overheads 10,000

Abnormal gain 100 5,784

5300 272,084 5300 270,684

ii. Abnormal loss and abnormal gains account 4mks

iii.
Abnormal loss a/c
shs Shs

Process I 2,000 Abnormal loss 2,000

2,000 2,000

Abnormal loss a/c

shs Shs

Scrap account 6,500 Process II 1,460

Profit & Loss a/c 1,044 Process III 5,784

7,544 7,544
 iv. Scrap debtor account 4mks

Scrap debtor a/c

Unit price shs Unit Price Shs

Process I 600 20 12,000 Cash 43,620

Process II 265 44 11,660 Abnormal gain 35 44 1,540

Process II 400 65 26,000 Abnormal gain 100 65 6,500

Abnormal loss 100 20 2,000

51,660
51,660