Cost and management accounting

1. QUESTION THREE
An engineering company
Workings for answer a
Reciprocal Method Stores MaintenanceMachining Assembly Finishing Total
Stores % 0.00% 10.00% 40.00% 30.00% 20.00% 100.00%
Maintenance % 5.00% 0.00% 55.00% 20.00% 20.00% 100.00%
Overhead costs 1,000 800 6,000 2,500 1,500 11,800
Let cost of Stores is KX and Maintenance is $ Y
So, X= 1000+ 5% of Y
So, X= 1000+ 0.05Y
Y= 800+ 10% of X
Y= 800+ 0.10X
Substituting the value of X in equation 2:
Y = 800 + 0.10(1000 + 0.05Y)
Y = 800 + 100+.005Y
Y – 0.005Y = 800+100
0.995Y = 900
Y = 900/0.995
Y = K905
Substituting the value of Y in equation 1:
So, X= 1000+ 0.05Y

2. So, X= 1000+ 0.05*905
So, X= 1000+ 45
X= K1,045
Allocation Summary Stores Maintenance Machining Assembly Finishing Total
Stores % 0.00% 10.00% 40.00% 30.00% 20.00% 100.00%
Maintenance % 5.00% 0.00% 55.00% 20.00% 20.00% 100.00%
Department cost 1,000 800 6,000 2,500 1,500 11,800
Total costs
Stores (1,045) 105 418 313.5 209 0.50
Maintenance 45 (905) 497.75 181 181 (0.25)
Cost after allocation - - 6,915 2,995 1,890 11,800
Answer a Machining Note
Machine Hours 50,000 A
Overhead cost 6,915 B
Overhead absorption rates 0.14 C=B/A
Answer a Assembly Finishing Note
Labor Hours 30,000 20,000 D
Overhead cost 2,995 1,890 E
Overhead absorption rates 0.10 0.09 F=E/D
Bid for Job K
Answer b Machining Assembly Finishing Total Note
Machine/ Labor hour used 45.00 15.00 12.00 G

3. Departmental predetermined OH Rate 0.14 0.10 0.09 H= See C, F
Overhead applied to Job K ('000) 6.22 1.50 1.13 8,855 I=G*H
Direct materials 24,000
Direct Labor 15,000
Total cost of Job K 47,855 J
Profit 11,963.75 K=J/80%*20%
Sell price 59,818.75 L=J+K
QUESTION FOUR
(a) Percentage of direct labour cost method = (K600 000 / K200 000) x 100
= 300% of direct labour cost
Direct labour hour method = (K600 000/40 000 direct labour hours)
= K15 per direct labour hour
Machine hour method = (K600 000/50 000 machine hour)
= K12 per machine hour
(B) The question states that the company has become machine-intensive and implies that in the long term there is a
closer association between overhead expenditure and machine hours than the other two methods. Therefore the best
measure of overhead resources consumed by jobs or products is machine hours.

4. (C) Job Ax (K)
Direct material 3788
Direct labour 1100
Direct expenses 422
Prime cost 5310
Production overhead (120 machine hours K12) 1440
Factory cost 6750
Administrative overheads (20% K6750) 1350
Total cost 8100
Profit (K8100/0.90 K8100) 900
Selling price 9000
Workings
Administration overhead absorption rate = Total admin. Overheads/total factory cost
= K328 000 / K1 640 000
= 20% of factory cost

5. QUESTION FIVE
Step 1
Process costing is a method of costing whereby products go through various manufacturing levels and individual costs need to be
calculated. Here, it is assumed that every process is an independent unit, and the output of one is considered as input for another.
Step 2
Primary process A/c
Particulars Units Cost Particulars Unit Cost
Direct material 65,000 39,000 Normal loss 6,500
Labour 5,730 Abnormal loss 3,500 2,870
Overheads 3,240 Secondary process 55,000 45,100
47,970 47,970
Cost per unit of Primary process = Total cost/ Normal Units
= 47,970/(65,000-6,500)
=47,970/58,500
=K0.82
Secondary process A/c
Particulars Units Cost Particulars Unit Cost
Primary Process A/c 55,000 45,100 Normal loss 2,750
Direct material 6,300
Labour 7,200
Overheads 4,100 Secondary process 53,000 63,600
Abnormal Gain 750 900
55,750 63,600 55,750 63,600
Cost per unit of Secondary process = Total cost/ Normal Units
= 62,700/(55,000-2,750)
=62,700/52,250
=K1.2

6. Finishing process A/c
Particulars Units Cost Particulars Unit Cost
Secondary Process A/c 53,000 63,600 Normal loss 2,650 3312
Labour 8,280 Abnormal loss 2,350 3,432
Overheads 5,160 Secondary process 48,000 70,296
53,000 77,040 53,000 77,040
Cost per unit of Finishing process = Total cost/ Normal Units
= (77,040-3312.5)/(55,750-2,650)
=73,727/50,350
=1.46 K
Part
Abnormal loss A/c
Particulars Units Cost Particulars Unit Cost
Primary process 3,500 2,870
By Costing P&L
costing
5,850 6,302
Finishing process 2,350 3,432
6,302 6,302
Abnormal gain A/c
Particulars Units Cost Particulars Unit Cost
To normal loss 750 900
By Secondary
process
750 900
900 900
QUESTION SIX

7. QUESTION SEVEN
QUESTION EIGHT

9. QUESTION NINE
a) Gross Wages to direct workers in the month
Basic wages - Total Attendeance - 2640 Hrs
Rate Per Hour K5,000 (Per Hour)
Basic Wages - K 13,200,000
Group Bonuses - K 2,840,000
Emplyer's Pension Contribution - K 1,460,000
Overtime Wages (Extra 40% for 180 Hrs) - K 360,000 ( K5000 * 40% * 180 Hrs) (Extra)
Gross Wages (Total) - K 17,860,000
b)
Cost Accounting Entry in Comapny Cost records
Entry No. 1
Basic Wages - Direct Workers K 13,200,000 Dr.
Group Bonuses - Direct Workers - K 2,840,000 Dr.
Emplyer's Pension Contribution - Direct workers K 1,460,000 Dr.

10. Overtime Wages - Direct Workers - K 360,000 Dr.
Basic Wages - Indirect Workers - K 3,760,000 Dr
Group Bonuses - Indirect Workers - K 710,000 Dr
Emplyer's Pension Contribution - Indirect Workers K 405,000 Dr
Overtime Wages - Indirect Workers - - K 120,000 Dr
To
Direct Workers wages Payable Account K 17,860,000 Cr.
Indirect Workers Wages Payable Account K 4,995,000 Cr.
(Being Amount Payable to Direct & Indirect Workers for the Month of Sept, 2020)
Entry No. 2
Machine Break-down Cost Overheads K 563,447 Dr.
Waiting Time Unproductive Cost Overheads K 267,151 Dr
To
Basic Wages - Direct Workers K 625,000 Cr. (K 425,000 + K 200,000)
Group Bonuses - Direct Workers - K 136,469 Cr. (K 91439 + K 45,030)

11. Emplyer's Pension Contribution - Direct workers K 69.129 Cr. (K 47,008 + K 22,121)
(Being Cost of Unproductive Factory Overheads transferred for Allocations)
Entry No. 3
Overhead - For Overtime wages - for Customer A K 192,000 Dr.
To
Overtime Wages - Direct Workers K 144,000 Cr.
Overtime Wages - Indirect Workers - K 48,000 Cr.
(Being Cost of Extra Overtime Charges paid for specific Customer is transferred so that proper contribution is derived
from particular custmer.)
Note: Direct wages for Overtime hrs are assumed to be allocated to particular Customer as part of Regular
Cost)
Working Sheet for above Entries
Gross Wages to indirect workers in the month
Basic wages - Total Attendeance - 940 Hrs
Rate Per Hour K4000 (Per Hour)

12. Basic Wages - K 3,760,000
Group Bonuses - K 710,000
Emplyer's Pension Contribution - K 405,000
Overtime Wages (Extra 40% for 75 Hrs) - K 120,000 ( K4000 * 40% * 75 Hrs) (Extra)
Gross Wages (Total) - K 4,995,000
Extra Overtime Cost of Specific request of particular Customer
i. 40% of 180 Hrs of Direct Workers - 72 Hrs.
Overtime Cost of Each Direct Worker - K5000*40% = K 2,000
Total Overtime Cost of 72 Hrs of Direct Workers = K2,000 * 72 = K 144,000
ii. 40% of 75 Hrs of Indirect Workers - 30 Hrs.
Overtime Cost of Each Indirect Worker - K4000*40% = K 1,600
Total Overtime Cost of 30 Hrs of Indirect Workers = K1,600 * 30 = K 48,000
Total Cost of Overtime wages of Particular Cutstomer for Direct and Indirect Worker -
Direct Worker - K 144,000

13. Indirect Worker - K 48,000
Total - K 192,000
iii. Cost of Non-productive time machine Breakdown 85 hours - Total Cost working
Basic Wages Cost - K 5000 * 85 = K 425,000
Group Bonuses - K 2,840,000/2640*85 = K 91,439 (Allocation)
Emplyer's Pension Contribution - K 1,460,000/2640 *85 = K 47,008 (Allocaton)
Total Cost K 563,447
iv. Waiting for work 40 hours - Total Cost Working
Basic Wages Cost - K 5000 * 40 = K 200,000
Group Bonuses - K 2,840,000/2640*40 = K 45,030 (Allocation)
Emplyer's Pension Contribution - K 1,460,000/2640 *40 = K 22,121 (Allocaton)
Total Cost K 267,151
QUESTION TEN

14. QUESTION ELEVEN
A) Production report for march 2013:
ON WEIGHTED AVERAGE COST METHOD
(WACM):
Input units Phy. Units Mat. In
Mat.
Cost
Conver.
Cost Total
12000 Op WIP (on WACM) 12000 12000 12000 12000
95000 Introduced & Completed 83000 83000 83000 83000
Transfer out 95000
Normal loss 2000 0 0 0
Cl WIP 10000 10000 8000 6000
107000 (i)Equivalent units 105000 103000 101000
Total costs to account for:
Op WIP 14000 5000 3000 22000
Incurred during march 200000 44000 52000
29600
0
Total Costs 214000 49000 55000
31800
0
(ii)cost per Eq. unit 2.04 0.48 0.54
(iii)Cost of Transf. out 193619.0476 45194 51733
29054
6
(iii)Cost of Cl WIP 20381 3806 3267 27454
Total cost accountted for:
31800
0
(iv) Process 2 Account:

15. DEBIT AMOUNT K CREDIT AMOUNT K
Op WIP 22000 Normal Loss 0
Transf. from Pro 1 200000
Transf. out to
FG 290546
Mat. Added 44000 Cl WIP 27454
Conv. Costs 52000
Total 318000 Total 318000
B) The business has to determine the cost of its products because
1: To determine the selling price of the products.
2: To know the value scrapped out of inputs during the process.
QUESTION TWELVE
Step 1
Working Notes
1
Particular Working
Normal loss in units 5000 kg x 10% 500 units
Normal loss in Amount 500 units x K2 per unit 1000 K

16. Abnormal loss in units
5000 units - 500 units -
4400 units
100 Units
Abnormal loss in
Amount
(110000 x 100 / 4500) units 2422 K
2
Particular Working
Normal loss in units 4400 kg x 5% 220 units
Normal loss in Amount 220 units x K6 per unit 1320 K
Abnormal Gain in units
4200 Units + 220 Units - 4400
Units
20 units
Abnormal Gain in
Amount
(204258 x 20 / 4180) units 977 K
3
Particular Working
Normal loss in units 4200 kg x 10% 420 units
Normal loss in Amount 420 units x K10 per unit 1320 K
Abnormal loss in units 4200 Units - 220 Units - 3500 280 Units

17. Units
Abnormal loss in
Amount
(358475 x 280 / 3780) units 26554 K
Step 2
Process 1 A/c (Working
Note 1)
Particular Qty in Kgs Amount (in K) Particular
Qty in
Kgs
Amount (in
K)
To Raw material 5000 40000 By Normal Loss 500 1000
To direct material 12000
To Direct Labour 10000
By Output transfer to
Process 2 A/c
4400 106578
To Direct Expenses 8000
To Departmental
Overhead
40000
5000 110000 5000 110000
Process 2 A/c (Working
Note 2)
Particular Qty in Kgs Amount (in K) Particular Qty in Amount (in

18. Kgs K)
To Raw material 4400 106578 By Normal Loss 220 1000
To direct material 25280
To Direct Labour 12000
By Output transfer to
Process 3 A/c
4200 203915
To Direct Expenses 12400
To Departmental
Overhead
48000
To Abnormal Gain 20 977
4420 205235 4420 205235
Process 3 A/c (Working
Note 3)
Particular Qty in Kgs Amount (in K) Particular
Qty in
Kgs
Amount (in
K)
To Raw material 4200 203915 By Normal Loss 420 4200
To direct material 46400 By Abnormal Loss. 280 26554
To Direct Labour 20000 By Finished Goods A/c 3500 327721

19. To Direct Expenses 8160
To Departmental
Overhead
80000
4200 358475 4200 358475
Step 3
Normal loss A/c
Particular Qty in Kgs Amount (in K) Particular
Qty in
Kgs
Amount (in
K)
To Process 1 A/c 500 106578 By Abnormal Gain A/c 20 120
To Process 2 A/c 220 25280
To Process 3 A/c 420 12000 By Cash 1120 6400
1140 6520
Abnormal loss
A/c
Particular Qty in Kgs Amount (in K) Particular
Qty in
Kgs
Amount (in
K)
To Process 1 A/c 100 2422 By Cash
Process 1 A/c 100 200

20. Process 3 A/c 280 2800
To Process 3 A/c 280 26554 By Costing PandL A/c 25976
380 28976 380 28976
QUESTION THIRTEEN
Katwa Mutale :
Gross Profit Working for November 2019 :
1. FIFO Method :
Particulars Calculation
No. of
Cars
Rate
Amount in
K
Opening Inventory 3 11400 (34200)
Purchases
( 4 x 11875 )
+
12 (157700)

21. ( 4 x 13300 )
+
( 4 x 14250 )
Sales
( 5 x 19000)
+
( 5 x 19000 )
+
( 1 x 19000 )
11 171000
Closing Inventory
4 x 14250
( remaining 4 cars
which are
purchased on 25th
Nov.)
4 57000
Gross Profit (Total
)
29100
2. LIFO METHOD :
Particulars Calculation No. of Rate Amount in

22. Cars K
Opening
Inventory
3 11400 (34200)
Purchases
( 4 x 11875 )
+
( 4 x 13300 )
+
( 4 x 14250 )
12 (157700)
Sales
( 5 x 19000)
+
( 5 x 19000 )
+
( 1 x 19000 )
11 164000
Closing Inventory
( 3 x 11400 )
+
( 1 x 11875)
( sold 4 cars
which are
purchased on
4 46075

23. 25th Nov , 4
cars which are
purchased on
20th Nov and
3 Cars which
are purchased
on 10th Nov )
Gross
Profit (Total )
18175
3. Weighted Average Method :
Particulars Calculation
No.
of
Cars
Rate
Amount
in K
Opening
Inventory
3 11400 (34200)
Purchases
( 4 x 11875 )
+
( 4 x 13300 )
+
( 4 x 14250 )
12 (157700)

24. Sales
( 5 x 19000)
+
( 5 x 10000 )
+
( 1 x 19000 )
11 164000
Closing
Inventory
Average Rate :
=
(3x11400)+(4x11875)+(4x13300)+(4x14250)
/ 15 Cars
4
12793.333
per car
51173
Gross
Profit (Total
)
23273
QUESTION FOURTEEN
Mutina
total
hour
60

25. basic
hrs
ovetime
40 20
pay
scale:
720 360 basic pay
180 premium
in this
question,
units/hour
is not
mentioned
and with
that I'm
assuming
it as 8
units/
hour
so in 60
hours, the
totoal
output
will be:
480
extra
output
50

26. time
saved
6.25
bonus 70.3125
gross
pay=
1330.313
Munida
total
hour
45
basic
hrs
ovetime
40 5
pay
scale:
720 90
basic
pay
45 premium
in this question, units/hour is not
mentioned and with that I'm
assuming it as 8 units/ hour
so in 60 hours, the totoal output will
be:
360
extra output 240
time saved 30
bonus 337.5
gross pay= 1192.5

27. Mumba
total
hour
48
basic
hrs
ovetime
40 8
pay
scale:
720 144
basic
pay
72 premium
in this question, units/hour
is not mentioned and with
that I'm assuming it as 8
units/ hour
so in 60 hours, the totoal
output will be:
384
extra output 106
time saved 13.25
bonus 149.0625
gross pay= 1085.063