Expert answer:Accounting/finance questions

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exam_questions.docx

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Question One:
ABC Ltd has an aggregate demand of 1.2 Million units. Each time they place an order there is an ordering
cost of shs 1,000, holding cost is shs 100 per unit. Determine:
i.
EOQ
ii.
No. of order to be made based EOQ
iii.
Total cost of stocks based on the EOQ
Question two
The following information was extracted from the books of Danex Holdings regarding its stocks:
i.
ii.
iii.
iv.
v.
Vi
Vii
Reorder quantity
Reorder period
Maximum consumption
Normal consumption
Minimum consumption
Maximum reorder period
Minimum reorder period
1,800
4 weeks
450 units/week
300 units/week
150 units/week
5 weeks
3 weeks
Required
Determine the following stock levels for Danex Holdings:
i.
Re-order level
ii.
Maximum stock level
iii.
Minimum stock level
1. Explain the difference between the following terms
a.
Product cost and period cost
b. Sunk cost and relevant cost
c. Incremental and sunk costs
d. Fixed and variable cost
e. Avoidable and unavoidable costs
f.
Controllable and uncontrollable costs
g. Direct and indirect costs
(14 marks)
Question 3
Based on performance, you have been provided with the following information regarding ABC Ltd for the
year ended 31 December 2004 :
Highest activity level
Lowest activity level
Labour hours
Service cost (Shs)
800
300
200,000
150,000
Required
1. Develop a total cost function based on the above data using the high-low method.
2. Using the total cost function, what is the total cost if the activity level is 1000 labour hours
Question 4
Assume the following purchases were made in ABC Ltd
Date of purchase
1st January
2nd January
3rd January
Units purchased
500
600
800
Price/unit
100
200
400
Units used on 4th January are 900. Determine the value/cost of units used by using FIFO, LIFO and
weighted average.
Required:
Determine the cost of units used and the value of the closing stocks using FIFO, LIFO and Weighted
Average.
Question 5
Sasumwa Construction limited has been awarded a contract to build a house. This is a
contract
No 45 for the company and the contract price is Shs.2.65 million. At the end of the
company’s
financial year, the contract was 85% complete and hence regarded as being near
completion. You
are also provided with the following information about the contract:
Particulars Shs.
Materials purchased and delivered 580,000
Materials issued from store 60,000
Materials returned to stores 9,000
Site expenses 300,000
Site wages 200,000
Plant sent to site 100,000
Architect’s fees 30,000
Plant returned from site 10,000
Subcontractor’s fees 105,000
Head Office overheads absorbed 60,000
Valuation at the year ending disclosed the following: Shs
Materials: 19,500
Plant on site 50,000
Work done but not yet certified 60,000
Additional information
a) The portion of the work which was completed during the year and certified by the
architect
was assessed as representing 75% of the whole contract price. The contractee made
payments to this extent less 10% retention money.
b) The management of the company decided for the purpose of preparing the
company’s
annual accounts to make a provision of a third of the notional profit against the
possibility
of defects and other contingencies arising later in respect of the work already certified
for payment.
Required:
– Prepare the contract account
– Compute the amount of profit or loss to be taken to the main profit and loss
account of
the company.
– Compute the value of work in progress.
Contract
…
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