BUSS 106 – COST ACCOUNTING.

UNIVERSITY EXAMINATIONS: 2021/2022
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS IN
INFORMATION TECHNOLOGY
BUSS 106: COST ACCOUNTING
FULL TIME/ PART TIME/ DISTANCE LEARNING
DATE: DECEMBER, 2021 TIME: 2 HOURS
INSTRUCTIONS: ANSWER ALL QUESTIONS

QUESTION ONE
a) Using examples, differentiate between the following terms:
i. Sunk costs and standard costs
ii. Controllable and uncontrollable costs
iii. Direct and indirect costs
6 Marks
b) A company manufactures two products, X and Y. The following costs have been estimated.

Fixed costs for the period are expected to be sh 220,000 and it is expected that 5,000 units of
product X and 2,000 units of product Y will be manufactured.
Required: calculate the total expected costs for the unit. 9 Marks
QUESTION TWO
a) X ltd opening inventory on 1.4.2021 was 275 units at sh 3.2 per unit.
During the month of April, the following issues and receipts were recorded.
8
th April: Received 600 units at sh 3 per unit
15th April: 400 units at sh 4 per unit
30th April: issued 925 units
Required: calculate the total value of issues under LIFO and weighted average methods.
8 Marks
b) An organizations cost function is known to be y=a+bx
The total cost for an output level of sh 1000 units is sh 395,000. the total variable costs are sh
135,000. Calculate the fixed costs. 2 Marks
C) the following unit costs are incurred in the production of 1,000 units of a product in a period.

Sh 3.7 of the semi variable costs are fixed costs
Required: what total cost would be incurred for the production of 1200 of the product in the
period? 5 Marks
QUESTION THREE
a) Panda Ltd. Produces wheat flour. The following information relates to the quantity of wheat
produced and the associated production cost over the ten-month period to 31 October
2020:


Required:
i. Using the linear regression method, formulate an equation of the form y = a + bx relating
the number of bags produced and the total production cost. (10 Marks)
ii. Using the high low method, formulate an equation of the form y = a + bx relating the
number of bags produced and the total production cost. (6 Marks)
iii. Using your equations in (i) and (ii) above, predict the total cost of producing 640 bags of
wheat flour. (4 Marks)
(Total 20 Marks)

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