Topic: Costing Methods

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MI – Nov 2020 – L1 – SB – Q3 – Costing Methods

Apportion joint costs of three products using the physical unit and sales value basis, and calculate profit percentages.

Standard Limited produces three products, “Sta,” “And,” and “Ard,” which pass through the same process and can all be sold as good products. Total joint costs incurred amount to N3,710,000. Output and selling prices of the products are as follows:

Product Output (Units) Selling Price (N)
Sta 6,000 250
And 3,500 400
Ard 4,500 350

Required:
Apportion the joint costs and calculate the profit percentage using:
a. The physical unit basis. (10 Marks)
b. The sales value basis. (10 Marks)

(Total 20 Marks)

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MI – Nov 2020 – L1 – SB – Q2 – Costing Methods

Prepare the contract account for “Recoverable 777” with materials, plants, and other expenses involved in the contract.

Recoverable Limited is into construction, and the following information relates to one of its contracts, code-named “Recoverable 777” as at the end of the first year. It is the company’s policy to take the difference between the value of work certified and the cost of work certified as profit for the year:

Description N
Materials purchased directly to site 3,450,000
Materials purchased directly to site but not yet paid 1,300,000
Materials transferred to site 5,650,000
Materials transferred out of site 720,000
Plants purchased for contract 15,000,000
Plant transferred to site 5,000,000
Payment of sub-contractor 4,500,000
Insurance (effective 2 months after commencement of contract) 600,000
Salary 7,500,000
Salary due but not paid 2,000,000
Other site expenses 1,905,000
Head office charges 500,000
Value of work certified 36,500,000
Contract value 50,000,000
Payment received 33,800,000
Value of material on site at end of year 850,000
Value of plant 1 c/d 12,000,000
Value of plant 2 c/d 4,000,000

Required:
Record the contract account for “Recoverable 777”. (Total 20 Marks)

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MI – Nov 2020 – L1 – SA – Q8 – Costing Methods

Calculate the profit to be taken from a contract based on work certified and cost of work certified.

: IJKL is a construction company with a contract which is 48% complete and the policy is to recognise three-quarters of notional profit. Value of work certified is N4,500,000, cash received from progress payment is N3,500,000, and the cost of work certified is N4,140,000. The contract sum of the project is N10,000,000.

What will be the profit taken?

A. N583,333

B. N385,000

C. N373,333

D. N210,000

E. N186,667

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MI – Nov 2020 – L1 – SA – Q7 – Costing Methods

Calculate the quantity of goods production given wastage and abnormal loss.

A chemical process has a normal wastage of 10% of input in a period. A quantity of 2,500kg of material was introduced, and there was an abnormal loss of 75kg.

What quantity of goods production was achieved?

A. 2,175 kgs

B. 2,250 kgs

C. 2,325 kgs

D. 2,425 kgs

E. 2,625 kgs

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MI – Nov 2020 – L1 – SA – Q5 – Costing Methods

Identify an incorrect statement about marginal costing in process costing.

When marginal costing is used in process costing, which of the following is NOT correct?

A. Process accounts will contain variable costs only

B. Equivalent units are valued at variable cost

C. Transfer from one process to another will be at total costs of the process

D. Losses, abnormal and normal will be valued at variable cost only

E. All fixed costs will be written off, each period, to costing profit or loss

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MI – Nov 2020 – L1 – SA – Q3 – Costing Methods

Identify a feature that is not characteristic of Just-in-Time (JIT) purchasing.

Which of the following is NOT a characteristic of Just-in-Time Purchasing?

A. Goods delivered immediately before demand or use

B. Increase in number of deliveries, each containing a smaller number of units

C. Goods/material delivery in “factory ready” containers, thereby reducing materials handling

D. Short-term agreement with many suppliers specifying prices, delivery, and acceptable quality levels

E. Minimal checking by purchaser of quality and quantity of deliveries

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MI – Nov 2015 – L1 – SA – Q9 – Costing Methods

Calculates the quantity of good production after accounting for normal and abnormal losses.

XYZ is a chemical processing company with 25,000kg input materials. The company has a normal loss of 10% and an abnormal loss of 750kg. What quantity of good production will be achieved in kg?
A. 24,250
B. 23,250
C. 22,500
D. 21,750
E. 20,750

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MI – May 2018 – L1 – SB – Q4b – Costing Methods

career paths for accountants in IT-based environments.

Describe FIVE career path options available to an Accountant in an IT-based environment. (10 marks)

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MI – May 2018 – L1 – SB – Q4a – Costing Methods

Apportionment of service department overhead and career paths for accountants in IT-based environments

a. The overhead costs of HABA LIMITED is analyzed below:

Production Departments N
Weaving 1,000,000
Spinning 500,000
Service Departments
Admin 80,000
Maintenance 60,000

The administrative overhead costs are to be apportioned on the basis of Weaving 50%, Spinning 30%, and Maintenance 20%, while the Maintenance overhead costs are to be apportioned on the basis of Weaving 60%, Spinning 20%, and Administrative 20%.

You are required to apportion service departments’ overhead to production departments using the continuous apportionment method. (10 marks)

 

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MI – May 2018 – L1 – SB – Q1 – Costing Methods

Preparation of process, abnormal loss, and abnormal gain accounts for Queensly Nigeria Limited.

The following data is compiled from the operations of QUEENSLY NIGERIA LIMITED in respect of their sole product:

Process 1 Process 2
Material introduced (Kgs) 8,000 2,000
Labour costs (N) 12,000 8,000
Material cost per kg (N) 10 15
Expenses (N) 20,000 15,000
Normal loss (%) 10 15
Output (Kgs) 6,800 7,700

You are required to:

  • Draw up the process, abnormal loss, and abnormal gain accounts.

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MI – Nov 2022 – L1 – SA – Q9 – Costing Methods

Calculation of room servicing cost per occupied room-night

The following information is available for the W Hotel for the latest thirty-day period:

  • Number of rooms available per night: 40
  • Percentage occupancy achieved: 65%
  • Room servicing cost incurred: ₦3,900

The room servicing cost per occupied room-night last period, to the nearest Naira, was:
A. ₦3.25
B. ₦5.00
C. ₦6.50
D. ₦97.50
E. ₦150.00

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MI – Nov 2022 – L1 – SA – Q8 – Costing Methods

Calculation of unit cost when production increases by 25%

The cost per unit of a product manufactured in a factory amounts to ₦160 (75% variable) when production is 10,000 units. When production increases by 25%, the unit cost of production will be:
A. ₦145
B. ₦150
C. ₦152
D. ₦140
E. ₦120

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MI – Nov 2022 – L1 – SA – Q6 – Costing Methods

Identification of methods for overhead cost absorption

Which of the following is NOT a method of overhead cost absorption?
A. Percentage of direct material cost
B. Machine hour rate
C. Labour hour rate
D. Percentage of direct labour cost
E. Repeated distribution method

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MI – Nov 2014 – L1 – SA – Q7 – Costing Methods-

Identify a characteristic of the push production system.

Which of the following is a characteristic of the Push Production System?

A. Elimination of non-value-adding activities
B. Emphasis on perfect quality
C. Short set-ups
D. Production is in anticipation of customer order
E. Reduction of cost of carrying inventory

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MI – May 2021 – L1 – SA – Q9 – Costing Methods

Identify the costing method that uses composite cost units.

Which of the following usually makes use of composite cost unit?

A. Job costing
B. Process costing
C. Contract costing
D. Batch costing
E. Service costing

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MI – May 2021 – L1 – SA – Q7 – Costing Methods

Identify the correct definition of abnormal gain in costing.

Abnormal gain is calculated as:

A. Unexpected profit from price increase due to sudden jump in demand
B. Profit from sale of fixed assets
C. Normal loss minus actual loss
D. Donations and subventions received unexpectedly
E. Profit realised outside the normal course of business

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MI – May 2021 – L1 – SA – Q6 – Costing Methods

Identify the concept not associated with process costing.

Which of the following is NOT associated with process costing?

A. Normal loss
B. Abnormal loss
C. Abnormal gain
D. Equivalent units
E. Cost of goods sold

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MI – May 2021 – L1 – SA – Q5 – Costing Methods

Define notional profit in contract costing.

Notional profit is:

A. Profit made by all companies in a nation
B. Profit estimated on an on-going contract at the end of a financial year
C. Profit earned from all branches of a business nationwide
D. Estimated profit on a job about to be commenced
E. Profit earned on a contract just concluded

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MI – May 2021 – L1 – SA – Q3 – Costing Methods

Identify the definition of overhead apportionment.

Overhead apportionment is a process of:

A. Charging costs to a number of cost centres or units
B. Direct allocation of costs to cost centres or cost units
C. Accounting for some portion of costs and carrying forward the balance
D. Sharing costs into direct and indirect elements
E. Differentiating between variable and fixed costs

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