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.

Question

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)

Answer

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Tags: Joint Costs, Physical Unit Basis, Profit Percentage, Sales Value Basis
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

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.

Question

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)

Answer

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Tags: Construction Accounting, Contract Accounts, Material Transfer, Work certified
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

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.

Question

: 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

Answer

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Tags: Contract Costing, Notional Profit, Work certified
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

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

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

Question

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

Answer

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Tags: Abnormal Loss, Process Costing, Wastage
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

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

Identify an incorrect statement about marginal costing in process costing.

Question

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

Answer

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Tags: Marginal Costing, Process Costing, Variable Costs
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

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

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

Question

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

Answer

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Tags: Inventory, Just-in-Time, Purchasing, Supply Chain
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

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

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

Question

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

Answer

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Tags: Abnormal Loss, Normal Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: NOV 2015

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

career paths for accountants in IT-based environments.

Question

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

Answer

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Tags: Career Path, Overhead Apportionment
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

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

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

Question

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)

Answer

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Tags: Career Path, Overhead Apportionment
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

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

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

Question

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.

Answer

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Tags: Abnormal Gain, Abnormal Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

MI – May 2023 – L1 – SA – Q8 – Costing Methods

This question asks for the basis on which factory overhead can be absorbed.

Question

Factory overhead can be absorbed on the basis of:
A. Percentage of material cost
B. Service cost
C. Manufacturing cost
D. Direct expenses
E. Depreciation

Answer

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Tags: Direct Expenses, Factory Overheads, Overhead Absorption
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

MI – Nov 2019 – L1 – SA – Q12 – Costing Methods

This question asks to identify where the concept of equivalent units of production is relevant.

Question

In which of the following is the concept of equivalent units of production relevant?
A. Job costing
B. Batch costing
C. Uniform costing
D. Contract costing
E. Process costing

Answer

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Level: Level 1

Topic: Costing Methods
Series: NOV 2019

MI – Nov 2019 – L1 – SA – Q7 – Costing Methods

This question asks for the system designed to suit the way goods are manufactured or services are provided.

Question

The system designed to suit the ways goods are manufactured or processed or the way services are provided is referred to as:
A. Job costing
B. Specific order costing
C. Costing methods
D. Process costing
E. Batch costing

Answer

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Tags: Costing Systems, Management Information, Manufacturing, MCQ
Level: Level 1

Topic: Costing Methods
Series: NOV 2019

MI – Nov 2019 – L1 – SA – Q2 – Costing Methods

This question asks for the term describing the total expenditure incurred on a specific activity or venture.

Question

The amount of expenditure (actual or notional) incurred on a particular activity or venture over a specified period of time is called: A. Cost Accounting
B. Costing
C. Cost
D. Expenditure
E. Cost Accountancy

Answer

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Level: Level 1

Topic: Costing Methods
Series: NOV 2019

MI – May 2017 – L1 – SA – Q3 – Costing Methods

Identify the element not used in process costing.

Question

Which of the following is NOT used in process costing?
A. Equivalent units
B. Progress payments
C. Abnormal loss
D. Material introduced
E. Scraps

Answer

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Tags: Abnormal Loss, Cost Management, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2017

MI – Mar-Jul 2020 – L1 – SB – Q1 – Costing Methods

Prepare a contract account, statement of financial position, and calculate the expected profit on a construction project.

Question

Piano Construction Company Limited has been in operation for many years. The following relates to Contract AO50 on the Akure-Owo site as at 31st Dec., 2017.

Item	Amount (N’000)
Wages	42,156
Materials delivered directly to site	54,203
Materials from main stores	657
Materials transferred to Akure-Ibadan Site	1,590
Plant purchased at cost	12,500
Plant transferred to Akure-Owo Site	5,250
Sub-contractor’s charges	19,580
Site expenses	5,086
Materials on site at 31st Dec.	18,300
Plant on site at 31st Dec.	14,750
Accrued wages at 31st Dec.	921
Prepayments at 31st Dec.	507
Value of work certified	117,500
Cost of work certified	102,300
Progress payments received from client	115,000

Head office charges are 10% of wages.

The contract value is N550,000,000 and it is anticipated that there will be further costs of N375,000,000 (including rectification claims). As this is the 1st year of the contract, no profit has been taken previously.

Required:

Prepare the Contract Account for project AO50 for the year ended 31st December, 2017. (15 Marks)
Prepare the Statement of financial position extracts as at 31st December, 2017. (3 Marks)
What is the expected profit on the contract on completion? (2 Marks)

Answer

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Tags: Construction Project, Contract Costing, Cost Management, Financial Reporting, Profit Calculation
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SA – Q8 – Costing Methods

Identify the item that is not a problem associated with site and contract works.

Question

Which of the following is NOT a problem associated with site and contract works?

A. Pilferage of materials, tools, etc
B. Unauthorised use of equipment and vehicles
C. Simple quantity budget for materials usage
D. Incorrect labour bookings
E. General difficulties of recording and paperwork

Answer

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Tags: Contract Costing, Cost Management, Site Works
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – Mar-Jul 2020 – L1 – SA – Q2 – Costing Methods

Identify the incorrect method of allocating service department costs.

Question

In a manufacturing set-up, the service department provides services to other service departments as well as the production department. Which of the following is NOT a method of allocating the service department cost?

A. Specified order of closing
B. Repeated distribution method
C. Indirect allocation method
D. Simultaneous equation method
E. Matrix method

Answer

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Tags: Cost Allocation, Cost Management, Costing Methods, Overhead Allocation, Service Department
Level: Level 1

Topic: Costing Methods
Series: MAR/JULY 2020

MI – May 2016 – L1 – SB – Q1b – Costing Methods

Calculate production cost per unit, variable cost, contribution, break-even point, and total non-production cost.

Question

Grammar Limited manufactures product G of which the sales for the year 2015 was ₦25,000,000 at the unit price of ₦40. Production overhead and selling overhead were ₦2.50 and ₦1.50 per unit, respectively. The following additional information are available for the year 2015:

	₦/unit
Direct material used	8.50
Direct labour	7.50
Fixed production overhead	6.00
Fixed selling overhead	2.00
Administration overhead	4.00

You are required to calculate:

i. Full production cost per unit and value
ii. Variable cost per unit and value
iii. Contribution per unit and value
iv. Break-even point in value
v. Total non-production cost per unit and value
vi. New break-even point (to the nearest Naira) if additional distribution expenses of ₦1.50/unit was incurred

Answer

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Tags: Absorption Costing, Cost Calculations, Marginal Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2016

MI – May 2016 – L1 – SB – Q1a – Costing Methods

State two advantages and two disadvantages of absorption and marginal costing.

Question

State any TWO advantages and any TWO disadvantages of absorption and marginal costing.
(8 Marks)

Answer

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Tags: Absorption Costing, Cost Accounting, Marginal Costing
Level: Level 1