Costing Methods – Page 7

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 2016 – L1 – SA – Q5 – Costing Methods

Calculate the absorption rate using Direct Labour for product YZ based on the given data.

Question

The following data were extracted from the records of ABCYZ Limited in respect of its product YZ:
The absorption rate using Direct Labour is
A. N2.00
B. N8.00
C. N12.00
D. N24.00
E. N40.00

Answer

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Tags: Absorption Rate, Costing, Direct Labour, Overhead Allocation
Level: Level 1

Topic: Costing Methods
Series: MAY 2016

MI – May 2024 – L1 – SB – Q3 – Costing Methods

Compute the price of store issues and the value of closing stocks using FIFO and LIFO methods.

Question

From the information given below, you are required to compute the price of store issues and the value of closing stocks using:
i. First-In-First-Out (FIFO) basis
ii. Last-In-First-Out (LIFO) basis

January 2nd: Purchased 500 Units of XYZ at N40 per unit
January 7th: Purchased 200 Units at N45 per unit
January 10th: Issued 300 Units
January 12th: Purchased 350 Units at N42 per unit
January 15th: Issued 500 Units
January 18th: Purchased 200 Units at N38 per unit

Answer

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Tags: Closing Stock, FIFO, LIFO, Pricing methods
Level: Level 1

Topic: Costing Methods
Series: MAY 2024

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

Question

Tripple Company Limited manufactures “MOP Heads” for use in its various offices across the country. The Cost Accountant has the following costs per unit produced:

A nearby company, Dusters Nigeria Enterprises, has offered to sell 10,000 units of these MOP Heads to Tripple Company Limited for N135 per unit. If Tripple Company Limited accepts the offer, some of the facilities presently in use to manufacture MOP Heads could be rented out to a third party at an annual rent of N195,000. In addition, N18 per unit of the fixed overhead cost applied to the production of MOP Heads would be totally eliminated. The Cost Accountant has also established that 75% of the overhead is fixed.

You are required to:

a. Advise the Chief Executive Officer of Tripple Company Limited whether the company should accept the offer of Dusters Nigeria Enterprises or not. (15 Marks)

b. State FIVE other qualitative factors that the Chief Executive Officer of Tripple Company Limited should consider in making a decision in (a) above. (5 Marks)

Answer

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Tags: Costing, Fixed Overheads, Make or buy decisions, Qualitative Factors, Relevant Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2015

MI – May 2024 – L1 – SA – Q10 – Costing Methods

Identifies a statement that is NOT a common feature of process costing systems.

Question

There are common features in most process costing systems. Which of the following is NOT one of the common features? A. Clearly defined process cost centres and the accumulation of all costs
B. Maintenance of accurate records of units and part units produced and the cost incurred by each process
C. Averaging of the prime costs of each process over the total production of that process, excluding partly completed units
D. Charging of the cost of the input of one process as the raw materials input of the following process
E. Clearly defined procedures for separating costs where the process produces two or more products

Answer

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Tags: Common Features, Cost Accumulation, Prime Costs, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2024

MI – May 2024 – L1 – SA – Q4 – Costing Methods

Identifies an aspect that is NOT a practical implication of Just-In-Time production.

Question

Which of the following is NOT a practical implication of Just-In-Time production? A. Production times must be very fast
B. Production must be reliable
C. Factory layout must not change to reduce movement
D. Deliveries from suppliers must be reliable
E. There must be full employee involvement

Answer

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Topic: Costing Methods
Series: MAY 2024

MI – May 2024 – L1 – SA – Q3 – Costing Methods

Identifies an item that is not part of the purchase process in material management.

Question

Which of the following is NOT part of the purchase process?

A. Purchase requisition
B. Purchase order
C. Material usage note
D. Goods received note
E. Purchase invoice

Answer

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Tags: Factory Operations, Material Management, Procurement, Purchase Process
Level: Level 1

Topic: Costing Methods
Series: MAY 2024

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.

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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.

You're reporting an error for "MI – Nov 2020 – L1 – SB – Q2 – Costing Methods"

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.

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

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

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

Identify an incorrect statement about marginal costing in process costing.

You're reporting an error for "MI – Nov 2020 – L1 – SA – Q5 – Costing Methods"

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

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

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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.

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

career paths for accountants in IT-based environments.

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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

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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.

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MI – May 2016 – L1 – SA – Q5 – Costing Methods

Calculate the absorption rate using Direct Labour for product YZ based on the given data.

You're reporting an error for "MI – May 2016 – L1 – SA – Q5 – Costing Methods"

MI – May 2024 – L1 – SB – Q3 – Costing Methods

Compute the price of store issues and the value of closing stocks using FIFO and LIFO methods.

You're reporting an error for "MI – May 2024 – L1 – SB – Q3 – Costing Methods"

MI – May 2015 – L1 – SB – Q3 – Costing Methods

Analyze a make or buy decision for MOP heads production.

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MI – May 2024 – L1 – SA – Q10 – Costing Methods

Identifies a statement that is NOT a common feature of process costing systems.

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MI – May 2024 – L1 – SA – Q4 – Costing Methods

Identifies an aspect that is NOT a practical implication of Just-In-Time production.

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MI – May 2024 – L1 – SA – Q3 – Costing Methods

Identifies an item that is not part of the purchase process in material management.

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