MAKERERE UNIVERSITY

COLLEGE OF BUSINESS AND MANAGEMENT SCIENCES

BACHELOR OF COMMERCE (ACCOUNTING OPTION)
YEAR II SEMESTER THREE ACADEMIC YEAR 2019/2020
COURSE WORK
TAKEHOME ASSIGNMENT:
BAM3101: COST ACCOUNTING
Instructions
1. This Course work should be done in groups of Maximum 5 Members
and should exhibit precised discussion of issues, application of
quantitative skills and management information presentation skills
2. Hand in this assignment on November 15, 2019 by5:00pm
3. Minimum of typed five (5) pages with proper layout of your work
4. The use of management Accounting principles will earn you extra
marks

Question One
For this question, you may need to refer to management and cost
accounting by Collins drury under chapter 1&2 .
(a) Describe the different functions of management accounting.
(7 marks)
(b) Basic. Classify each of the following as being usually fixed (F), variable
(V), semi-fixed (SF) or semi-variable (SV):
(i) Direct labour;
(ii) Depreciation of machinery;
(iii) Factory rental;
(iv) Supplies and other indirect materials;
(v) Advertising;
(vi) Maintenance of machinery;
(vii) Factory manager’s salary;
(viii) Supervisory personnel;
(ix) Royalty payments.
(18 marks)

Question Two
(a) Describe the role of the cost accountant in a manufacturing
organization. (8 marks)
(b) Explain whether you agree with each of the following statements:
(i) ‘All direct costs are variable’.
(ii) ‘Variable costs are controllable and fixed costs are not’.
(iii) ‘Sunk costs are irrelevant when providing decision making
information’.
(9 marks)

Question Three: Product cost calculation.

From the information given below you are required to:
(a) Prepare a standard cost sheet for one unit and enter on the standard
cost sheet the costs to show sub-totals for:
(i) Prime cost;

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 (ii) Variable production cost;
(iii) Total production cost;
(iv) Total cost.
(b) Calculate the selling price per unit allowing for a profit of 15 per cent
of the selling price.
The following data are given:
Budgeted output for the year 9800 units Standard details for one unit:
Direct materials 40 square metres at £5.30 per square metre
Direct wages:
Bonding department 48 hours at £12.50 per hour
Finishing department 30 hours at £7.60 per hour
Budgeted costs and hours per annum:
Variable overhead:
(£) (hours)
Bonding department 375 000 500 000
Finishing department 150 000 300 000
Fixed overhead:
(£) (hours)
Production 392 000
Selling and distribution 196 000
Administration 98 000
(19 marks)

Question Four: Under- and over-absorption of overheads and

calculation of budgeted expenditure and activity.
A large firm of solicitors uses a job costing system to identify costs with
individual clients. Hours worked by professional staff are used as the basis
for charging overhead costs to client services. A predetermined rate is
used, derived from budgets drawn up at the beginning of each year
commencing on 1 April.
In the year to 31 March 2018 the overheads of the solicitors’ practice,
which were absorbed at a rate of £7.50 per hour of professional staff, were
over-absorbed by £4760. Actual overheads incurred were £742 600.
Professional hours worked were 1360 over budget.
The solicitors’ practice has decided to refine its overhead charging system
by differentiating between the hours of senior and junior professional
staff, respectively. A premium of 40 per cent is to be applied to the hourly
overhead rate for senior staff compared with junior staff.
Budgets for the year to 31 March 2019 are as follows:
Senior professional staff hours 21 600
Junior professional staff hours 79 300
Practice overheads £784 000
Required:
(a) Calculate for the year ended 31 March 2018:
(i) Budgeted professional staff hours
(ii) Budgeted overhead expenditure
(5 marks)
(b) Calculate, for the year ended 31 March 2019, the overhead
absorption rates (to three decimal places of a £) to be applied to:

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 (i) Senior professional staff hours
(ii) Junior professional staff hours (4
marks)
(c) How is the change in method of charging overheads likely to
improve the firm’s job costing system?
(3 marks)
(d) Explain briefly why overhead absorbed using predetermined rates
may differ from actual overhead incurred for the same period.
(2 marks)

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Question Five: Overhead analysis and calculation of product
costs.
A furniture-making business manufactures quality furniture to customers’
orders. It has three production departments and two service departments.
Budgeted overhead costs for the coming year are as follows:
Total (£)
Rent and rates 12, 800
Machine insurance 6, 000
Telephone charges 3, 200
Depreciation 18, 000
Production supervisor’s salaries 24, 000
Heating and lighting 6, 400
70, 400
The three production departments – A, B and C, and the two service
departments – X and Y, are housed in the new premises, the details
of which, together with other statistics and information, are given below.
Departments
A B C X Y
Floor area occupied (sq.metres) 3000 1800 600 600 400
Machine value (£000) 24 10 8 4 2
Direct labour hrs budgeted 3200 1800 1000
Labour rates per hour £3.80 £3.50 £3.40
£3.00 £3.00
Allocated overheads:
Specific to each department (£000) 2.8 1.7 1.2 0.8 0.6
Service Department X’s costs apportioned 50% 25% 25%
Service Department Y’s costs apportioned 20% 30% 50%
Required:
(a) Prepare a statement showing the overhead cost budgeted for each
department, showing the basis of apportionment
used. Also calculate suitable overhead absorption rates.
(9 marks)
(b) Two pieces of furniture are to be manufactured for customers. Direct
costs are as follows:
Job 123 Job 124
Direct material £154 £108
Direct labour 20 hours Dept A 16 hours Dept A
12 hours Dept B 10 hours Dept B
10 hours Dept C 14 hours Dept C
Calculate the total costs of each job.
(5 marks)
(c) If the firm quotes prices to customers that reflect a required profit of
25 per cent on selling price, calculate the quoted selling price for
each job. (2 marks)
(d) If material costs are a significant part of total costs in a
manufacturing company, describe a system of material control that
might be used in order to effectively control costs, paying practical
attention to the stock control aspect. (9 marks)