Question one:
a) What is the relationship between costing, management accounting, and financial accounting.( 3 marks)
b) Distinguish between cost apportionment and cost allocation. (2 marks)
c) The aim of just in time system is to produce the required items of high quality at the time they are required. Outline any five characteristics of just in time to the environment. (5 marks)
d) What is the economic order quantity when demand is 25% per working day,ordering cost are 150 pounds per order, the item cost three pounds each and carring costs are 12% per year. ( 5 marks)
e) Define the terms as used in costing:
i. Cost drivers
ii. Cost pools
iii. Profit center
iv. Break- even point
v. Limiting factor(5 marks)
f) Two products x and y are made using similar equipments and methods. The data for the last period are:
X Y
Units produced 6000 8000
Labor hours per unit 1 2
Machine hour per unit 4 2
Set-ups in period 15 45
Orders handled in the period 12 60
Overheads for the period pound
Relating to production set-ups 179000
Relating to order handling 30000
Relating to machine capacity 55000

Required:
Calculate the overheads to be absorbed per unit of each product based on;
a) Conventional absorption costing using a labor hour absorption rate. (5 marks)

b) An ABC approach using suitable cost drivers.( 5 marks)

Question Two:
a) Define break-even point. (3 marks)
b) The launch of a new product is being considered and four possible levels are being considred depending on consumer reaction. The variable costs associated with these levels are shown below:

Consumer reaction Adverse Average Good Excellent
Variable costs (pound 000) 20 30 45 70
There are fixed costs of pound 36000 and the contribution sales ratio is expected to be 60%.
Required:
Calculate
a) Profit on loss at each of the four levels. (8 marks)

b) Break -even point in sales value. (4 marks)

c) The level of sales at which a profit of pound 10000 would be made.( 5 marks)

Question three:
a) Miti mingi manufacturing co. produces electric equipments and the following information is obtained from the co.

The variable production cost per unit is expected to be;

Sh.
Direct material 40
Direct wages 30
Variable expenses 15
Total 85
The fixed overhead estimated at sh.480000 per annum is expected to be incurred in
Equal amounts each month from 1st Jan 2006.
The production is expected to commence in Jan and sales on 1st Feb. 2006.four months are:

Year 2006 Units Sales value
Feb 6200 651000
March 6800 707200
April 5400 594000
May 6000 630000
The following additional information was given

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