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 – Nov 2023 – L1 – SB – Q2b – Costing Methods

calculation of total remuneration for workers.

Question

There are six workers in a production department of a manufacturing company: Ayo, Bola, Cosmas, Dapo, Eniola, and Alasa. The following information is extracted from the company’s records for the month: Standard production per month is 1,250 units.

Production by each employee:

Ayo: 1,000 units
Bola: 1,250 units
Cosmas: 1,375 units
Dapo: 900 units
Eniola: 1,125 units
Alasa: 1,200 units

Piecework rate is N100.00 per unit of actual production.
Additional bonus is N200.00 for each 1% of actual production above 80% of the standard production. There’s also a production allowance of N5,000 per month.

Required:
Compute the total remuneration for the workers for the month.

Answer

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Tags: Bonus calculation, Piece Rate System
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

MI – Nov 2023 – L1 – SB – Q2a – Costing Methods

Comparison of time rate and piece rate remuneration methods

Question

The TWO main labour remuneration methods are:
i. Time rate system
ii. Piece rate system

List FIVE advantages of each of them.

Answer

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Tags: Labour Costing, Remuneration, Time Rate System
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

MI – Nov 2023 – L1 – SB – Q1 – Costing Methods

Create a stores ledger using the weighted average method based on given inventory transactions.

Question

The stores data of ABC Limited for the month of July is as follows:

Required:
Prepare the store ledger account in tabular form using the weighted Average Price Method, showing daily balances as a memorandum on the table. Show workings

Answer

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Tags: Cost Accounting, Inventory Management, Stores Ledger, Weighted Average Method
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

MI – Nov 2023 – L1 – SA – Q9 – Costing Methods

Identifying activities that are part of Activity-Based Costing (ABC).

Question

Activities such as customer service and distribution, material handling, and set-ups are part of:
A. Standard costing
B. Marginal costing
C. Contract costing
D. Activity-based costing
E. Job costing

Answer

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Tags: Activity-Based Costing, Cost Allocation, Production Activities
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

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

Calculating the number of deliveries per year based on reorder quantity and annual demand.

Question

The reorder quantity is 2,000 while demand for one year in units is 20,000. What is the number of deliveries per annum?
A. 6
B. 8
C. 10
D. 14
E. 16

Answer

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Tags: Deliveries, Demand, Inventory Management, Reorder Quantity
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

MI – Nov 2023 – L1 – SA – Q4 – Costing Methods

Identifying an option that is NOT an inventory valuation method.

Question

Which of the following is NOT an inventory valuation method?
A. Last-In-First-Out
B. Weighted average
C. Periodic average price
D. First-In-First-Out
E. Economic order quantity

Answer

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Tags: Costing, Inventory Valuation, Valuation Methods
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

MI – Nov 2023 – L1 – SA – Q1 – Costing Methods

Identifying a characteristic that is NOT associated with the LIFO materials pricing method.

Question

Which of the following is NOT a characteristic of ‘Last-In-First-Out’ (LIFO) materials pricing method?
A. Results in many batches being only partly charged to production where a subsequent batch is received
B. It is an actual cost system
C. It is acceptable by the tax authorities
D. Administratively clumsy
E. Makes cost comparison between jobs difficult

Answer

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Tags: Costing Systems, Inventory Management, LIFO, Materials Pricing
Level: Level 1

Topic: Costing Methods
Series: NOV 2023

MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

Question

Joyle Construction Limited is currently working on two contracts with the following details as at December 31.

Details	Contract A (₦’000)	Contract B (₦’000)
Material	16,140	23,100
Wages	61,900	23,136
Expenses on site	8,270	10,344
Plant purchased	191,000	78,000
Accrued wages	5,060	2,690
Materials as at 31/12	2,670	7,680
Value of work certified	140,000	102,000
Cash received on certified work	119,000	76,500
Completed work not yet certified	4,450	2,640
Head office charges apportioned	15,660	12,230
Plant value as at 31/12	152,800	62,400

The contract value is ₦500,000,000 for Contract A and ₦350,000,000 for Contract B.

Required:
Prepare contract “A” and contract “B” accounts for Joyle Construction Limited as at December 31 in a columnar form. Show the profit taken at year-end and the balances carried forward. (Show workings where necessary).

Answer

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Tags: Contract Costing, Profit Recognition, Work in Progress
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

MI – May 2023 – L1 – SB – Q1 – Costing Methods

Preparation of Process 1 and Process 2 accounts, including the cost of goods produced and applicable abnormal loss or gain.

Question

A company manufactures a product which goes through two processes. The following are the extracts from the company’s records:

Process 1:

Materials: 10,000 units at the cost of ₦100,000
Labour: ₦20,000
Overheads: ₦20,000
Normal loss: 10%
Actual production: 8,500 units
Scrap sales: ₦5 per unit

Process 2:

Transfer from process 1: 8,500 units valued at ₦127,500
Labour: ₦15,000
Overheads: ₦10,000
Normal loss: 10%
Actual production: 8,400 units
Scrap sales: ₦3 per unit

Required:
a. Prepare Process 1 account. (10 Marks)
b. Prepare Process 2 account. (10 Marks)

(Show the calculations of cost of goods produced and applicable abnormal loss or gain.)

Answer

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

Topic: Costing Methods
Series: MAY 2023

MI – May 2023 – L1 – SA – Q10 – Costing Methods

This question asks about the effect of FIFO on closing stock value and profit when prices are rising.

Question

When prices are rising, FIFO method will provide:
A. Highest value of closing stock but lowest profit
B. Highest value of profit but lowest value of closing stock
C. Highest value of closing stock and profit
D. Lowest value of closing stock and profit
E. Same value of closing stock and profit

Answer

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Tags: FIFO, Profit Calculation, Stock valuation
Level: Level 1