THE UNIVERSITY OF DODOMA

COLLAGE OF BUSINESS AND ECONOMICS (COBE)

DEPARTMENT OF ECONOMICS

COURSE CODE: AF 211

COURSE NAME: COST AND MANAGEMENT ACCOUNTING

COURSE INSTRUCTOR: MR. DAVID MUSHI

NATURE OF WORK: INDIVIDUAL ASSIGNMENT

S/N NAME REG. NUMBER COURSE SEX SIGN
1. MARTHA BOSCO ENOCK T24-03-19560 BCOM-FIN F
1

a) OVERHEAD ANALYSIS SHEET

Production Department Service Department

Basis of
Apportion Maintenan
Overheads ment Amount Cutting Shaping Stores ce

Total Direct
Overheads allocation 363,000 140,000 160,000 35,000 28,000

Factory Rent Floor area 525,000 270,000 180,000 45,000 30,000

Factory
building
Insurance Floor area 70,000 36,000 24,000 6,000 4,000

Value of
the plants
Plant and and
Machinery Ins machinery 39,000 30,000 5,000 2,500 1,500

Value of
Plant and the plants
Machinery and
Depreciation machinery 58,500 45,000 7,500 3,750 2,250

Canteen Number of
Subsidy employees 150,000 51,000 90,000 6,000 3,000

572,000 466,500 98,250 68,750

SECONDARY APPORTIONMENT
Basis of
Department Apportionment

Maintenance hour
Maintenance required 37,125 27,500 4,125 68,750
 Number of stores
Store requisition 68,250 34,125 102,375

1,205,500

Grand Total

b)

Overhead rate =
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝐶𝑜𝑠𝑡
𝑀𝑎𝑐ℎ𝑖𝑛𝑒 𝐻𝑜𝑢𝑟𝑠

Cutting Department:

Machine hours = 12,000 hours

Budgeted overhead cost = K 677,375

So,

Overhead rate= 677,375

12000

= K 56.45 per machine hour

Therefore, the overhead absorption rate for the cutting department is

K 56.45 per machine hour.

Shaping Department:

Overhead rate = 𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝐶𝑜𝑠𝑡

𝐿𝑎𝑏𝑜𝑢𝑟 𝐻𝑜𝑢𝑟𝑠

Labour hours = 15,000 hours

Budgeted overhead cost = K 528,125

So,

Overhead rate= 528,125

15000

= K 35.21 per labour hour

Therefore, the most appropriate overhead absorption rate for the shaping department is
 K 35.21 per labour hour.

c)

Cutting department;

𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝒂𝒃𝒔𝒐𝒓𝒃𝒆𝒅 = 𝑨𝒄𝒕𝒖𝒂𝒍 𝒎𝒂𝒄𝒉𝒊𝒏𝒆 𝒉𝒐𝒖𝒓 𝒘𝒐𝒓𝒌𝒆𝒅 × 𝑶𝒗𝒆𝒓𝒉𝒆𝒂𝒅 𝒓𝒂𝒕𝒆

Overhead absorbed = 14000 hours × K56.45 per hour

Overhead absorbed = K790, 300

Therefore this is over-absorbed overhead since absorbed overhead > actual overhead. It is over the
actual overhead by K258,800

Shaping department;

overhead absorbed = 16000 hours × K35.21 per hour

= K563,360

This is also Over-absorbed overhead since absorbed overhead > actual overhead. It is over the actual
overhead by K157,860
2

a)

LIFO

DATE RECEIPTS ISSUE BALANCE

Qty Rate Amount Qty Rate Amount Qty Rate Amount

1st Aug 1000 9.50 9500 - - - 1000 9.50 9500

15th Aug 900 11.00 9900 1900 10.21 19400

19th Aug 800 11.00 8800 1100 9.64 10,600

20th Aug 600 10.50 6300 - - - 1700 9.94 16900

26th Aug 600@10.50 10.50 12,150 500 9.5 4,750

100@11.00
11.00
500@9.50
9.50

Total Amount Charged to Production

8800 + 12,150 = 20,950

Total Value of Inventory Transaction

4,750
WEIGHTED AVERAGE

DATE RECEIPTS ISSUE BALANCE

QTY RATE AMOUNT QTY RATE AMOUNT QTY RATE AMOUNT

1st Aug 1000 9.50 9500 - - - 1000 9.50 9500

15th Aug 900 11.00 9900 - - - 1900 1021 19400

19th Aug 800 10.21 8168 1100 10.21 11232

20th Aug 600 10.50 6300 - - - 1700 10.31 17532

26th Aug 1200 10.31 12372 500 10.32 5160

Total Amount Charged to Production

8168 + 12,372 = 20,540

Total Value of Inventory Transaction

5,160

FIFO

DATE RECEIPTS ISSUE BALANCE

QTY RATE AMOUNTQTY RATE AMOUNT QTY RATE AMOUNT

1st Aug 1000 9.50 9500 1000 9.50 9500

15th Aug 900 11.00 9900 1900 10.21 19400

19th Aug 800@9.50 9.50 7600 200@ 9.50 10.73 11800

900@11.00

20th Aug 600 10.50 6300 - - - 1700 10.65 18100

26th Aug 12850 500 10.50 5250

Total Amount Charged to Production

7600 + 1900 + 9900 + 1050 = 20,450

Total Value of Inventory is

5,250

b)

Advantages of FIFO

 It is a simple method to understand and operate.

 Closing stock reflects recent or current market prices.
 Issues are priced at actual historical cost.

Disadvantages of FIFO

 Time consuming as price fluctuate frequently.

 The state and costs of units are large.
 Overstates profit during rising prices.

Advantages of LIFO (Last in First out)

 Very useful when prices are mixing.

 Meeting current cost with current revenue.
 Prevents and avoid overstatement of print during inflation.

Disadvantages of LIFO

 Not allowed or permitted under some accounting standards.

 Not suitable for perishable materials
Advantages of Weighted Average costing

 Easy to calculate and operate.

 It is practical and best expensive inventory system.
 It's a reliable costing method useful to management.
 Smoothen price fluctuates.

Disadvantages of Weighted Average costing

 Does not represent the actual cost of specific batteries?

 Requires frequent recalculation.
 Issues and closing stock are not at current cost.
 Less suitable for material regulation strict batch control.

c)

WIP = Equivalent units x cost per completed units.

Given; cost per completed = 30.50 units

But,

Equivalent units = Number counts x percentage of completion

Where as ;

600 units = 40% complete

400 units = 60% complete

300 units = 80% complete

So according to equivalent units formula,

600 = 600 × 40 = 240 equivalent units

400= 400 × 60 = 240 equivalent units

300= 300 × 80 = 240 equivalent units

TOTAL EQUIVALENT UNIT= 720 equivalent units

WIP VALUE = 720 × 30.50 = 21,960

Therefore, The Work-In-Progress value is 21,960

a)

Incentive scheme is a formal program designed to motivate employees, or team, to achieve specific desired
outcomes by offering rewards.

Purpose of an incentive scheme

 Motivate employee to increase productivity.

 Encourage workers to work faster and better.
 Reward employees for higher output and efficiency.
 The rewards and pay are linked directly to performance of each individual or team.
 Reduce unit out of production.

b)

Data Given

Basic working week = 38 hours

Overtime premium = 80% of normal rate

Pay rate of grade A = R22 per hour

Pay rate of grade B = Tsh / 8 per hour

Overtime pay = overtime hours × overtime rate

Overtime rate = Normal rate × 120%.

Normal pay = Normal hours × normal pay rate for Grade A.

 Normal pay = 38 hours × TZS 22 per hour

Normal Pay= 836 TZS

For Grade B

Normal Pay= 38 hours × 18 TZS per hour

= 684 TZS

Employees Hours worked Normal Hours Overtime

1 41 38 3

2 44 38 6

3 40 38 2

4 38 38 0

5 38 38 0

6 45 38 7

So no we calculate for every employee

Employee 1 – GRADE A

Normal pay = 836

Overtime rate = 22 × 120% = 26.40

Overtime Pay = 26.40 × 3 = 79.20

Total pay = TZS 915.20

Employee 2 – GRADE A

Normal pay = 38 × 22 = 836

Overtime pay = 6 × 26.40 = 158.40

Total pay = TZS 994.40

Therefore,

Employee Total Normal Pay

1 915.20
2 994.40
3 727.20
4 684
5 684
6 1020.80

c)

Given;

Standard time = 20 minutes per unit

Grade A hourly rate = TZS 22

Enhancement = 6%

From,

Standard piecework rate= Basic piece rate × (100% + Enhancement)

But,

Standard time per unit (hour) = 20 ÷ 60 = 𝟏⁄𝟑hour

Basic piece rate = 22 × 𝟏⁄𝟑= 7.33 per unit

Standard piecework rate = 7.33 × 6% = 7.77 per unit

Therefore the standard piece work rate is TZS 7.77 per unit
3

d)

Pay = Units Produced × piecework rate

Employee Units Produced Rate Pay (TZS)

1 170 7.77 1320.90

2 170 7.77 1320.90

3 150 7.77 1165.50

4 150 7.77 1165.50

5 160 7.77 1243.20

6 180 7.77 1398.60

a)

DIRECT COSTS FACTORY OFFICE & ADMINITION

SELLING & DISTRIBUTION
OVERHEADS OVERHEADS

Salesmen’s salary 625

Advertising 625

Warehouse charges 250

Carriage outward 187.50

Manager’s salary 2,500

Office stationery 250

Telephone charges 62.5

Office lighting 250

Postage & 125

telegrams

Rent – office 1,250

Depreciation –
625
office premises

Consumable stores 1,250

Wages of foreman 1,250

Electric power 250

Factory lighting 750

Storekeeper’s
500
wages

Oil and water 250

Rent – factory 2,500

Repairs – factory
1,750
plant

Depreciation –
250
factory plant

Direct materials 50,000

Direct labour 15,000

Prime Cost = Direct Materials + Direct Labour = TZS 65,000

Total Factory Overheads = TZS 8,750

Factory Cost = Prime Cost + Factory Overheads = 65,000 + 8,750 = TZS 73,750

Total office Overheads = TZS 5,062.50

Cost of Production = Factory Cost + Office Overheads

= 73,750 + 5,062.50

= TZS 78,812.50
Total selling and distribution Overheads = TZS 1,687.50

Cost of Sales = Cost of Production + Selling & Distribution Overheads

= 78,812.50 + 1,687.50

= TZS 80,500.00

Profit = Sales – Cost of Sales

= 94,750 – 80,500

= TZS 14,250

b)

Cost of credit

Is anything for which costs are measured it can be Products, services, department or projects

Cost Unit

Is the unit for the products or services related to which costs are ascertained from example per unit, per kg,
per lbs.

Cost centre

This is a production or service location, function, administration or item where costs are measured but
revenues are

Not directly earned, only costs are measured not profits.

Revenue centre

This is a location, activity or items where it's only responsible for generating revenue, and not controlling
costs
5

a)

Cost Allocation Cost Apportionment

Charging whole cost directly to a cost centre or

Sharing a cost among several cost centres
cost unit

Used when cost is clearly identifiable Used when cost is common

No estimation involved Based on fair basis (floor area, labour hours etc.)

Cost Reduction Cost Control

Permanent reduction in unit cost Ensuring costs do not exceed standards

Forward-looking Ongoing monitoring

Focuses on efficiency improvement Focuses on prevention of waste

b)

The following are the steps of Cost accounting Cycle;

Collection of cost data

Classification of costs

Allocation and apportionment of overheads

Absorption of overheads

Cost ascertainment

Cost analysis and interpretation

reporting to management
C)

Product A (TZS) B (TZS) C (TZS)

Direct material 3,000 6,000 8,000

Direct wages 4,000 4,000 10,000

Variable overheads 3,000 5,000 7,000

Total Variable Cost 10,000 15,000 25,000

Selling price 18,000 25,000 48,000

But,

Contribution = Selling price – Variable cost

Product Contribution per unit (TZS)

A 18,000 – 10,000 = 8,000

B 25,000 – 15,000 = 10,000

C 48,000 – 25,000 = 23,000

Period 1 total Contributions

Product Units Contribution/unit Total Contribution

A 10,000 8,000 80,000,000

B 10,000 10,000 100,000,000

C 10,000 23,000 230,000,000

Total Contribution (Period I)

= 410,000,000
Profit = Contribution – Fixed costs

= 410,000,000 – 135,000

= 409,865,000

Period 2 Total Contributions

Product Units Contribution/unit Total Contribution

A 20,000 8,000 160,000,000

B 13,000 10,000 130,000,000

C 5,000 23,000 115,000,000

Total Contribution (Period II)

= 405,000,000

Profit = 405,000,000 – 135,000

= 404,865,000

The following are the reasons profit fell Despite Higher Sales

 Fixed cost remained Constant

 Increase in lower contribution products
 Changes in Sales for Product C
 REFERENCES
Horngren, C. T., Datar, S. M., & Rajan, M. V. (2018).
Cost accounting: A managerial emphasis (16th ed.). Pearson Education.
Drury, C. (2015).
Management and cost accounting (9th ed.). Cengage Learning.