1. The following information relates to the output levels and corresponding overhead costs for Clover Limited for the last four months:

Required: Using the high-low method
i. Formulate the cost function(Y) for the above relationship
ii. Estimate the total overhead costs(OC) associated with 45 units of output.

2. Butterfly East Ltd., an automobile mechanic, has been operating a welding garage in Kitui for the past year, making and selling metal doors and windows.
The costs of the welding job assignment are as follows:

Required
Formulate an equation to estimate the total cost of the welding shop and compute the cost of undertaking 1,100 job assignments using the High-low method.

3. The following information relates to the activities of the production departments of Banjo East Limited for September 2024:

The total overheads incurred by the production department during the period amounted to USD 300,000.
Job number X210 was produced in the department during the same period. The following relevant data is available:

Required
Calculate the total cost of job number X210 using the following methods of overhead absorption:
i. Direct labor hours(C/dl)
ii. Direct machine hours(C/mh)

4. Heckle Enterprises operates an integrated cost and financial accounting system. The following information has been extracted from the company’s cost and financial accounts as at 30 September 2025:

Required
Compute the financial net profits as at 30 September 2025.

5. TRUE or FALSE: Abnormal loss has no impact on the value of stock, whereas stock is inflated to cover the normal loss.

6. Dongo East Limited manufactures and sells a single product. The following information relates to the company for the year ended 31 December 2025:

The following changes are expected to occur during the year ending 31 December 2025:
i. Variable selling and distribution expenses will be reduced by 8% due to increased efficiency of salespersons
ii. Variable overheads will increase by 4%
iii. Labor costs will reduce by 5%
iv. Material cost will increase by 3% due to inflation
v. Selling price will be reduced by 4% to attract customers.
vi. No closing stock is expected at the end of the period.

Required
i. Expected break-even sales(BES) revenue for the year ending 31 December 2025.

7. Marogold Enterprises operates a garment-making company based in Nakuru. The following information was extracted from the company’s books of account for the year ended 31 December 2025:

Required: Prepare a cost statement showing:
i. Prime cost(PC) of uniforms manufactured
ii. Total cost(TC) of uniforms manufactured

8. Peter is organizing a fundraising concert for his non-charitable organization. He plans to sell tickets to evet at USD 16.80 per ticket. He has agreed with a catering firm to supply meals at USD 10.80 per person. The cost of renting premises for the event is USD 160 while the cost of hiring an orchestra is USD 200.

Required: Calculate the break-even point.

9. Domex Limited has provided the following information:

Required
Calculate the contribution sales(C/S) ratio.

10. Amix Limited manufactures a single product. The following data relates to the product for the year ended 30 September 2025:

Additional information
i. The normal level of activity per year is USD 400,000 units.
ii. Fixed costs are incurred evenly throughout the year.
iii. The fixed costs during the year were the same as budgeted costs.
iv. There were no stocks of the product at the beginning of the financial year
v. In the first quarter, 110,000 units were produced and 80,000 units sold.

Required
Prepare statements for the financial year ended 30 September 2025 and compute the net profit using:
i. Marginal costing technique
ii. Absorption costing technique.

11. Tavo Manufacturing Limited is currently working at 40% capacity and produces 40,000 units of aluminum roofing sheets, the unit cost of which is USD 440, comprised as follows:

Additional information
i. The selling price per unit is USD 500.
ii. If the capacity is increased to 55%, the raw material cost will increase by 3%, and the selling price will fall by 1%.
iii. If the capacity is increased to 75%, the raw material cost increases by 5%, and the selling price falls by 2%

Required
Prepare a flexible budget for three capacity levels (40%, 55%, and 75%) and advise the management on the best capacity option to implement.

12. Batex manufactures several production components. Its usage for component A is as follows:

Required: Calculate:
i. The Reorder level(RL)
ii. The minimum level(MNL)
iii. The maximum level(MXL)
iv. The average stock level(ASL)

13. TRUE or FALSE:If a trader's mark-up on cost is 35%, his gross margin is 65%

14. Lotus Safaris operates ten(10) tour buses between two game parks which are 50 km apart. The cost accountant of the company obtained the following data relating to these buses for December 2025:

Additional information
i. The seating capacity of each bus is 40 passengers
ii. During December 2025, the passengers carried were 85% of seating capacity.
iii. All the tour buses operated all the days of the month.
iv. Each bus made two(2) round trips per day.

Required
i. Prepare the operating cost sheet for December 2025 and find the total cost(TC).
ii. Compute the cost per passenger(CPP) in km for the month of December 2025.

15. Diamond’s accounting year ends on December 31. On December 31, 2025, the company issued USD 500,000 of 6%, 5-year bonds at 100. Interest is payable semi-annually.

Required: Compute the semi-annual interest payment on June 30.

16. Sotex Limited produces farm machinery. Each piece of equipment is built to customer specifications. During January,2025, its first month of operations, Sotex began working on three customer orders: jobs 1, 2, and 3. The following transactions occurred during January:
i. Purchased production materials on account totaling USD 675,000
ii. Processed material requisitions for the following items:

iii. Processed timesheets showing the following:

iv. Applied overhead using a predetermined rate of 150% of direct labor cost.
v. Completed Job 1 and transferred it to finished goods
vi. Delivered Job 1 to the customer and billed USD 210,000.

Required
i. Calculate the total production costs(PC) in January for each of the three jobs.
ii. How much gross profit(GP) did Sotex Ltd earn from the sale of Job 1.
iii. Assuming selling costs totaled USD 6,000 and General and administration costs totaled USD 16,500 in January, prepare an income statement for Sotex Ltd. for the month and compute the net profit(NP)(Assume there is no adjustment to costs of goods sold for underapplied or overapplied overhead)

17. The financial and cost accounts of Makini Enterprises reflected different profits for the year ending 31 December 2025. The cost accounts profit (CAP) was USD 54,080, while the financial accounts profit (FAP) was USD 225,740. Makini’s Cost Accountant revealed the following differences between the cost accounts and the financial accounts:

Required
Which of the following statements correctly shows how to reconcile the profit reflected by the cost accounts and the financial accounts' profit for the financial year ended 31 December 2025:

18. Mark runs a drinking water business and has determined that the fixed costs add up to USD 200,000, while the variable costs of producing one bottle of drinking water are USD 5 per unit. The selling price per bottle is USD 25.

Required

Determine how many units Mark will need to sell to break even.

19. Zarix Enterprises operates a small brick manufacturing company in Kilifi. The breakdown of the company’s variable and fixed costs for June was as follows:

Fixed costs are estimated at USD 225,000, and the company produced 50,000 units in June.
Required
The mixed costs in the equation form Y=f + Vx

20. Manex operates separate financial and cost accounts. The following information relates to Mamasua for the year ended 30 September 2025:
i. The cost accounts included overheads recovered based on USD 1.25 per machine hour.400 machine hours were utilized, and the actual overhead incurred was USD 110,000.
ii. Machinery that had a net book value of USD 10,500 was sold at USD 7,500
iii. Discount allowed and discount received amounted to USD 3,500 and USD 2,500, respectively.
iv. Debenture interest of USD 6,500 was paid during the year ended 30 September 2025.
v. Goodwill written -off amounted to USD 10,000.
vi. A national rent charge of USD 7,000 was charged in respect to the company’s premises.
vii. Financial profit for the year ended 30 September 2025 has been determined as USD 37,500.
viii. Rent of USD 12,500 was received during the year.
ix. The financial accounts use the FIFO method to value materials, while the cost accounts use the LIFO method.
Manex had given the following stock values:

Required
The cost accounts profit(Loss) for the year ended 30 September 2025

21. TRUE or FALSE: Abnormal loss can be estimated.

22. Zekari Limited manufactures a single product that passes through two processes. The details for process I for May 2021 are as follows:

Additional information
i. The normal loss is estimated at 20% of the materials input.
ii. Losses can be scrapped at USD 5 per kg.
iii. The output for May 2021 was 35,000 kgs.

Required
Prepare the process I account and compute the abnormal gain/loss(units/ kgs).

23. Hagai East  Limited manufactures two types of lotions: one for Men and the other for Women. The following estimates relate to the financial year ending 31 December 2025:

Additional information
i. The cost of direct materials is USD 30 per kg.
ii. The permanent workers are paid an hourly rate of USD 50, while casual workers are paid at the rate of USD 35.
iii. The stocks of direct materials on 1 January 2025 and 31 December 2025 are expected to be 52,500 kgs. and 105,000 kgs. respectively.

Required:
i. Prepare the sales budget and compute the total gross sales(TGS)
ii. Prepare the production budget and compute the total budgeted production units (TPU)for women and men.

24. The management accountant of Empire Manufacturing Company provided the following information for the year ended 31 December 2022:

Additional information
i. The cost journal for the period showed rent of USD 91,330 was allocated to WIP in respect of work overheads while office overhead costs amounted to USD 13,150
ii. The company operated an integrated accounting system

Required
Prepare the cost ledger accounts and compute the closing balance(balance carried down) for the following accounts:
i. Store ledger(SL) control account
ii. WIP control account
iii. Finished Goods(FS) control account
iv. Cost ledge(CL) control account

25. Laxico Limited has three branches, namely Orange, Black, and White. Information relating to the divisions for the year ended 31 December 2025 is as follows:

Additional information
i. The total fixed overheads of the company amounted to USD 1,725,000.
ii. 30% of the total fixed overheads incurred are specific to each division.
iii. The firm’s policy is to apportion fixed overhead cost to the divisions using sales revenue.

Required
Advise the management of Laxico Ltd which division(s), if any, should be closed in order to maximize profits.

26. Drake West Ltd.'s financial profit and loss statement for the year shows a profit of USD 5,000, while the costing profit and loss statement shows a profit of USD 9,500. The difference in profits could reflect:

27. Hagai West Limited manufactures two types of lotions: one for Men and the other for Women. The following estimates relate to the financial year ending 31 December 2025:

Additional information
i. The cost of direct materials is USD 30 per kg.
ii. The permanent workers are paid an hourly rate of USD 50, while casual workers are paid at the rate of USD 35.
iii. The stocks of direct materials on 1 January 2025 and 31 December 2025 are expected to be 52,500 kgs. and 105,000 kgs., respectively.

Required:
i. Prepare the materials usage budget and compute total quantity consumed(TQC).
ii. Prepare the material purchases budget and compute the total purchases value(TPV).
iii. Prepare the Labor cost budget and compute the total labor costs (TLC)for the permanent and casual workers.

28. TRUE or FALSE: Every profit center is a responsibility center, but not every responsibility center is a profit center.

29. According to the ethical principles of professional management accountants (as outlined by the Institute of Management Accountants), integrity requires:

30. Carbon North Ltd has three divisions: Manufacturing, Sales, and Investment. The Manufacturing Division manager controls production costs but has no authority over selling price or capital investments.
The Manufacturing Division is best classified as:

31. Total maintenance cost is USD 280,000 at 14,000 machine hours and USD 340,000 at 19,600 machine hours.
The variable cost per machine hour is:

32. A management accountant is pressured by the CFO to defer recording expenses to improve reported divisional profit. This violates:

33. If a regression analysis yields an r^2 (coefficient of determination) value of 0.45, how should a management accountant interpret this result?

34. If the correlation coefficient (r) in a cost estimation model is calculated as -0.94, this indicates:

35. TRUE or FALSE: The Industrial Engineering method of cost estimation is highly objective and does not rely on historical accounting data, making it ideal for new product lines.

36. A company’s financial controller notices that the physical inventory count at the end of the year is significantly lower than the balance shown in the financial accounting records. Which inventory system is the company most likely using, and what is the primary control weakness?

37. Calculate the Economic Order Quantity (EOQ) given the following data:
• Annual demand = 5,000 units
• Ordering cost per order = USD 30
• Annual holding cost per unit = USD 20.

38. Under the Halsey premium bonus scheme, a worker’s standard time to complete a job is 10 hours, but they complete it in 8 hours. If the basic time rate is USD 20 per hour and the bonus is 50% of the time saved, what are the worker’s total earnings for the job?

39. TRUE or FALSE: If the annual demand for an item doubles, the Economic Order Quantity (EOQ) will also exactly double, assuming ordering and holding costs remain constant.

40. Job No. XY10 requires USD 50,000 in Direct Materials and USD 30,000 in Direct Labor. The company absorbs production overheads at 120% of Direct Labor cost. Administrative overhead is absorbed at 20% of the total production cost.

Required: What is the total cost of Job No. XY10?

41. A hospital has 200 beds. During the month of August (31 days), the hospital operated at an average of 80% bed occupancy. The total operating costs for the month were USD 2,480,000. What is the cost per patient-day (bed-day)?

42. In a Process Account, how is an Abnormal Loss recorded?

43. In the context of reconciling budgeted absorption costing(AC) profit to actual absorption costing profit, which of the following adjustments is required?

44. TRUE or FALSE: A significant behavioral disadvantage of absorption costing is that it can incentivize production managers to overproduce, thereby artificially inflating short-term profits by hiding fixed costs in unsold inventory.

45. The "Angle of Incidence" on a Break-Even chart indicates:

46. Tungsten East Limited is operating at full capacity. It receives a special order for 1,000 units at USD 85 per unit. To fulfill this order, the company must give up 1,000 units of regular sales. The regular selling price is USD 110, and the variable cost is USD 60 per unit.
What is the net financial impact of accepting the special order?

47. If the Profit-Volume (P/V) ratio of a company is 40% and the fixed costs are USD 200,000, what is the break-even sales revenue?

48. TRUE or FALSE: When making a "make-or-buy" decision, the apportioned share of general factory rent and administrative overheads is considered a relevant cost.

49. In the context of budgeting, a "Budget Centre" is best defined as:

50. The following data were obtained from Hassium East Ltd:
• Budgeted sales for Month 1: 50,000 units.
• Company policy: Closing inventory of finished goods must be 10% of the following month's budgeted sales.
• Budgeted sales for Month 2: 60,000 units.
• Opening inventory of finished goods for Month 1: 5,000 units.

Required: What is the budgeted production for Month 1?