Question 1: Essential to the effective operation of any costing system in any business is the ability to define cost units and cost centers.
a) Explain the term “cost unit” and illustrate your answer by reference to any manufacturing company and any service industry.
b) Explain the term “cost centre” and describe how a company will use cost centers in a management accounting system.
Question 2
Tindo Ltd buys and sells product Q-3. It values stock on the basis of first in first out (FIFO). At 1st June 2001 stock in hand consisted of 4,500 units which were acquired at sh 50 per unit. The operations for the month were as follows:
Date Purchase Sales
4 5,000@ sh 48
5 6,000 @ sh 60
7 5,500 @ sh 49
11 4,000 @ sh 50
12 7,000 @ sh 61
13 5,000 @ sh 50
18 6,000 @ sh 47
19 8,000 @ sh 64
10 6,000 @ 49.50
21 5,000 @ sh 65
22 7,000 @ sh 50
25 6,000 @ sh 49
26 2,500 @ sh 47
27 stock on 26th June were damaged and returned 500 @ shs47
28 500 @ sh 60
29 14,000 @ sh 64
Required
Stores ledger card & Closing stock valuation