Multiple Choice QuestionWhen preparing a scatter diagram, the estimated line of cost behavior is drawn on a scatter diagram to show the relation between:Multiple choice question.cost and unit volumevariable and fixed costslowest and highest point of activityfixed cost and unit volume

A line on a scatter diagram to show the relation between cost and unit volume is the:Multiple ChoiceEstimated line of cost behavior.Margin of safety line.Break-even line.Standard cost line.Contribution margin line.

True or False QuestionTrue or false: On a scatter diagram, costs are plotted on the horizontal axis.True false question.TrueFalse

How are variable costs represented graphically?Group of answer choicesstarting at a given point and having a downward sloping line as activity increasesstarting at zero and having an upward sloping line as activity increasesthe intersection of the total costs and total revenue linesa horizontal line, staying the same irrespective of the level of activity

What type of costs increase or decrease in total with the budgeted volume of activity but remain constant when expressed on a per unit basis?Multiple choice question.Mixed costsVariable costsFixed costsDiscretionary costs

QUESTION ONE (a) Outline FOUR disadvantages of using the scatter graph as a method of cost estimation. (4 marks) (b) Remah Ltd has established the following information for the costs and revenues for the month of October 2022 at an activity level of 500 units: Sh.“000” Direct materials Direct labour Production overheads Selling costs Total costs Sales revenue Profits 16,250 32,500 6,500 8,125 63,375 113,750 50,375 Additional information: 1. All direct costs are variable costs. 2. 20% of selling costs and 50% of the production overheads are fixed over all levels of activity respectively. Required: (i) Determine cost estimation equation in the form Y = a + bx using the account analysis method. (4 marks) (ii) Calculate the total profit at an activity level of 1,000 units. (3 marks) (c) Moyalematt supermarket maintains a variety of inventory. The following information is given for stock item “Z”: 1. Consumption in kilograms per month: Month Kilograms January February March April May June 15,000 6,000 22,000 20,000 10,000 15,000 July August September October November December 17,000 12,000 9,000 8,000 6,000 10,000 2. Lead time is 5 - 8 days. Someakenya.com AD32 Page 2 Out of 5 3. Annual holding cost per unit per annum is Sh.26.60. 4. The purchase price is Sh.200 and discounts are not allowed. 5. The ordering cost per order is Sh.798. 6. The annual demand is the accumulated monthly consumption. Required: (i) The optimal economic order quantity (EOQ). (3 marks) (ii) Frequency of placing orders. (2 marks) (iii) Reorder level. (2 marks) (iv) Maximum inventory level. (2 marks) (Total: 20 marks) QUESTION TWO (a) Outline FOUR assumptions of cost volume profit (CVP) analysis. (4 marks) (b) Highlight FOUR factors influencing wage rate determination. (4 marks) (c) Toto enterprise manufactures dolly kits for children. It is currently considering various techniques of overhead absorption that are more efficient to apply to job costing: Cost centre P Q Sh. Sh. Direct material cost 800,000 600,000 Direct labour cost 600,000 500,000 Factory overheads 600,000 400,000 Direct labour hours 40,000 50,000 Machine hours 120,000 7,500 Required: Calculate the overhead absorption rate (OAR) on the following basis: (i) Percentage of direct material cost basis for cost centre P. (2 marks) (ii) Direct labour hours basis for cost centre Q. (2 marks) (iii) A particular job marked as Job number JB22 consumed the following inputs during the year: Cost centre P Q Sh. Sh. Materials issued 5,000 15,000 Direct labour cost 4,800 4,000 Direct labour hours 400 500 Machine hours 1,500 100 Additional information: 1. Administration overheads are absorbed at the rate of 20% on factory costs. 2. Profit mark-up is 331 /3 % on cost. Required: Calculate the total cost and total sales for Job number JB22. (6 marks) (iv) Assuming the job number JB22 consists of 50 items, calculate the selling price per unit. (2 marks) (Total: 20 marks) Someakenya.com AD32 Page 3 Out of 5 QUESTION THREE (a) Expl