QUESTION ONE (30 MARKS)

(a) Explain the classification of activities according to ABC analysis. [4 marks]

(b) Explain the limitations of break-even analysis. [4 marks]

(c) Distinguish between job costing and process costing. [5 marks]

(d) Explain the disadvantages of switching to back flush accounting. [4 marks]

(e) Explain the classification of costs according to behavior. [3 marks]

(f) Explain the methods of transfer pricing. [5 marks]

(g) Distinguish between target costing and cost plus. [5 marks]

QUESTION TWO (20 MARKS)

The following information relates to Soba Manufacturing Ltd.

	Sh.
Freight on sales	3,000
Expenses direct	11,000
Materials used in primary packing	12,000
Labour for factory supervision	3,400
Bad debts - normal	1,300
Advertisement	1,250
Direct labour cost	12,000
Indirect expenses (factory)	1,200
Materials used in office	3,250
Indirect expenses (office)	1,250
Depreciation - factory	2,350
Materials used in selling	5,300
Materials used in manufacturing	111,000
Depreciation office building and equipment	2,150
Selling expenses	4,700
Material used in factory	2,150
Selling price may yield a profit of 20% on selling price

Required:

(a) Prime cost. [5 marks]

(b) Works cost. [5 marks]

(c) Cost of production. [3 marks]

(d) Total cost. [5 marks]

(e) Selling price. [2 marks]