Accounting H.W

Assignment (3)
Deadline: Saturday 30/04/2022 @ 23:59

Course Name: Cost Accounting Student’s Name:
Course Code: ACCT 301 Student’s ID Number:
Semester: 2nd CRN:
Academic Year: 1443 H

For Instructor’s Use only
Instructor’s Name:
Students’ Grade: /10 Level of Marks: High/Middle/Low

Instructions – PLEASE READ THEM CAREFULLY
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Assignment Question(s): (Marks 10)
Q1. State the reasons for allocating support department costs to the operating department. What are its various methods? Provide numerical examples of any two methods and discuss how these methods could be used to allocate these costs? (CH 8, 2.5 Marks)
Answer:

Q2. Z&C has two support departments, A1 and A2, and two operating departments, B1 and B2. Z&C has decided to use the direct method and allocate variable A1 dept. costs based on the number of transactions and fixed A1 dept. costs based on the number of employees. A2 dept. variable costs will be allocated based on the number of service requests and fixed costs will be allocated based on the number of computers. The following information is provided: (CH 8, 2.5 Marks)

Support Departments Operating Departments
A1 A2 B1 B2
Total Department variable costs 5,000 6,000 38,000 21,000
Total department fixed costs 5,800 11,000 42,000 18,000
Number of transactions (VC) 15 18 80 45
Number of employees (FC) 5 7 15 12
Number of service requests (VC) 12 7 15 10
Number of computers (FC) 6 8 10 12

Allocate variable and fixed costs.
Answer:

Allocate variable cost :
A1 (125) (5,000) 3,200 1,800 0
A2 (25) (6,000) 3,600 2,400 0
Total variable cost 0 0 44,800 25,200 70,000

Allocate fixed cost :
A1 (27) (5,800) 3,222.22222 2,577.77778 0
A2 (22) (11,000) 5,000 6,000 0
Total Fixed cost 0 0 50,222.22222 26,577.7778 76,800

Total FC and VC 0 0 95,022.22222 51,777.7778 146,800

Q3. JTC Corporation is a metal product manufacturer that produces three products: A, B, and C. The joint costs of the three products in 2018 were SAR 50,000. The total number of units for each product and the selling price per unit are given below: (CH 9, 2.5 Marks)

Product Units Selling Price per unit
A 20,000 SAR 6
B 12,500 SAR 5
C 7,500 SAR 4

Using the physical volume method and sales value at the split-off method, allocate the joint costs to each product.
Answer:
Determine the total produced units = 20,000+ 12,500 + 7,500 = 40,000 units
Total joint costs of products = 50,000 SAR
The joint cost per unit = # Of units / total joint costs = 40,000units / 50,000 SAR = 0.8 SAR
• Physical Output Method
Products Allocation
Product A = 20,000 / 0.8 = 25,000
Product B = 12,500 / 0.8 = 15,625
Product C. = 7,500 / 0.8 = 9,375

• Sales value at the split-off method
1stSales value at split-off point for product A = 20,000 x SAR6 = SAR120,000
Sales value at split- off point for product B = 12,500 x SAR5 = SAR62,500
Sales value at split-off point for product C = 7,500 x SAR4 = SAR30,000
2nd Total Sales value at split-off point = SAR212,500
3rd The Joint Cost per unit =212,500 / 50,000 SAR = SAR4.25
Allocated joint costs by Split-off point method =Total Sales value at Split-off point / Split-off point Joint Cost per unit

Products Allocation
Product A =120,000 / 4.25 = 28,235.2941

Product B = 62,500 / 4.25 = 14,705.8824
Product C. = 30,000 / 4.25 = 7,058.82353

Q4. ABC Ltd. is preparing a budget for 2018. Following are the information related to budget preparation: (CH 10, 2.5 Marks)
Budgeted selling price per unit = SAR 200 per unit
Total fixed costs = SAR 250,000
Variable costs = SAR 65 per unit
Required:
Prepare flexible budget for 2,000, 2,500, 3,000 and 3,500 units.
Answer:
• Sales in 2,000
Revenues = 200 * 2000 = 400,000
Variable cost = 65 * 2000 = 130,000
Contribution margin = Revenue – Variable = 400,000 – 130,000 = 270,000
Fixed cost = 250,000
Operating income = Contribution margin – Fixed = 270,000 – 250,000 = 20,000
• Sales in 2,500
Revenues = 200 * 2,500 = 500,000
Variable cost = 65 * 2,500 = 162,500
Contribution margin = Revenue – Variable = 500,000 – 162,500 = 337,500
Fixed cost = 250,000
Operating income = Contribution margin – Fixed = 337,500 – 250,000 = 87,500
• Sales in 3000
Revenues = 200 * 3,000 = 600,000
Variable cost = 65 * 3,000 = 195,000
Contribution margin = Revenue – Variable = 600,000 – 195,000 = 405,000
Fixed cost = 250,000
Operating income = Contribution margin – Fixed = 405,000 – 250,000 = 155,000
• Sales in 3500
Revenues = 200 * 3,500 = 700,000
Variable cost = 65 * 3,500 = 227,500
Contribution margin = Revenue – Variable = 700,000 – 227,500= 472,500
Fixed cost = 250,000
Operating income = Contribution margins – Fixed = 472,500 – 250,000 = 222,500

 

 

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