Cost Accounting

College of Administration and Finance Sciences

Assignment (2)

Deadline: Saturday 09/04/2022 @ 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

• The Assignment must be submitted on Blackboard (WORD format only) via allocated

folder.

• Assignments submitted through email will not be accepted.

• Students are advised to make their work clear and well presented, marks may be

reduced for poor presentation. This includes filling your information on the cover

page.

• Students must mention question number clearly in their answer.

• Late submission will NOT be accepted.

• Avoid plagiarism, the work should be in your own words, copying from students or

other resources without proper referencing will result in ZERO marks. No exceptions.

• All answers must be typed using Times New Roman (size 12, double-spaced) font.

No pictures containing text will be accepted and will be considered plagiarism.

• Submissions without this cover page will NOT be accepted.

College of Administration and Finance Sciences

Assignment Question(s): (Marks 10)

Q1. Explain how job costing is used in service sectors and manufacturing sectors? Provide

examples by citing one job costing example of the service sector and one example of the

manufacturing sector of a Saudi company to support your answers. (CH 5, 2 Marks)

Answer:

College of Administration and Finance Sciences

College of Administration and Finance Sciences

Q2. Axel Ltd. uses a process costing system for its sole processing department. There were 24,000

units in beginning WIP inventory for March and 216,000 units were started in March. The

beginning WIP units were 75% complete and the 19,500 units in ending WIP were 60%

complete. All materials are added at the start of processing.

(CH 6, 3 Marks)

Required:

a) Compute the no. of units started & completed.

b) Compute the EUP for DM and CC using FIFO and WA methods.

c) Calculate total manufacturing cost/EUP under both methods, if the following details are

available:

FIFO WA

Direct Material Cost SAR 700,000 SAR 910,000

Conversion Cost SAR 920,000 SAR 1,210,000

Answer:

College of Administration and Finance Sciences

College of Administration and Finance Sciences

Q 3 DD Company has two departments, Dept. A and Dept. You are provided the following costs

for five activities that occur at the manufacturing plant every month:

(CH 7, 2 Marks)

Activity Total Costs (SAR) Total number of units of Cost Driver

Material handling 315,000 450,000 parts

Supervision of direct labor 180,000 110 employees

Janitorial and cleaning 250,000 5,500 hours

Machining 350,000 8,500 machine hours

Total costs 1,095,000

The above activities are used by the two departments as follows:

Department A Department B

Material handling 220,000 parts 230,000 parts

Supervision of direct labor 65 employees 45 employees

Time spent cleaning 2,500 hours 3,000 hours

Number of machine hours 6,000 machine hours 2,500 machine hours

College of Administration and Finance Sciences

a. How much of the material handling cost will be allocated to Department A?

b. What is the ABC allocation rate for supervision of direct labor?

Answer:

3.a) Material handlng cost allocation rate

= Total material handling cost / total parts

= $315,000 / 450,000 parts

= $0.70 per part

Material handling costs allocated to Department A

= Total parts in department A * Material handlng cost allocation rate

= 220,000 parts * $0.70 per part

= $154,000 3.b) ABC allocation rate for supervision of direct labor

= Total cost of supervision of direct labor / Total number of employees

= $180,000 / 110 employees

= $1,636.36 per employee

Q 4. T&T produces product ‘X’ as a part of its main product. Each year, the company produces

75,000 units of product ‘X’. The costs of production are mentioned below. An outside supplier

has offered to deliver 75,000 units of product ‘X’ annually at a cost of $7.35 per unit. A fixed

production cost of $ 120,000 is unavoidable for product ‘X’. Should T&T Co. make or buy

product ‘X’?

(CH 4, 2 Marks)

College of Administration and Finance Sciences

The production costs per unit for manufacturing a unit of product B are:

Production Cost Amount ($)

Direct Materials 2.55

Direct Labor 1.95

Variable Manufacturing Overhead 1.20

Answers:

Q5. “ABC is a costing method that allocates overhead and indirect costs to related products and

services.” Comment on this statement and examine how ABC is used in the manufacturing sector

with a suitable example. (CH 7, 1 Mark)

Answer:

College of Administration and Finance Sciences

Activity based costing (ABC) is a method for all the more exactly designating overhead expenses by assigning them to activities. Whenever costs are relegated to activities, the expenses can be allocated to the expense protests that utilization those activities. The framework can be utilized for the designated decrease of overhead expenses. ABC works best in complex conditions, where there are many machines and items, and tangled processes that are difficult to figure out. Alternately, it is of less use in a smoothed out climate where manufacturing processes are abridged, so that expenses are not difficult to relegate.

Activity based costing (ABC) is a framework you can use to observe manufacturing costs. It separates overhead expenses between manufacturing related activities. The ABC framework allots expenses for every Activity that goes into manufacturing, for example, laborers testing an item.

Producing organizations with high overhead costs use Activity based costing to get a more clear image of where cash is going. Since ABC gives explicit manufacturing cost breakdowns, you can see which items are really productive.

By utilizing Activity based costing, you can:

1)Think about both the immediate and overhead expenses of making every item

2)Perceive that various items require different indirect costs

3)All the more precisely set costs

4)See which overhead costs you could possibly scale back