Accounting Question

I want the answer without similarity at all, and Conceptual and professional, they’re important. I have a solution model.

College of Administration and Finance Sciences
Assignment (2)
Deadline: Saturday 23/11/2024 @ 23:59
Course Name: Cost Accounting
Student’s Name:
Course Code: ACCT 301
Student’s ID Number:
Semester: First
CRN: 13494
Academic Year: 1446 H
(2024-25)
For Instructor’s Use only
Instructor’s Name: Dr. Mohammed Arshad Khan
Students’ Grade:
/15
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.
Restricted – ‫مقيد‬
College of Administration and Finance Sciences
Assignment Questions:
(Marks 15)
Question 1 – Explain the following methods to allocate Support Department Cost to
Operating Department with Suitable Numerical Example.
(5 Marks)
a) Step Down Method
b) Reciprocal Method
Restricted – ‫مقيد‬
College of Administration and Finance Sciences
Question 2 – ‘Grow Well Juice’ company produces three products differently. These
products are jointly produced up to certain stage and afterwards they are identified
separately as Product A, B and C. The joint cost of processing these products are
SAR 120,000. You are required to allocate this Joint Cost among the three different
product by using the following methods.
(5 Marks)
A) Sales Value at Split Off Method
B) Net Realizable Value (NRV) Method
The quantitative information of these products are as follows:
Products
A
B
C
Restricted – ‫مقيد‬
KG Produced Selling Price
Per KG at
Split Off
20,000
SAR 1.2
40,000
SAR 1.4
80,000
SAR 0.8
Final Sale
Value
Separable
Cost
70,000
94,000
80,000
6,000
9,000
10,000
College of Administration and Finance Sciences
Question 3 – Robert Inc. is preparing a budget for 2024. The budgeted selling price
per unit is $ 12, and total fixed costs for 2024 are estimated to be $ 8,000. Variable
Cost are budgeted at $ 3/unit. Prepare a flexible budget for the volume level of 2000,
2500 and 3000.
Restricted – ‫مقيد‬
(5 Marks)
College of Administration and Finance Sciences
Assignment (2)
Deadline: Saturday 23/11/2024 @ 23:59
Course Name: Cost Accounting
Student’s Name:ELITE
Course Code: ACCT 301
Student’s ID Number:
Semester: First
CRN:
Academic Year: 1446 H
(2024-25)
For Instructor’s Use only
Instructor’s Name: Zuhur Alatawi
Students’ Grade:
/15
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.
Assignment Questions:
(Marks 15)
College of Administration and Finance Sciences
Question 1 – Explain the following methods to allocate Support Department Cost to Operating
Department with Suitable Numerical Example.
(5 Marks)
a) Step Down Method
The step-down method of cost allocation begins by selecting an order for allocating costs among
support departments, usually based on the degree of service each department provides to others. The
step-down method allocates some (but not all) support department costs to other support
departments. The process starts with the first support department, whose costs are allocated to all
other departments (both support and operating) that use its services. Each subsequent support
department’s costs are then allocated to all other departments that rely on its services, excluding any
support department whose costs have already been allocated
b) Reciprocal Method
The reciprocal method fully allocates support department costs to other support departments,
recognizing the mutual services exchanged between departments. The reciprocal method allocates
all support department costs to other support departments. This method involves calculating the
total cost of each support department by accounting for its use of other support department services.
a) Step-Down Method
Numerical Example:
Department
Direct Costs
Service Provided to Others (%)
Maintenance (M)
$10,000
HR 20%, Production 40%, Sales 40%
Human Resources (HR)
$5,000
M 10%, Production 45%, Sales 45%
Production
$50,000
Sales
$30,000
Step 1: Start with HR (chosen first due to lesser percentage service provided to M).
– HR is allocated first:
– Maintenance: 10% of $5,000 = $500
– Production: 45% of $5,000 = $2,250
– Sales: 45% of $5,000 = $2,250
Step 2: Allocate Maintenance costs.
New Maintenance cost: $10,000 (original) + $500 (from HR) = $10,500
– Allocate Maintenance:
– Production: 40% of $10,500 = $4,200
– Sales: 40% of $10,500 = $4,200
College of Administration and Finance Sciences
Final Allocations:
– Production gets $2,250 (from HR) + $4,200 (from Maintenance) = $6,450
– Sales get $2,250 (from HR) + $4,200 (from Maintenance) = $6,450
b) Reciprocal Method
Numerical Example:
Department
Direct Costs
Service Provided to Others (%)
Maintenance (M)
$10,000
HR 20%, Production 40%, Sales 40%
Human Resources (HR)
$5,000
M 10%, Production 45%, Sales 45%
Step 1: Formulate equations:
Let be M the total cost of Maintenance, and HR be the total cost of Human Resources.
M= 10,000+ 0.10 (5,000+0.20M)
M= 10,000+ 500+0.02 M
Step 2: Solve the equations:
1. Substitute HR from the second equation into the first:
M = 10,000+0.10 ( 5,000+0.20M)
M = 10,000+500+0.02M
M-0.02M = 10,500
0.98M =10,500
M= 10,714.29
2. Use M to solve for HR :
HR = 5,000+0.20(10,714.29)
HR = 5,000+2,142.86
HR = 7,142.86
Step 3: Allocate the costs to Production and Sales:
– Maintenance to Production: 40% of $10,714.29 = $4,285.71
– Maintenance to Sales: 40% of $10,714.29 = $4,285.71
– HR to Production: 45% of $7,142.86 = $3,214.29
– HR to Sales: 45% of $7,142.86 = $3,214.29
Final Allocations:
– Production gets $4,285.71 (from Maintenance) + $3,214.29 (from HR) = $7,500
– Sales get $4,285.71 (from Maintenance) + $3,214.29 (from HR) = $7,500
College of Administration and Finance Sciences
FINAL ANSWER:
Step-Down Method
HR to Maintenance, Production, and Sales:
Maintenance: $500
Production: $2,250
Sales: $2,250
Maintenance to Production and Sales (including $500 of HR):
Production: $4,200
Sales: $4,200
Final Assignment
Production: $6,450
Sales: $6,450
Reciprocal Method
Create Equations:
M=10,000+0.10HR
HR=5,000+0.20M
Solve
Maintenance (M) = $10,714.29
HR = $7,142.86
Assign to Production and Sales
Production: $7,500
Sales: $7,500
College of Administration and Finance Sciences
Question 2 – ‘Grow Well Juice’ company produces three products differently. These products are
jointly produced up to certain stage and afterwards they are identified separately as Product A, B and
C. The joint cost of processing these products are SAR 120,000. You are required to allocate this Joint
Cost among the three different product by using the following methods.
(5 Marks)
A) Sales Value at Split Off Method
B) Net Realizable Value (NRV) Method
The quantitative information of these products are as follows:
Products
KG Produced
Selling Price Per KG at Split Off
Final Sale Value
Separable Cost
A
B
C
20,000
40,000
80,000
SAR 1.2
SAR 1.4
SAR 0.8
70,000
94,000
80,000
6,000
9,000
10,000
Relative
Weight
16.67%
Allocated
Joint Costs
20,000
Answer:
Sales Value at Split-Off Method
Product Pounds
Produced
A
20,000
Selling
Price per
Pound
1.2
Total Sales Value at SplitOff
24000
B
40,000
1.4
56000
38.89%
46,667
C
80,000
0.8
64000
44.44%
53,333
Total
140,000
144000
120,000
Net realizable value Method
Final
Product Sales
Value
A
70,000
Separable Cost
6,000
64,000
Relative
NVR
29.22%
NRV
Allocated
Joint Costs
35,068.49
B
94,000
9,000
85,000
38.81%
46,575.34
C
80,000
10,000
70,000
31.96%
38,356.16
Total
244,000
219000
120,000
College of Administration and Finance Sciences
Question 3 – Robert Inc. is preparing a budget for 2024. The budgeted selling price per unit is $ 12, and
total fixed costs for 2024 are estimated to be $ 8,000. Variable Cost are budgeted at $ 3/unit. Prepare a
flexible budget for the volume level of 2000, 2500 and 3000.
(5 Marks)
Answer:
Volume Levels
Sales in units
Revenues
Variable costs
Contribution margin
Fixed costs
Operating income
2,000
$24,000
$6,000
$18,000
$8,000
$10,000
2,500
$30,000
$7,500
$22,500
$8,000
$14,500
3,000
$36,000
$9,000
$27,000
$8,000
$19,000
Calculation
Variable Cost = 12 per unit * Sales in unit
CM = Revenue – Variable Cost
Operation Income = CM – Fixed Cost
Ref;
Eldenburg, L. G., & Wolcott, S. K. (2011). Cost Management: Measuring, Monitoring, and
Motivating Performance. Wiley.