Accounting Question

Assignment Question(s):(Marks 15)

Q1. List the two types of fixed costs and give example2) Points)

Q2. Present and explain the equation of the total mixed cost line. (2 Points)

Q3. Why use an allocation base? (3 Points)

Q4. The following information summarizes the company’s cost structure: ( 4 points)

Variable cost per unit ………SAR1.3

Fixed cost per unit ………….SAR4.5

Total cost per unit …………..SAR 5.8

Units produced and sold …SAR48,000

Required: Estimate the following costs at the 40,000 unit level of activity: a. Total variable cost. b. Total fixed cost. c. Variable cost per unit. d. Fixed cost per unit.

Q5. ABC Corporation manufactures two products, Product M and Product N. Product N is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product N. Product N is the more complex of the two products, requiring one hour of direct labor time per unit to manufacture compared to one-half hour of direct labor time for Product M. Product N is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labor-hours. The company estimated it would incur

SAR 500,000

in manufacturing overhead costs and produce 10,000 units of Product N and 60,000 units of Product M during the current year. Unit cost for materials and direct labor are:

Product MProduct N

Direct material……SAR 10SAR 24

Direct laborSAR 8SAR 12

Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. b. The company’s overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below:

Estimated

OverheadExpected Activity

CostsProduct MProduct NTotal

Activity cost Pools

Machine setups required …..SAR 200,0008001,2002,000

Purchase orders issued……..43,500500100600

Machine-hours required ……104,0003,00010,00013,000

Maintenance requests issued…152,5008601,1402,000

SAR 500,000

Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (4 Points)