Business Finance
ACCT 301 Southeastern University Packaging Department via Direct Method Worksheet

ACCT 301

Southeastern University

ACCT

Question Description

I need an explanation for this Accounting question to help me study.

The accountant for Kadhim Inc. is preparing the budgets for operating department support service costs. Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected:

Khaleel Compagny produces three products A, B and C. During the year the joint costs of processing the coffee were SAR270,000. Production and sales value information were as follows:

In a recent accounting period, Ismail Company experienced a SAR30,000 unfavorable variance for variable production costs. Explain the meaning of an unfavorable variance. Suggest two possible

How are budgets related to organizational strategies?

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Final Answer

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Running head: ACCOUNTING

1

Accounting

Student’s Name:
Institutional Affiliation:

ACCOUNTING

2
Question 1

a. The best approach to show allocation of maintenance department cost to the cutting
depatment is the use of direct method as shown below.
From

To
Maintenance

Cafeteria

Cutting

Packaging

In SAR

In SAR

In SAR

In SAR

Direct costs

50,000

45,000

275,000

300,000

Maintenance

-50,000

23,333.33

26,666.67

298,333.33

326,666.67

Allocation
Total

0

45,000

The maintenance cost that should be allocated to the

50,000

operating department.
Allocation basis for maintenance cost

Square feet

The allocation ratio based in direct methods

3500:4000
07:08

The share of maintenace cost that should be allocated

23,333.33

to cutting department is (50,000×7/15)
Thus, the maintenance cost that should be allocated to

23,333

cutting department is 23,333
b. The statement indicating the allocation of support department cost to the packaging
department via...

UCLA

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