ACCT301 SEU Maintenance Cost Worksheet

User Generated

onune93

Business Finance

ACCT301

Saudi electronic university

ACCT

Description

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Q 1: The accountant for Khadim 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: Support Departments Maintenance Direct costs Square feet Cafeteria SAR50,000 SAR45,000 Number of employees Operating Departments Cutting SAR275,000 Packaging SAR300,000 15 10 150 250 1,500 2,000 3,500 4,000 a- If the direct method is used, calculate maintenance costs allocated to the cutting department? b- If the direct method is used, calculate the total cost (including allocations) for the packaging department? c- Assume you are working for the organization and are requested to allocate support department costs. Describe how you would choose the best method? Q 2: Khaleel Company 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: Sales Value Product Units at Split-Off Separable Costs Selling Price A 300,000 SAR9 per unit SAR5.00 per unit SAR32 per unit B 200,000 SAR8 per unit SAR3.00 per unit SAR30 per unit C 400,000 SAR7 per unit SAR2.00 per unit SAR20 per unit Chose one method to allocate joint costs and allocate the joint costs. Page 1 of 2 Q 3: 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 Q 4: How are budgets related to organizational strategies? Page 2 of 2
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Explanation & Answer

Attached.

PROBLEM 1
Particular
Cost incurred
Reallocation
of cost
maintenance
Reallocation
of cost of
cafeteria
Total

Basis of
allocation
3500:4000

Maintenance

Cafeteria

Cutting L

Packaging

50000
50000

45000

275000
23333

300000
26667

45000

16875

28125

0

315208

354792

150:250

0

A)
Maintenance cost allocated to cutting department = SAR23333
B)
Total cost for packaging department =SAR354792

C)
Criteria for selecting the method for allocating support Dep't overhead to the production
department
Service departments provide services only to production departments - Direct method

Support departments provide service to other service departments to e.g. Service departments
are x and y x provide service to y and operating departments department y only to operating
departments - Step method

At least two service departments they may render administration to one another and, there
these bury office administrations are to be given due weight while redistributing costs of
administration division - Reciprocal help strategy

PROBLEM 2
The net realizable met...


Anonymous
Excellent resource! Really helped me get the gist of things.

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