assignment question

Q 1 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:

Support Departments         Operating Departments

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Maintenance      Cafeteria         Cutting           Packaging

Direct costs                   SAR50,000  SAR45,000      SAR275,000       SAR300,000

Number of employees                  15                 10               150                     250

Square feet                              1,500            2,000            3,500                  4,000

  • If the direct method is used, calculate maintenance costs allocated to the cutting department?
  • If the direct method is used, calculate the total cost (including allocations) for the

packaging department?

  • Assume you are working for the organization and are requested to allocate support

department costs.  Describe how you would choose the best method?

            ( 2 marks)






Q 2 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:

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.          (1 mark)




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 (1 mark)






Q 4      How are budgets related to organizational strategies? (1 mark)


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