Saudi Electronic University Cost Accounting Questions

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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
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?
( 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)
Q3
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)
Q4
How are budgets related to organizational strategies? (1 mark)

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