ACCT 301 -Cost Accounting Worksheet-SEU .

College of Administrative and Financial Sciences Assignment 2 Deadline: 31/10/2020 @ 23:59 Course Name: Cost accounting Student’s Name: Course Code: ACCT 301 Student’s ID Number: Semester: 1 CRN: Academic Year: 1441/1442 H For Instructor’s Use only Instructor’s Name: Students’ Grade: Marks Obtained/Out of Level of Marks: High/Middle/Low Instructions – PLEASE READ THEM CAREFULLY • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. • Assignments submitted through email will not be accepted. • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. • Students must mention question number clearly in their answer. • Late submission will NOT be accepted. • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. • All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). • Submissions without this cover page will NOT be accepted. Page 1 of 3 Q1 Give example of company using ABC costing and explain the process used in this company to assign costs in an ABC system? (Week 7: Chapter 7, ABC costing) Answer: Q 2 Give examples of questions managers could ask to help them identify relevant qualitative factors that will be used before making decision? (Week 9: Chapter 4, Relevant information for decision making) Answer: Q 3 Kadhim Co. manufactures product B which is a part of its main product. Kadhim Co makes 50,000 units of product B per year. The production costs are detailed below. An outside supplier has offered to supply 50,000 units of product B per year at $ 2.45 each. Fixed production cost of $ 40,000 associated with the product B are unavoidable. Should Kadhim Co make or buy the product B? The production cost per unit for manufacturing a unit of product B are: Direct Materials 0.85 Direct Labor 0.65 Variable Manufacturing Overhead 0.40 (Week 9: Chapter 4, Relevant information for decision making) Answer: Page 2 of 3 Page 3 of 3 College of Administrative and Financial Sciences Assignment 2 Deadline: 31/10/2020 @ 23:59 Course Name: Cost accounting Student’s Name: Course Code: ACCT 301 Student’s ID Number: Semester: 1 CRN: Academic Year: 1441/1442 H For Instructor’s Use only Instructor’s Name: Students’ Grade: Marks Obtained/Out of Level of Marks: High/Middle/Low Instructions – PLEASE READ THEM CAREFULLY • The Assignment must be submitted on Blackboard (WORD format only) via allocated folder. • Assignments submitted through email will not be accepted. • Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page. • Students must mention question number clearly in their answer. • Late submission will NOT be accepted. • Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions. • All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism). • Submissions without this cover page will NOT be accepted. Page 1 of 5 Q1 Give example of company using ABC costing and explain the process used in this company to assign costs in an ABC system? (Week 7: Chapter 7, ABC costing) Answer: Saudi Basic Industries Corporation (SABIC) is one of the world’s leading manufacturers of chemicals, fertilizers, plastics, and metals. they supply these materials to other companies, who use them to make the products on which the world has come to depend. SABIC uses Activity based costing system to allocate its overhead to diffirent products it produce using the following steps: 1. Identify the relevant cost object. The design of the ABC system begins with identification of one or more cost objects that are relevant to managers. For example, managers may wish to assign manufacturing costs to products when they adopt an ABC system. In this case, direct manufacturing costs are traced to products and manufacturing overhead costs are allocated using ABC. 2. Identify activities and group homogeneous activities. To identify the activities performed within the production process, the use of resources must be tracked and, in many cases, additional information gathered from employees For example, accountants may ask production managers about the types of tasks and functions performed in each production area. At this time, an accountant would categorize activities into unit, batch, product, customer, facility, and organization levels. 3. Assign costs to the activity cost pools. Costs related to each activity are identified and pooled. Some costs are directly traced to the cost pools. Indirect material costs are often traced directly to batch or unit cost pools, whereas costs such as property taxes, insurance, and lease or depreciation are directly traced to the facility. Similarly, costs such as depreciation on equipment used for only one product line are traced to a cost pool for that product line 4. Choose a cost driver for each activity cost pool. activity costs are allocated to cost objects using a driver that explains changes in activity cost. A cost driver is the best allocation base choice for an ABC cost pool. In other words, a causeand-effect relationship should be evident between the allocation base and activity costs. Page 2 of 5 5. Calculate an allocation rate for each activity cost pool. An allocation rate is calculated by dividing activity costs by some measure of volume for the cost driver. 6. Allocate activity costs to the final cost object. Costs are allocated to the cost object based on the actual volume of activity for the cost driver. Page 3 of 5 Q 2 Give examples of questions managers could ask to help them identify relevant qualitative factors that will be used before making decision? (Week 9: Chapter 4, Relevant information for decision making) Answer: Decision making is based in part on qualitative factors. Then the Qualitative factors should always be considered before making any business decisions. And these factors are differ from decision to decision, in making the qualitative factors that has the biggest impact on nonroutine decisions are: 1- quality of inputs available from a supplier. 2- effects of decision on regular customers 3- effects of decision on employee morale 4- effects of production on the environment or the community Page 4 of 5 Q 3 Kadhim Co. manufactures product B which is a part of its main product. Kadhim Co makes 50,000 units of product B per year. The production costs are detailed below. An outside supplier has offered to supply 50,000 units of product B per year at $ 2.45 each. Fixed production cost of $ 40,000 associated with the product B are unavoidable. Should Kadhim Co make or buy the product B? The production cost per unit for manufacturing a unit of product B are: Direct Materials 0.85 Direct Labor 0.65 Variable Manufacturing Overhead 0.40 (Week 9: Chapter 4, Relevant information for decision making) Answer: Make Direct Material (50000X 0.85) $42,500 Direct labor (50000X 0.65) $32,500 Variable manufacturing Overhead (50000X 0.40) $20,000 Fixed cost buying from Suppliers (50000X$2.45) Total Cost Buy $122,500 $95,000 $122,500 Kadhim Co Shoule Make the product B because the relevant cost of make is lower than the relevant cost to buy. Page 5 of 5