Static budgets are often used by production departments

ACCT 301 SEU Cost Accounting Cost Allocation & Production Departments Discussion
Subject
Business Finance

Course
ACCT 301

School
Saudi electronic university

Department
ACCT

Question Description
FOLLOW the instructions in the file

To be the solution in the Word file

NO matching ratio

All answered must be typed using Times New Roman (size 12, double-spaced) font.

Yes, I would like a solution that matches the same meaning of this file, but with different examples and a mismatch of wordsCollege of Administrative and Financial Sciences Assignment 3 Deadline: 21/11/2020 @ 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 • 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 Q 1 Provide numerical example of assigning support department cost and discuss the purpose of assigning support department costs (Week 10: Chapter 8, Measuring and Assigning Support Department Costs). (2 marks) The costs of support departments are common to all producing departments and must be allocated to them to satisfy many important objectives. 1. To obtain a mutually agreeable price. Accurate cost allocation helps a firm create meaningful and competitive bids. 2. To compute product-line profitability. Reliable product cost information helps a firm ensure that all products are profitable. 3. To predict the economic effects of planning and control. Accurate cost allocation helps a firm assess the profitability of various support services and determine the appropriate mix of support services offered by the firm. 4. To value inventory. All manufacturing costs, direct and indirect, must be assigned to the products produced to meet GAAP requirements. 5. To motivate managers. Allocation of support department costs: ◼ Helps each producing department select the appropriate level of support service consumption. ◼ Encourages support department managers to be more sensitive to the needs of the producing departments. Page 2 of 5 As Numerical example Assume the following KSA Company has two support departments (Administration and Janitorial) and three producing departments (Fabricating, Assembly, and Finishing). Costs and activities are as follows: Administration Janitorial Fabricating Assembly Finishing Direct costs ................ $50,000 $30,000 $40,000 $50,000 $25,000 Number of employees 10 30 40 20 Square feet ................. 2,000 10,000 28,000 15,000 Direct labor hours ...... 5,000 6,000 2,000 Administrative services are allocated based on the number of employees; janitorial services are allocated based on square footage. Overhead rates for the three producing departments are based on direct labor hours. The allocation of Support department costs uing the step down method assuming adminstration costs are allocated first will be as follows: Direct Costs Allocate Admin. Costs Admin. 50,000 (50,000) Janitorial 30,000 5,000 50,000×10/100 Total Allocated Janitorial Costs 0 35,000 (35,000) Total Cost 0 0 Fabricating 40,000 15,000 50,000×30/100 55,000 6,604 35,000×10/53 Page 3 of 5 61,604 Assembly 50,000 20,000 50,000×40/100 70,000 18,491 35,000×28/53 88,491 Finishing 25,000 10,000 50,000×20/100 35,000 9,906 35,000×15/53 44,906 Q 2 LMN Compagny produces three products K, L and M. During the year, the joint costs of processing the three products were $480,000. Production and sales value information were as follows: Sales Value Product Units at Split-Off Separable Costs Selling Price K 500,000 $13 per unit $6.00 per unit $40 per unit L 300,000 $12 per unit $4.00 per unit $37 per unit M 200,000 $8 per unit $3.00 per unit $28 per unit Allocate the joint costs using the physical output method. (Week 11: Chapter 9, Joint product and by – Product costing) (1.5 marks) Physical output Method Relative Product Units Weight K 500,000 50% L 300,000 30% M 200,000 20% 1,000,000 Allocated Cost 480,000 × 50% = 240,000 480,000 × 30% = 144,000 480,000 × 20% = 96,000 480,000 Page 4 of 5 Q 3 Provide numerical examples of static and flexible budget and discuss how these budgets could be used to evaluate the performance of the managers (Week 12: Static and flexible budgets). (1.5 marks) Assume that KSA Company is preparing its Static budget for 2019, using the following budgeted amounts, budgeted selling price per unit is $10, budget units to be sold is 1000 units, and total fixed costs for 2019 are estimated to be $5,000. Variable costs are budgeted at $3/unit.