Company using ABC costing and explain the process used in this company to assign costs in an ABC system
Q1. Give example of company using ABC costing and explain the process used in this company to assign costs in an ABC system? (3 marks)
Answer:
Q2. 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 SAR 2.45 each. Should Kadhim Co make or buy the product B? (3 marks)
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
Answer:
Q 3. LMN Compagny produces three products K, L and M. During the year, the joint costs of
processing the three products were SAR 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. (3 marks)
Answer:
Q4. A company uses a process costing system for its sole processing department. There were 4,000 units in beginning WIP inventory for June and 36,000 units were started in June. The beginning WIP units were 60% complete and the 3,250 units in ending WIP were 40% complete. All materials are added at the start of processing. (6 Marks)
Required:
a) Compute the no. of units started & completed.
b) Compute the EUP for DM and CC using FIFO and WA methods.