College of Administrative and Financial Sciences

Assignment 3
Deadline: 19.07.2021@ 23:59

Course Name: Cost accounting Student’s Name:

Course Code: ACCT 301 Student’s ID Number:
Semester: summer term CRN:
Academic Year: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.
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for poor presentation. This includes filling your information on the cover page.
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resources without proper referencing will result in ZERO marks. No exceptions.
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pictures containing text will be accepted and will be considered plagiarism).
 Submissions without this cover page will NOT be accepted.

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 1. Provide numerical examples of a Direct Material Budget for the second quarter (April to
June) by considering a manufacturing company operating in Saudi Arabia as a sample study.
(2marks)

Direct Material Budget for the second quarter:

Direct Material budget is essential to be prepared at the beginning of every quarter or every month.

This is because the direct material budget shows the amount of Materials is required to fulfill the

Manufacturing needs and also the policy of safety Stock for the company.

Quarter 2 (April to June)

Units Direct To Be Produced 1,400
Materials Per Unit ×1
Production Needs 1,400
Desired Ending Inventory 160
Total Needs 1560
Less : Beginning Inventory -126
Direct Materials To Be Purchased 1,434
Cost Of Raw Material per pound × $3
Total Purchase Cost Of Raw Material $4,302

2. XYZ Industries Co. decided to allocate Human Resource department costs based on the number
of employees in each department and Information Technology costs based on the number of
machine hours in each department. (2marks)
Required:
a) Give a numerical example for the four departments, given the table below, (the
numerical information should be appropriate as per the table given as a reference.

Support Departments Operating Departments

Human Information Hot Rolled cold Rolled TOTAL
Resource Technology Hollow Steel Hollow Steel

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Total department cost $1,00,000 $2,00,000 $4,00,000 $6,00,000 $13,00,000
Number of employees 2 6 6 8
Number of machine hours 600 800 1200 1300

b- Then based on your given information, use The Direct method to allocate support department
costs.

Allocate cost:
Support Department Operating Departments
Allocation Informatio Hot Rolled
Human Cold Rolled
n Hollow
Resource Hollow Steel
Technology Steel
Human Resource (6:6:8) -$1,00,000 $30,000 $30,000 $40,000
Information Technology
-$2,30,000 $1,10,400 $1,19,600

TOTAL $1,40,400 $1,59,600

1. For what types of products is the physical output method appropriate? Give suitable and real
example that should support your answer. ch9 (1mark)

The physical output method allocates joint costs using the relative proportion of physical output for

each main product. This method is only used when output for all main products can be expressed

using the same physical measure, such as meters, pounds, or gallons. Each main product is allocated

a proportion of joint costs based on that product's physical output divided by the total physical

output of all main products.

Suppose the company uses pounds of final product as the physical volume allocation base. Each log

processed results in 500 pounds of chipboard and 500 pounds of lumber. Thus, the relative weight

of chipboard is 500 lbs/1,000 lbs. The joint costs of $220 are multiplied by this proportion to

calculate the amount of joint costs allocated to chipboard:

(500 lbs/1,000 lbs) × $220 = $110

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A similar set of calculations leads to the allocation of $110 of joint costs to lumber as follows:

Main Products
Chipboard Lumber Total
Base: Pounds of final products 500 Ibs 500 Ibs 1000 Ibs
Proportion 500 Ibs/ 1000 Ibs 500 Ibs/ 1000 Ibs
Allocated join costs $ 110 $ 110 $ 220

Suppose the company instead uses the number of board feet of final product as the allocation base.

For each log processed, the company produces 100 board feet of chipboard and 300 board feet of

lumber. In this case, the amount of joint costs allocated to each main product is calculated as

follows:

Main Products
Chipboard Lumber Total
Base: Pounds of final products 100 pd ft 300 pd ft 400 pd ft
Proportion 100 pd ft/ 400 pd ft 300 pd ft/ 400 pd ft
Allocated join costs $ 55 $ 165 $ 220

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