SEMESTER – SPRING 2024

MANAGERIAL ACCOUNTING (MGT404)

ASSIGNMENT NO. 01
DUE DATE: APRIL 30, 2024 MARKS: 15
Learning Objective
The students are expected to develop an understanding on the computation of cost rates for activity pools
and determining a product cost under Activity-based Costing System.

Learning Outcomes
After going through this activity, the students will be able to understand the assignment of costs to cost pools, compute
activity rates for the cost pools, assign costs to a cost object, compute product cost and customer margins under using
activity-based costing.
Question
Zee manufactures and sells high-school student chairs directly to schools. It uses the Activity Based Costing
(ABC) system for its internal decision making. It has 2 overhead departments with the following costs:
Manufacturing overhead . . . . . . . . . . . . . . . . . Rs. 800,000
General overhead . . . . . . . . . . . . . . . . . . . . . . Rs. 600,000
Its ABC system has determined following activity cost pools and activity measures:
Activity Cost Pool Activity Measure

Assembling units . . . . . . . . . . Number of units

Processing orders . . . . . . . . . Number of orders
Supporting customers . . . . . . Number of customers
Other . . . . . . . . . . . . . . . . . . . Not applicable
“Other” activity includes the organization-sustaining costs and costs of unused capacity. Hence, this pool
has not been allocated any cost. Zee distributes manufacturing and general overhead costs to the activity cost
pools based on the following data:

Assembling Processing Supporting

Overhead Costs Other
Units Orders Customers
Manufacturing 60% 25% 5% 10%
General 15% 50% 20% 15%
Total activity 2,000 Units 500 Orders 200 Customers -
Compute the following: (4+3+3+5 Marks)
a) The first-stage allocation of overhead costs to the activity cost pools.
b) Compute activity rates for the activity cost pools.
c) Knowledge Academy (KA) – a customer ordered a total of 100 chairs at 4 different times. Prepare a table
showing overhead costs attributable to KA.
d) KA sells each chair at Rs. 600. The cost of direct materials and direct labor is Rs. 150 and Rs. 60 per chair
respectively. Determine the KA’s customer margin.

IMPORTANT
24 hours extra/grace period after the due date is usually available to overcome uploading
difficulties. This extra time should only be used to deal with emergencies and the above-mentioned
due dates should always be treated as final to avoid any inconvenience.
IMPORTANT/SPECIAL INSTRUCTIONS/SOLUTION GUIDELINES:
BE NEAT IN YOUR PRESENTATION
DEADLINE
• Make sure to upload the solution file before the due date on VULMS.
• Any submission made via email after the due date will not be accepted.

FORMATTING GUIDELINES
• Use the font style “Times New Roman” or “Arial” and font size “12”.
• It is advised to compose your document in MS-Word format.
• You may also compose your assignment in Open Office format.
• Use black and blue font colors only.

REFERENCING GUIDELINES
• Use APA style for referencing and citation. For guidance search “APA reference style” in
Google and read various websites containing information for better understanding or visit
http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html

RULES FOR MARKING

Please note that your assignment will not be graded or graded as Zero (0), if:
• It is submitted after the due date.
• The file you uploaded does not open or is corrupt.
• It is in any format other than MS-Word or Open Office, e.g., Excel, PowerPoint, PDF etc.
• It is cheated or copied from other students, internet, books, journals etc.

Note related to load shedding: Please be proactive!

Dear students!
As you know, pre-Mid-Term semester activities have started, and load shedding
problems are also prevailing in our country. Keeping in view the fact, you all are
advised to post your activities as early as possible without waiting for the due date. For
your convenience, the activity schedule has already been uploaded on VULMS for the
current semester, therefore no excuse will be entertained after due date of assignments
or GDBs.