Q 1 The accountant for Kadhim Inc. is preparing the budgets for operating department support service costs.Maintenance costs are allocated based on square feet, and cafeteria costs are allocated based on number of employees. The following data have been collected:
Support DepartmentsOperating Departments
Number of employees1510150 250
Square feet1,5002,0003,500 4,000
- If the direct method is used, calculate maintenance costs allocated to the cutting department?
- If the direct method is used, calculate the total cost (including allocations) for the
- Assume you are working for the organization and are requested to allocate support
department costs.Describe how you would choose the best method? ( 2 marks)
Q 2 Khaleel Compagny produces three products A, B and C.During the year the joint costs of processing the coffee were SAR270,000.Production and sales value information were as follows:
ProductUnitsat Split-OffSeparable CostsSelling Price
A300,000 SAR9 per unit SAR5.00 per unit SAR32 per unit
B200,000 SAR8 per unit SAR3.00 per unit SAR30 per unit
C400,000 SAR7 per unit SAR2.00 per unit SAR20 per unit
Chose one method to allocate joint costs and allocate the joint costs.(1 mark)
Q 3In a recent accounting period, Ismail Company experienced a SAR30,000 unfavorable variance for variable production costs.Explain the meaning of an unfavorable variance. Suggest two possible (1 mark)
Q 4How are budgets related to organizational strategies? (1 mark)
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