Overview
Question 1 – Explain the following methods to allocate Support Department Cost to Operating Department with Suitable Numerical Example. (5 Marks)
- Step Down Method
- Reciprocal Method
Question 2 - ‘Grow Well Juice’ company produces three products differently. These products are jointly produced up to certain stage and afterwards they are identified separately as Product A, B and C. The joint cost of processing these products are SAR 120,000. You are required to allocate this Joint Cost among the three different product by using the following methods. (5 Marks)
A)Sales Value at Split Off Method
B)Net Realizable Value (NRV) Method
The quantitative information of these products are as follows:
Products | KG Produced | Selling Price Per KG at Split Off | Final Sale Value | Separable Cost |
A | 20,000 | SAR 1.2 | 70,000 | 6,000 |
B | 40,000 | SAR 1.4 | 94,000 | 9,000 |
C | 80,000 | SAR 0.8 | 80,000 | 10,000 |
Question 3 - Robert Inc. is preparing a budget for 2024. The budgeted selling price per unit is $ 12, and total fixed costs for 2024 are estimated to be $ 8,000. Variable Cost are budgeted at $ 3/unit. Prepare a flexible budget for the volume level of 2000, 2500 and 3000. (5 Marks)