5 Case Study - 3 Reem Batteries and Power Appliances Co. LLC is one among the largest dry charged battery manufacturing companies in the Middle East. Gulf Star, one of its leading product, is manufactured through two distinct processes P and Q. The company has a policy of fixing the selling price of the product at a mark-up of 15%. The following information is obtained in relation to Process Q for the month of March 2020. Opening stock of WIP is 800 units valued at RO 4,464 made up of RO 2,500 for materials, RO 1,000 for labour and RO 964 for production Overheads. These units were 90% complete as to materials and 80% complete as regard to labour and production overheads. 6,000 units at the rate of RO 14.5 per unit were transferred from Process P in the beginning of the month. Further direct materials amounting to RO 15,960 were added to the process. The total labour cost and production overheads incurred are RO 22,720 and RO 14,456 respectively. At the end of the month, 1200 units are in WIP. These units were 70% complete as to materials, 60% complete as regard to labour and 50% complete as regard to production overheads. The Production Manager of the company approached you to assist him in the preparation of the Process accounts. You are required to a) Prepare Process Q account and calculate the total cost of producing the product. (7 Marks) b) Estimate the selling price of the final product as per the company's policy and prepare a brief report on the production process to the Management. (3 Marks) 6 Case Study - 5 Al Zahran Printing Services is a family business established in Oman in the year 2012 with an objective to provide world-class printing solutions of the corporate customers in Oman. The firm is experiencing a steady growth in the business over the past 8 years and is highly appreciated by all its customers. From the last five years, the firm is receiving majority of its orders from four major customers and is executing the orders ensuring quality and consistency. As the firm is established as a family business, they appointed one person as a financial accountant who records all the expenses and calculates the profit by deducting total expenses from total income. The owners of the firm are satisfied with this method as they were into profits since inception. However, the owners noticed that the quantum of profits started declining from the past two years and they believe that it is due to the increase in the expenses. In light of the current scenario, the firm appointed you as a cost accountant and you were asked to identify the reasons for the declining in the profits. The financial accountant provided the following data for the month of April 2020. Particulars Total Total income from the four Jobs 1250 Less : Direct Material Cost @ RO 12.5 per kg (575) Direct Labour Cost @ RO 7.5 per hour (165) Overheads (345) Total Expenses 1085 Profit 165 After further investigation into the expenses incurred, you identified the following points: (a) The price of the job charged to Job 1, Job 2, Job 3 and Job 4 is RO 300, RO 200, RO 400 and 350 respectively. (b) The raw material cost charged to Job 1, Job 2, Job 3 and Job 4 is RO 125, RO 140, RO 160 and RO 150 respectively. (c) The labour cost charged to the Job 1, Job 2, Job 3 and Job 4 RO 22.5, RO 37.5, RO 60 and RO 45 respectively. 8 (d) The overheads need to be charged to the jobs based on consumption of raw material. As a cost accountant, you suggested the firm to adopt job costing technique in its firm to ascertain the profits and to determine the price of the jobs. The owners of the business have asked you to submit a report on the same for their consideration. started declining from the past two years and they believe that it is due to the increase in the expenses. In light of the current scenario, the firm appointed you as a cost accountant and you were asked to identify the reasons for the declining in the profits. The financial accountant provided the following data for the month of April 2020. Particulars Total Total income from the four Jobs Less: Direct Material Costa RO 12.5 per kg (575) Direct Labour Cost @ RO 7.5 per hour (165) Overheads (345) 1250 Total Expenses 1085 Profit 165 After further investigation into the expenses incurred, you identified the following points: (a) The price of the job charged to Job 1, Job 2, Job 3 and Job 4 is RO 300, RO 200, RO 400 and 350 respectively. (b) The raw material cost charged to Job 1, Job 2, Job 3 and Job 4 is RO 125, RO 140, RO 160 and RO 150 respectively. (c) The labour cost charged to the Job 1, Job 2, Job 3 and Job 4 RO 22.5, RO 37.5, RO 60 and RO 45 respectively. 8 (d) The overheads need to be charged to the jobs based on consumption of raw material. As a cost accountant, you suggested the firm to adopt job costing technique in its firm to ascertain the profits and to determine the price of the jobs. The owners of the business have asked you to submit a report on the same for their consideration. You are required to a) Analyse the profitability of each job in the month of April 2020 by preparing T accounts. (4 Marks) b) Advise the firm, how much price should be charged to each job in the next month assuming the material costs are expected to RO 2.5 per unit and assuming the firm needs a margin of 20%. (Round off the Job price to the nearest hundreds) (4 Marks) c) Prepare a report to assist the owners of the business to take a decision. (2 Marks) 5 Case Study - 3 Reem Batteries and Power Appliances Co. LLC is one among the largest dry charged battery manufacturing companies in the Middle East. Gulf Star, one of its leading product, is manufactured through two distinct processes P and Q. The company has a policy of fixing the selling price of the product at a mark-up of 15%. The following information is obtained in relation to Process Q for the month of March 2020. Opening stock of WIP is 800 units valued at RO 4,464 made up of RO 2,500 for materials, RO 1,000 for labour and RO 964 for production Overheads. These units were 90% complete as to materials and 80% complete as regard to labour and production overheads. 6,000 units at the rate of RO 14.5 per unit were transferred from Process P in the beginning of the month. Further direct materials amounting to RO 15,960 were added to the process. The total labour cost and production overheads incurred are RO 22,720 and RO 14,456 respectively. At the end of the month, 1200 units are in WIP. These units were 70% complete as to materials, 60% complete as regard to labour and 50% complete as regard to production overheads. The Production Manager of the company approached you to assist him in the preparation of the Process accounts. You are required to a) Prepare Process Q account and calculate the total cost of producing the product. (7 Marks) b) Estimate the selling price of the final product as per the company's policy and prepare a brief report on the production process to the Management. (3 Marks) 6 Case Study - 5 Al Zahran Printing Services is a family business established in Oman in the year 2012 with an objective to provide world-class printing solutions of the corporate customers in Oman. The firm is experiencing a steady growth in the business over the past 8 years and is highly appreciated by all its customers. From the last five years, the firm is receiving majority of its orders from four major customers and is executing the orders ensuring quality and consistency. As the firm is established as a family business, they appointed one person as a financial accountant who records all the expenses and calculates the profit by deducting total expenses from total income. The owners of the firm are satisfied with this method as they were into profits since inception. However, the owners noticed that the quantum of profits started declining from the past two years and they believe that it is due to the increase in the expenses. In light of the current scenario, the firm appointed you as a cost accountant and you were asked to identify the reasons for the declining in the profits. The financial accountant provided the following data for the month of April 2020. Particulars Total Total income from the four Jobs 1250 Less : Direct Material Cost @ RO 12.5 per kg (575) Direct Labour Cost @ RO 7.5 per hour (165) Overheads (345) Total Expenses 1085 Profit 165 After further investigation into the expenses incurred, you identified the following points: (a) The price of the job charged to Job 1, Job 2, Job 3 and Job 4 is RO 300, RO 200, RO 400 and 350 respectively. (b) The raw material cost charged to Job 1, Job 2, Job 3 and Job 4 is RO 125, RO 140, RO 160 and RO 150 respectively. (c) The labour cost charged to the Job 1, Job 2, Job 3 and Job 4 RO 22.5, RO 37.5, RO 60 and RO 45 respectively. 8 (d) The overheads need to be charged to the jobs based on consumption of raw material. As a cost accountant, you suggested the firm to adopt job costing technique in its firm to ascertain the profits and to determine the price of the jobs. The owners of the business have asked you to submit a report on the same for their consideration. started declining from the past two years and they believe that it is due to the increase in the expenses. In light of the current scenario, the firm appointed you as a cost accountant and you were asked to identify the reasons for the declining in the profits. The financial accountant provided the following data for the month of April 2020. Particulars Total Total income from the four Jobs Less: Direct Material Costa RO 12.5 per kg (575) Direct Labour Cost @ RO 7.5 per hour (165) Overheads (345) 1250 Total Expenses 1085 Profit 165 After further investigation into the expenses incurred, you identified the following points: (a) The price of the job charged to Job 1, Job 2, Job 3 and Job 4 is RO 300, RO 200, RO 400 and 350 respectively. (b) The raw material cost charged to Job 1, Job 2, Job 3 and Job 4 is RO 125, RO 140, RO 160 and RO 150 respectively. (c) The labour cost charged to the Job 1, Job 2, Job 3 and Job 4 RO 22.5, RO 37.5, RO 60 and RO 45 respectively. 8 (d) The overheads need to be charged to the jobs based on consumption of raw material. As a cost accountant, you suggested the firm to adopt job costing technique in its firm to ascertain the profits and to determine the price of the jobs. The owners of the business have asked you to submit a report on the same for their consideration. You are required to a) Analyse the profitability of each job in the month of April 2020 by preparing T accounts. (4 Marks) b) Advise the firm, how much price should be charged to each job in the next month assuming the material costs are expected to RO 2.5 per unit and assuming the firm needs a margin of 20%. (Round off the Job price to the nearest hundreds) (4 Marks) c) Prepare a report to assist the owners of the business to take a decision. (2 Marks)