Name ID MCQ Q1 Which one of the following decisions general rule is based on keeping the business segment if its contribution margin covers its avoidable fixed costs Keep or drop decision Q 2 For manufacturers, outsourcing decisions are often known as a Make or buy b Q 3 what is the role of supporting department a produce production b provide services to the operating and other support departments c Provide service Q4 LT Ltd makes plastic products The normal selling price of the product is SAR 45 per unit KK Company wants to purchase 10,000 units at SAR 30 from LT Ltd The relevant costs of production per unit of the product produced by LT Ltd are SAR 22 The incremental profit if company accepts the special order will be SAR 60,000 SAR 80,000 SAR 40,000 SAR 50,000 Q5 The following allocation method allocates some (but not all) support department costs to other support departments Direct method Step down method Reciprocal method Stand alone method Q6 In the determination of make or buy decision, managers must choose the alternative with the Lowest relevant cost Highest relevant cost Contribution margin Fixed cost Short Answer (4 Marks) ABC incorporation has two support departments, Administration department and Information Technology department and two operating departments, Assembly department and Finishing department Company allocates administration costs on the basis of the number of employees and information technology cost on the basis of number of computers in each department Given the information below, use the direct method to allocate support department costs Details Support Department Operating Departments Total Administration Information Technology Assembly Finishing Total department costs $72,000 $108,000 $579,000 $273,000 $ 1,032,000 Number of employees 5 6 33 24 68 Number of computers 6 9 5 5 25 Answer Fill in the below Allocation of Costs Administration $ 0 Information Technology $ 0 Totals $ 0 $ 0 $ 1,032,000

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Name .ID.. MCQ Q1. Which one of the following decisions general rule is based on keeping the business segment if its contribution margin covers its

Name .ID..

MCQ

Q1. Which one of the following decisions general rule is based on keeping the business segment if its contribution margin covers its avoidable fixed costs?

Keep or drop decision
Q.2 For manufacturers, outsourcing decisions are often known as

a. Make or buy

Q.3 what is the role of supporting department?

a. produce production

b. provide services to the operating and other support departments.

c. Provide service

Q4. LT Ltd. makes plastic products. The normal selling price of the product is SAR 45 per unit. KK Company wants to purchase 10,000 units at SAR 30 from LT Ltd. The relevant costs of production per unit of the product produced by LT Ltd. are SAR 22. The incremental profit if company accepts the special order will be:

SAR 60,000
SAR 80,000
SAR 40,000
SAR 50,000

Q5. The following allocation method allocates some (but not all) support department costs to other support departments

Direct method
Step-down method
Reciprocal method
Stand-alone method

Q6. In the determination of make or buy decision, managers must choose the alternative with the:

Lowest relevant cost
Highest relevant cost
Contribution margin
Fixed cost

Short Answer (4 Marks)

ABC incorporation has two support departments, Administration department and Information Technology department and two operating departments, Assembly department and Finishing department. Company allocates administration costs on the basis of the number of employees and information technology cost on the basis of number of computers in each department. Given the information below, use the direct method to allocate support department costs.

Details

	Support Department		Operating Departments		Total
	Administration	Information Technology	Assembly	Finishing
Total department costs	$72,000	$108,000	$579,000	$273,000	$1,032,000
Number of employees	5	6	33	24	68
Number of computers	6	9	5	5	25

Answer: Fill in the below

Allocation of Costs
Administration			..	.	$0
Information Technology			.	..	$0
Totals	$0	$0			$1,032,000