Q1. State the reasons for allocating support department costs to the operating department. What are its various methods? Provide numerical examples of any two methods and discuss how these methods could be used to allocate these costs?

Answer:

Q2. Z&C has two support departments, A1 and A2, and two operating departments, B1 and B2. Z&C has decided to use the direct method and allocate variable A1 dept. costs based on the number of transactions and fixed A1 dept. costs based on the number of employees. A2 dept. variable costs will be allocated based on the number of service requests and fixed costs will be allocated based on the number of computers. The following information is provided:

	Support Departments		Operating Departments
	A1	A2	B1	B2
Total Department variable costs	5,000	6,000	38,000	21,000
Total department fixed costs	5,800	11,000	42,000	18,000
Number of transactions	15	18	80	45
Number of employees	5	7	15	12
Number of service requests	12	7	15	10
Number of computers	6	8	10	12

Allocate variable and fixed costs.

Answer:

Q3. JTC Corporation is a metal product manufacturer that produces three products: A, B, and C. The joint costs of the three products in 2018 were SAR 50,000. The total number of units for each product and the selling price per unit are given below:

Product	Units	Selling Price per unit
A	20,000	SAR 6
B	12,500	SAR 5
C	7,500	SAR 4

Using the physical volume method and sales value at the split-off method, allocate the joint costs to each product.

Answer:

Q4. ABC Ltd. is preparing a budget for 2018. Following are the information related to budget preparation: (CH 10, 2.5 Marks)

Budgeted selling price per unit = SAR 200 per unit

Total fixed costs = SAR 250,000

Variable costs = SAR 65 per unit

Required:

Prepare flexible budget for 2,000, 2,500, 3,000 and 3,500 units.