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Q1. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns...

Q1. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. Do you think Activity-Based Costing (ABC) has any advantages if so discuss few advantages and also the challenges of this system and how we can resolve it?   

Q2. ALHAMAD Corporation uses process costing. A number of transactions that occurred in December are listed below.

(1) Raw materials that cost $38,200 are withdrawn from the storeroom for use in the Mixing Department. All of these raw materials are classified as direct materials.
(2) Direct labor costs of $36,500 are incurred, but not yet paid, in the Mixing Department.
(3) Manufacturing overhead of $42,100 is applied in the Mixing Department using the department's predetermined overhead rate.
(4) Units with a carrying cost of $112,400 finish processing in the Mixing Department and are transferred to the Drying Department for further processing.
(5) Units with a carrying cost of $143,800 finish processing in the Drying Department, the final step in the production process, and are transferred to the finished goods warehouse.
(6) Finished goods with a carrying cost of $138,500 are sold.

Required:
Prepare journal entries for each of the transactions listed above.

Q3. Explain why a plant wide overhead allocation system may not be optimal for many companies in today is business environment?

Q4.

Selling price 150 S.R per unit

Variable cost 90 S.R per unit

Fixed cost 600,000 S.R (TOTAL)

What is the beak-even-point?

What is the selling price, if break - even point is 12000 units?

Business   Accounting   
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Homework Answers

Answer #1

Answer of Q4. ;-

Contribution Per unit = Sales Price per unit - Variable Cost per unit

= $150 - $90

= $60 per unit

Contribution in % = (Contribution per unit / Sales Price per unit)*100

= ($60 / $150)*100

= 40%

a) Break Even Point (in units) :-

= Fixed Cost / Contribution per unit

= $600000 / $60

= 10000 units

Break even point (in Doller):-

= Fixed Cost / Contribution in %

= $600000 / 40%

= $1500000

b) Calculation Selling Price At Break Even Point is 12000 unit

Contribution Per unit = Fixed Cost / Break Even Point

= $600000 / 12000

= $50

Selling Price per unit = Contribution Per unit / Contribution in %

= $50 / 40%

= $125 per unit

Total Selling Price = 12000 * $125

= $1500000

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