Q1. Spaghetti is a family-owned restaurant in KSA.The corporate office provides 2 kinds of services (maintenance and personnel) to 3 locations (Riyadh, Jeddah and Dammam).
In a recent accounting period, the cost for maintenance was $25,000 and for personnel was $15,000.Maintenance costs are allocated on the basis of square feet, and personnel costs are allocated based on the basis of number of employees.
If the restaurant uses the direct method and the costs of Riadh location, Jeddah location and Dammam location are $15,000, $12,000 and $10,000 respectively, calculate the total costs allocated to each restaurant location.
Q 2 The cost to produce one unit of the product is:
Material $ 12.00
Labor $ 9.00
Variable cost $ 6.00
Fixed expenses$ 18.00
Total fixed expenses: $ 1,440,000
The companyâ€™s normal capacity is 100,000 units.The figures given above are for 80,000 units.
The company has received a special offer for 20,000 units for a price of $ 36 per unit from a foreign customer.
Advice the manufacturer on whether the order should be accepted.
Q 3 Taha Compagny produces three products: Product A, Product B, and Product C.
During the year the joint costs of processing the three products were $400,000.Production and sales value information were as follows:
ProductUnitsat Split-OffSeparable CostsSelling Price
A400,000 $20 per unit $ 20 per unit$40 per unit
B400,000 $18 per unit $ 15 per unit$28 per unit
C800,000$12 per unit $14 per unit$17 per unit
a.Allocate the joint costs using the physical output method.
b.Allocate the joint costs using the net realizable value method.
c. Allocate the joint costs using sales value at split-off point method.