Q1. Differentiate between routine operating decisions and non-routine operating decisions with suitable examples. List all non-routine operating decisions and explain any two decisions with suitable examples.
Note: Your answer must include numerical examples for each method along with qualitative consideration.
Q2. Suppose that you are working in a company as a cost manager that has two support departments and two operating departments. Determine the total department cost and allocation base for these departments and allocate the support department cost to the operating department based on the following methods: Assume you are a cost manager in a company with two support departments and two operating departments. Determine the entire department cost and allocation base for these departments, and then distribute the support department cost to the operational department using the techniques listed below: (4 Marks)
• The direct method
• The step-down method
Note: You are required to assume values of your own and they should not be copied from any sources.
Q3. SFC Company is in the manufacturing process of wooden products and makes several wooden items. The following is the information related to three products manufactured by SFC company: Product X, Y, and Z. The joint costs of the three products in 2015 were SAR 110,000. The total number of units for each product and the selling price per unit is given below:
Products Units Selling Price per unit
X 5,000 SAR 150
Y 3,500 SAR 125
Z 2,200 SAR 100
Using the physical volume method and sales value at the split-off method, allocate the joint costs to each product:
Q4. A company is planning to prepare a budget for the year 2017 and provides you with the following information regarding the preparation of the budget:
Budgeted selling price per unit $650 per unit
Total fixed costs $155,000
Variable costs $175 per unit
You are required to prepare a flexible budget for 500, 600, 700, and 800 units.