Process of identifying activities in an organisation and assigning costs under the Activity Based Costing (ABC) system

Q1. What is the process of identifying activities in an organisation and assigning costs under the Activity Based Costing (ABC) system? Elucidate. You will need to include the right numerical examples to support your answer. (2 Marks) (Chapter 7, Week 7)

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Q2. PPLC Company has two support departments, SD1 and SD2, and two operating departments, OD1 and OD2. The company decided to use the direct method and allocate variable SD1 dept. costs based on the number of transactions and fixed SD1 dept. costs based on the number of employees. SD2 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: (4 Marks) (Chapter 8, Week 10)

  Support Departments Operating Departments
  SD1 SD2 OD1 OD2
Total Department variable costs 18,000 19,000 51,000 35,000
Total department fixed costs 20,000 24,000 56,000 30,000
Number of transactions 30 40 200 100
Number of employees 14 18 35 30
Number of service requests 28 18 35 25
Number of computers 15 20 24 28

You are required to allocate variable and fixed costs using direct method.


Q3. What are an organization’s outsourcing decisions and constrained resource decisions? Provide a suitable numerical example of these decisions and explain how quantitative and qualitative considerations support a company’s decision-making process.

(2 Marks) (Chapter 4, Week 9)

Note: Your answer must include suitable numerical examples. You are required to assume values of your own, and they should not be copied from any sources.


Q4. VBN plastic industry makes three plastic toys: T1, T2, and T3. The joint costs of the three products in 2017 were SAR 120,000. The total number of units for each product and the selling price per unit is given below:(3 Marks) (Chapter 9, Week 11)

Product Units Selling Price per unit
T1 45,000 SAR 15
T2 26,000 SAR 14
T3 18,000 SAR 10


You are required to allocate the joint costs to each product using the physical volume method and sales value at the split-off method.


Q5. MN&M Corporation is preparing a budget for 2018. The company provides you with the following details which will help you to prepare the budget:

(4 Marks) (Chapter 10, Week 12)

Budgeted selling price per unit = SAR 500 per unit

Total fixed costs = SAR 150,000

Variable costs = SAR 100 per unit


You are required to prepare a flexible budget for 1,000, 1,100, 1,200 and 1,300 units.



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