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Northwestern Job Costing Used in Service Sectors & Manufacturing Sectors Questions

Assignment Question(s): (Marks 10)

Q1. Explain how job costing is used in service sectors and manufacturing sectors? Provide examples by citing one job costing example of the service sector and one example of the manufacturing sector of a Saudi company to support your answers. (CH 5, 2 Marks)

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Answer:

Q2. Axel Ltd. uses a process costing system for its sole processing department. There were 24,000 units in beginning WIP inventory for March and 216,000 units were started in March. The beginning WIP units were 75% complete and the 19,500 units in ending WIP were 60% complete. All materials are added at the start of processing.

(CH 6, 3 Marks)

Required:

a) Compute the no. of units started & completed.

b) Compute the EUP for DM and CC using FIFO and WA methods.

c) Calculate total manufacturing cost/EUP under both methods, if the following details are available:

  

FIFO

WA

 

Direct Material Cost

SAR 700,000

SAR 910,000

 

Conversion Cost

SAR 920,000

SAR 1,210,000

Answer:

Q 3 DD Company has two departments, Dept. A and Dept. You are provided the following costs for five activities that occur at the manufacturing plant every month:

(CH 7, 2 Marks)

  

Activity

Total   Costs (SAR)

Total   number ofunits of Cost Driver

 

Material handling

315,000

450,000   parts

 

Supervision of direct labor

180,000

110   employees

 

Janitorial and cleaning

250,000

5,500   hours

 

Machining

350,000

8,500   machine hours

         

Total costs

1,095,000

The above activities are used by the two departments as follows:

    

Department   A

Department   B

 

Material handling

220,000 parts

230,000 parts

 

Supervision of direct labor

65employees

45 employees

 

Time spent cleaning

2,500 hours

3,000 hours

 

Number of machine hours

6,000 machine hours

2,500 machine hours

a. How much of the material handling cost will be allocated to Department A?

b. What is the ABC allocation rate for supervision of direct labor?

Answer:

Q 4. T&T produces product ‘X’ as a part of its main product. Each year, the company produces 75,000 units of product ‘X’. The costs of production are mentioned below. An outside supplier has offered to deliver 75,000 units of product ‘X’ annually at a cost of $7.35 per unit. A fixed production cost of $ 120,000 is unavoidable for product ‘X’. Should T&T Co. make or buy product ‘X’?

(CH 4, 2 Marks)

The production costs per unit for manufacturing a unit of product B are:

  

Production   Cost

Amount ($)

 

Direct   Materials

2.55

 

Direct   Labor

1.95

 

Variable   Manufacturing Overhead

1.20

Answers: 

Q5. “ABC is a costing method that allocates overhead and indirect costs to related products and services.” Comment on this statement and examine how ABC is used in the manufacturing sector with a suitable example.