College of Administration and Finance Sciences
Assignment (1)
Deadline: Sunday 14/07/2024 @ 23:59
Course Name: Cost Accounting
Student’s Name:
Course Code: ACCT 301
Student’s ID Number:
Semester: Summer
CRN: 50169
Academic Year: 1445 H
For Instructor’s Use only
Instructor’s Name: Dr. Youssef RIAHI
Students’ Grade:
/15
Level of Marks: High/Middle/Low
Instructions – PLEASE READ THEM CAREFULLY
 The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
 Assignments submitted through email will not be accepted.
 Students are advised to make their work clear and well presented, marks may be reduced for
poor presentation. This includes filling your information on the cover page.
 Students must mention question number clearly in their answer.
 Late submission will NOT be accepted.
 Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
 All answers must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism.
 Submissions without this cover page will NOT be accepted.
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College of Administration and Finance Sciences
Assignment Question(s):
(Marks 15)
Q1. Abdul Karim Company manufactures a product A. The company estimates the cost function for
the total costs. The cost driver is number of units. The following information were collected:
Month
Units
January
3,560
SAR 242,400
February
3,800
SAR 252,000
March
4,000
SAR 260,000
April
3,600
SAR 244,000
May
3,200
SAR 228,000
June
3,040
SAR 221,600
Compute a cost function using the high-low method.
Answer:
Variable cost per unit = (260,000 – 221,600) / (4,000 – 3,040) = 40
Fixed cost = 260,000 – (40*4,000) = 100,000
Cost function: Total cost = 100,000 + 40 X
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Total Costs
(3 Marks)
College of Administration and Finance Sciences
Q2.
Hashim Corporation sells its product for SAR17 per unit. Its variable cost is SAR 10 per unit, and
total fixed costs are SAR 800. Assuming next period’s estimated sales are 300, calculate the following
amounts:
a. Degree of operating leverage
(1Mark)
b. Margin of safety in units
(1Mark)
c. Margin of safety in revenues
(1Mark)
Answer
a.
Contribution margin (CM) = Sales revenue – variable cost = (17-10) * 300 = 2,100
Profit = CM – fixed cost = 2,100 – 800 = 1,300
Degree of operating leverage = CM / Profit = 2,100 / 1,300 = 1.61
b. CM per unit = SP – Vcu = 17 – 10 = 7
Breakeven in units = FC / CMu = 800 / 7 = 114 unit
Margin of safety in units = (Target sales – breakeven sales) = 300 – 114 = 186 unit
c. Margin of safety in revenues = (300*17) – (114*17) = SAR 3,162
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College of Administration and Finance Sciences
Q3. TTL Corporation is in the manufacturer of several plastic products. TTL sells its one of the plastic
product for SAR 500. The variable costs per unit are SAR 200, and the total fixed costs are SAR
510,000. Based on cost-volume profit analysis, calculate:
(6 Marks)
a) Contribution margin per unit and contribution margin ratio.
b) Break-even point in units and sales SAR.
c) Pretax profit if the company sells 2,200 units.
d) Profit/loss if the company sells 1,500 units.
e) Units needed to reach target pretax profit of SAR 180,000.
f) Sales SAR needed to reach the target pretax profit of SAR 180,000.
Answer:
a. CMu = SP – Vcu = 500 – 200 = SAR 300
CM % = CMu / SP = 300 / 500 = 60%
b. Breakeven in units = FC / CMu = 510,000 / 300 = 1,700 units
Breakeven in SAR = FC / CM% = 510,000 / 60% = SAR 850,000
c. Pretax profit = Sales revenue – Variable cost – Fixed cost
= (2,200*500) – (2,200*200) – 510,000 = 150,000
d. Loss = Sales revenue – Variable cost – Fixed cost
= (1,500*500) – (1,500*200) – 510,000 = (60,000)
e. Units to achieve profit = (FC + PROFIT) / CMu = (510,000 + 180,000) / 300 = 2,300 units
f. Revenue to achieve profit = (FC + PROFIT) / CM% = (510,000 + 180,000) /60% = SAR 1,150,000
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College of Administration and Finance Sciences
Q4. Which types of companies would most likely use the job costing? Provide example of one Saudi
Company. How actual allocation rates and estimated allocation rates are analyzed in these
compagnies?
(3 Marks)
Answer:
Job costing is a costing method used by companies to allocate costs to individual jobs, projects, or custom
products. It involves tracking the costs of direct materials, direct labor, and overhead expenses for each job
separately.
Actual Allocation Rates vs. Estimated Allocation Rates


Actual Allocation Rates: These rates are based on the actual costs incurred during the production of a
job. They are calculated by dividing the actual overhead costs by the actual allocation base (e.g., direct
labor hours, machine hours).
Estimated Allocation Rates: These rates are predetermined based on the estimated overhead costs
and the estimated allocation base. They are used to allocate overhead costs to jobs before the actual
costs are known.
Analysis by Companies
Companies analyze actual and estimated allocation rates to:



Evaluate Cost Accuracy: Compare the actual and estimated rates to assess the accuracy of cost
allocations.
Cost Control: Identify any significant differences between actual and estimated rates to control and
manage costs effectively.
Performance Evaluation: Assess the performance of the production process and make necessary
adjustments.
Example of a Saudi Company
One example of a Saudi company using job costing is Saudi Basic Industries Corporation (SABIC).
SABIC is a global leader in diversified chemicals and operates using job costing to allocate costs to its various
custom product lines.
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