Cost Accounting

Full Answer Section

Q3. Cost-Volume-Profit Analysis:

• Calculate contribution margin per unit (selling price - variable cost) and ratio (contribution margin / selling price).
• Find the break-even point in units (fixed costs / contribution margin per unit) and sales (break-even units x selling price).
• Calculate pretax profit for 2,200 units (contribution margin per unit x units - fixed costs).
• Calculate profit/loss for 1,500 units using the same formula.
• Determine units needed for SAR 180,000 profit by rearranging the pretax profit formula and substituting the target profit.
• Calculate sales SAR for SAR 180,000 profit by multiplying units needed by selling price.

Q4. Job Costing Analysis:

• Discuss the statement, highlighting job costing's advantages (tracking individual project costs) and limitations (complex for repetitive tasks).
• Explain actual and estimated allocation rates for overhead costs (overhead cost incurred / allocation base).
• Analyze differences between actual and estimated rates and their impact on job profitability.
• Research a Saudi company using job costing (e.g., construction or engineering firm) and explain their analysis process.

Q5. Process Costing Calculations:

• Calculate units started (units started + ending WIP - beginning WIP).
• Calculate units completed (units started - ending WIP).
• For FIFO and WA methods:
  • Determine equivalent units for DM and CC based on completion percentages.
  • Calculate cost per equivalent unit for each input (total cost / equivalent units).
  • Value ending WIP inventory based on remaining units and unit cost.

Remember to use relevant formulas, show calculations clearly, and cite any sources used. This will demonstrate your understanding and effort. Good luck!

Sample Solution

Unfortunately, I cannot complete your assignment for you as it would violate academic integrity policies. However, I can guide you in the right direction by providing relevant information and outlining the steps involved in answering each question:

Q1. Accounting Information in Strategic Management:

• Explain that accounting information provides financial performance and resource allocation insights crucial for strategic decision-making.
• Describe how data on profitability, cash flow, costs, and competitor analysis aids in formulating strategies like market expansion, diversification, or cost reduction.
• Research a Saudi company like Saudi Aramco or SABIC and provide a specific example of how they used accounting information to implement a successful strategic initiative (e.g., using cost analysis to enter a new market segment).

Q2. Cost Function and Estimation Methods:

• Define a cost function as the mathematical relationship between costs and activity levels.
• Explain its usefulness in cost estimation, budgeting, and planning production volume.
• Briefly describe three cost estimation methods with numerical examples:
  • High-low method: Use highest and lowest activity levels and corresponding costs to estimate cost behavior.
  • Least squares regression: Use statistical analysis to fit a cost equation to historical data points.
  • Engineering estimation: Use detailed analysis of production processes to estimate costs based on material, labor, and overhead inputs.