What is the company’s degree of operating leverage
Managerial Accounting
Assignment Question(s): (Marks 15)
Q1. Assume yourself to be a cost manager of ARAMCO and you are in the task of Cost Classifications. Explain how the following costs would help you as cost manager to make decision. (2 Marks)
Product Vs Period Cost
Prime Vs Conversion Cost
Committed Vs Discretionary Cost
Q2: A fresh graduate employed as an accountant of a manufacturing company and is working on over applied and under applied overheads.
Explain how you would assist him/her in computing over applied and under applied overheads. Give numerical examples (2 Marks)
Q3.a. Latif Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company’s three activity cost pools are as follows:
Required:
Compute POHR per activity (Round off to two decimal places)
Calculate the overhead cost per unit, if the company produces 1,000 units of product A and 500 units of product B. (5 MARKS)
Q4. Explain Equivalent Units of Production and its computation using weighted average method and FIFO method. (2 Marks)
Q5a. ‘Cost Structure and Profit Stability’ is one of the most import strategy of a corporations. Explain how managers, maintain cost structure for stability in profit during both good and bad years. (2 Marks)
Q5b.The following is Allison Corporation’s contribution format income statement for last month:
| Account title | Amount in SR |
| Sales | 850,000 |
| Variable Cost | 250,000 |
| Contribution Margin | 600,000 |
| Fixed Expenses | 450,000 |
| Net operating Income | 150,000 |
The company has no beginning or ending inventories. The company produced and sold 15,000 units last month.
Required: (2 Marks)
Compute Margin of Safety.
What is the company’s degree of operating leverage?