Accounting and Cost Management: Strategic Applications and Calculations

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No 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.
Assignment Question(s): (Marks 15)
Q1. Explain the role of accounting information in strategic management. How does accounting information assist in the formulation and implementation of organizational strategies? Support your answer by providing an example of one Saudi Company in this regard. (2 Marks)
Note: Your answer must include a suitable example showing the role of accounting information in strategic management of an organization. (Chapter 1, Week 1) Answer:
Q2. What do you mean by cost function and for what purpose does it serve for? What are the various methods used to estimate cost functions? Explain each method with suitable numerical examples. (3 Marks) (Chapter 2, Week 2) Answer:
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: (4 Marks) Contribution margin per unit and contribution margin ratio.
Break-even point in units and sales SAR.
Pretax profit if the company sells 2,200 units.
Profit/loss if the company sells 1,500 units.
Units needed to reach target pretax profit of SAR 180,000.
Sales SAR needed to reach the target pretax profit of SAR 180,000. (Chapter 3, Week 3) Answer:
Q4. “Job costing is a method of cost accounting used by companies to find out the cost of specific jobs or projects.” Comment on this statement and examine how actual allocation rates and estimated allocation rates are analyzed by the companies? Support your answer with an example of one Saudi company that use job costing. (2 Marks) (Chapter 5, week 4 )
Answer:
Q5. A company uses a process costing system for its sole processing department. There were 4,000 units in beginning WIP inventory for June and 36,000 units were started in June. The beginning WIP units were 60% complete and the 3,250 units in ending WIP were 40% complete. All materials are added at the start of processing. (4 Marks) (Chapter 6 Part 1, Week 5)
Required:
a) Compute the no. of units started & completed.
b) Compute the EUP for DM and CC using FIFO and WA methods. Answer:

📌 Struggling with where to start this assignment? Follow this guide to tackle your assignment easily!

This assignment covers strategic management, cost functions, cost-volume-profit (CVP) analysis, job costing, and process costing. You will analyze how accounting information helps in strategic decision-making, understand cost estimation methods, and perform numerical calculations. Follow this step-by-step guide to complete your assignment effectively.

1️⃣ Understanding the Assignment

📌 Key Requirements:
✔ No plagiarism – write in your own words and cite sources where necessary.
✔ Use Times New Roman, size 12, double-spaced format.
✔ Answer all five questions with explanations and examples.
✔ Support answers with numerical calculations and real-world company examples (preferably from Saudi Arabia).

2️⃣ Step-by-Step Answer Guide

🔹 Q1: Role of Accounting Information in Strategic Management (2 Marks)

How Accounting Information Assists Strategic Management:

Decision-Making: Helps managers allocate resources efficiently and make informed decisions.
Performance Evaluation: Tracks financial progress and identifies areas needing improvement.
Risk Management: Identifies financial risks and opportunities.
Budgeting and Forecasting: Provides insights into future financial conditions.
Competitive Advantage: Helps businesses optimize pricing and cost structures.

Example – Saudi Company:

📌 Saudi Aramco uses advanced accounting systems to track costs, manage financial risks, and develop long-term investment strategies. Its financial reports help in expansion projects like the Jafurah gas field development, aligning financial goals with corporate strategies.

📌 How to Approach This Question:

Define strategic management.
Explain how accounting supports decision-making.
Provide an example of a Saudi company (e.g., Saudi Aramco, SABIC, or STC).

🔹 Q2: Cost Function and Estimation Methods (3 Marks)

Definition of Cost Function:

A cost function is a mathematical representation of how costs change with activity levels. It helps businesses predict future expenses and set prices.

Methods to Estimate Cost Functions:

1️⃣ High-Low Method

Uses the highest and lowest activity levels to estimate variable and fixed costs.
Example: If total costs are SAR 20,000 at 1,000 units and SAR 30,000 at 2,000 units, variable cost per unit = (30,000 – 20,000) / (2,000 – 1,000) = SAR 10/unit.

2️⃣ Regression Analysis

Uses statistical techniques to estimate cost behavior based on past data.
More accurate than the high-low method.

3️⃣ Scatter Plot Method

Graphs cost data points to identify patterns and trends visually.

📌 How to Approach This Question:

Define cost function.
Explain the three estimation methods.
Provide a simple numerical example for each method.

🔹 Q3: Cost-Volume-Profit (CVP) Analysis for TTL Corporation (4 Marks)

Given Data:

Selling price per unit = SAR 500
Variable cost per unit = SAR 200
Fixed costs = SAR 510,000

1. Contribution Margin (CM) Per Unit & CM Ratio

📌 CM per unit = Selling Price – Variable Cost = 500 – 200 = SAR 300
📌 CM ratio = CM per unit / Selling Price = 300 / 500 = 0.60 (60%)

2. Break-Even Analysis

📌 Break-even units = Fixed Costs / CM per unit
= 510,000 / 300 = 1,700 units

📌 Break-even sales (SAR) = Break-even units × Selling Price
= 1,700 × 500 = SAR 850,000

3. Profit/Loss Calculations

📌 Pretax profit at 2,200 units:
Total CM = 2,200 × 300 = SAR 660,000
Profit = Total CM – Fixed Costs = 660,000 – 510,000 = SAR 150,000

📌 Profit/Loss at 1,500 units:
Total CM = 1,500 × 300 = SAR 450,000
Loss = 450,000 – 510,000 = -SAR 60,000 (Loss)

4. Target Profit Calculation (SAR 180,000)

📌 Required units = (Fixed Costs + Target Profit) / CM per unit
= (510,000 + 180,000) / 300 = 2,300 units

📌 Required sales (SAR) = Required units × Selling Price
= 2,300 × 500 = SAR 1,150,000

📌 How to Approach This Question:

Clearly show all calculations.
Use formulas step by step.

🔹 Q4: Job Costing System (2 Marks)

Definition of Job Costing:

A method where costs are assigned to specific jobs or projects, rather than processes. Used in industries with customized production.

Actual vs. Estimated Allocation Rates:

Estimated Rate: Used at the beginning of a project based on expected costs.
Actual Rate: Calculated after project completion based on real costs incurred.
Companies compare both to adjust future pricing.

Example – Saudi Company Using Job Costing:

📌 Saudi Binladin Group (Construction Industry)

Uses job costing for large-scale projects like airports and skyscrapers.
Tracks materials, labor, and overhead for each project separately.

📌 How to Approach This Question:

Define job costing.
Explain actual vs. estimated rates.
Provide a Saudi company example.

🔹 Q5: Process Costing System Calculations (4 Marks)

Given Data:

Beginning WIP = 4,000 units (60% complete)
Started units = 36,000
Ending WIP = 3,250 units (40% complete)

1. Units Started & Completed:

📌 Started & Completed = Total Started – Ending WIP
= 36,000 – 3,250 = 32,750 units

2. Equivalent Units of Production (EUP) using FIFO & WA Methods:

📌 FIFO Method:

EUP for Direct Materials (DM) = (Started & Completed) + (Ending WIP × Completion %)
= 32,750 + (3,250 × 40%) = 34,050 units
EUP for Conversion Costs (CC) = (Started & Completed) + (Ending WIP × Completion %) – (Beginning WIP × Initial Completion %)
= 32,750 + (3,250 × 40%) – (4,000 × 60%) = 31,650 units

📌 Weighted Average (WA) Method:

EUP for DM = (Completed + Ending WIP)
= 36,000 – 3,250 + (3,250 × 40%) = 35,300 units
EUP for CC = Same as above but adjusted for CC = 34,450 units

📌 How to Approach This Question:

Show each step with formulas.
Differentiate FIFO and WA calculations.

3️⃣ Final Submission Checklist

✅ All answers are well-explained and structured.
✅ All calculations are step-by-step and clearly shown.
✅ Used real Saudi company examples where required.
✅ No personal opinions—only facts and research.
✅ Submitted before the deadline to avoid penalties.

By following this guide, you will effectively complete your assignment with high accuracy and maximize your marks! 🚀

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