Costing system for a product or services

1. Mazoon Traders LLC manufactures two different types of gadgets, Media pad and Yoga
pad. The company relies on activity based costing system.
Products Media pad Yoga pad
Units of Production 5,000 4,000
Direct labor hours 500 350
Number of s placed 22 18
Machine set up hours 25 22
No. of Deliveries 38 20
No.of production runs 13 23
Machine set up costs 26,550
Machine running costs 26,400
Procurement costs 38,000
Delivery costs 24,320
You are required to calculate the cost per unit of Media pad and Yoga pad under ABC (2 marks)
and absorption costing (2 marks) methods. Compare the cost per unit of production and suggest
which costing method is good (1 marks). (5 Marks)
2. Al Lama Traders manufactures kid’s toys. It makes two products: battery bike and gaming
pad in production plant named ‘star kids’. The products details, sales plan and forecast are shown
in the table.
Product 1st Quarter
Units
2nd Quarter
Units
3rd Quarter Units 4th Quarter Units
Battery bike 10,500 15,500 17,500 18,500
Game pad 11,000 12,500 14,500 15,000
Assume that the selling price is OMR 30 per unit for battery bike and OMR 15 per unit for game pad.
Average sales return is 13% of total sales and the discounts and bad debts amounting to 2% of
the total sales.
i) You are required to prepare a Sales Budget for the year 2022. (4 Marks)
ii) Assume that the company expects a competitor to enter into the market. In such case, the sale
of total units in each product is expected to decrease by 10%. However, the management wants
retain the total sales value. Analyse and suggest a suitable way to achieve this sales target.
(1 Marks)
Star Traders Co. is into manufacturing bakery products and it has different expenses for making
the product. It has given the following particulars related to the income and expenses.
Months Sales(OMR)
Materials
(OMR) Wages(OMR)
August, 2021 25,000 8,500 2,550
September, 2021 22,000 6,500 2,850
October, 2021 25,000 8,000 3,250
November, 2021 24,000 7,000 3,400
December, 2021 26,000 12,000 3,050
Credit terms:
 Amount from credit sales will be collected in next month.
 Suppliers will allow two months credit.
 Lag in payment of wages are one month.
 Cash balance on 1st October, 2021 is expected to be OMR 25,500.
You are required to prepare a cash budget for three months ending 31st December, 2021. (5 Marks)