Almarai Company Ltd manufactures two types of Sprizzer - Classic and Luxury. Each product requires the incorporation of a difficult-to-handle special part (one of them for a Classic and four for a Luxury). Both of these products are made in batches (large batches for Classic and small ones for Luxury). Each new batch requires that the production facilities are 'set up'. Details of the two products are: Annual production and sales - units Sales price per unit Batch size - units Direct labour time per unit-hours Direct labour rate per hour Direct material cost per unit Number of special parts per unit Number of set-ups per batch Number of separate material issues from stores per batch Number of sales invoices issued per year شناص Management Accounting-1/Assignment Shinas OMR8 التقنية 22 OMR م التطبيقية شناص University of Technology and Applied Scien BSAC21208/BAAC2204 Overhead cost analysis Set-up cost Special part handling cost Customer invoicing cost Material handling cost Other overheads Required: (a) Calculate the profit per unit and the return on sales for Standard and Luxury Sprizzers using Classic 12,000 OMR65 1,000 2 OMR 73,200 60,000 29,000 63,000 108,000 In recent months, Almarai Company Ltd has been trying to persuade customers who buy the Classic to purchase the Luxury instead. An analysis of overhead costs for Almarai Company Ltd has provided the following information: (i) the traditional direct-labour-hour based absorption of overheads; (ii) activity-based costing methods. (b) Comment on the managerial implications for Almarai Company Ltd of the results in (a) above. 1 50 Cost driver Number of set-ups Number of special parts Number of invoices Number of batches Labour hours جامعة التقنية والعلوم التطبيقي" Luxury 12,000 OMR 87 50 2.5 OMR 8 OMR32 University of Technology 4 3 1 240 Somenter-Fall-2025-2 Page 5 of
Almarai Company Ltd manufactures two types of Sprizzer - Classic and Luxury. Each product requires the incorporation of a difficult-to-handle special part (one of them for a Classic and four for a Luxury). Both of these products are made in batches (large batches for Classic and small ones for Luxury). Each new batch requires that the production facilities are 'set up'. Details of the two products are: Annual production and sales - units Sales price per unit Batch size - units Direct labour time per unit-hours Direct labour rate per hour Direct material cost per unit Number of special parts per unit Number of set-ups per batch Number of separate material issues from stores per batch Number of sales invoices issued per year شناص Management Accounting-1/Assignment Shinas OMR8 التقنية 22 OMR م التطبيقية شناص University of Technology and Applied Scien BSAC21208/BAAC2204 Overhead cost analysis Set-up cost Special part handling cost Customer invoicing cost Material handling cost Other overheads Required: (a) Calculate the profit per unit and the return on sales for Standard and Luxury Sprizzers using Classic 12,000 OMR65 1,000 2 OMR 73,200 60,000 29,000 63,000 108,000 In recent months, Almarai Company Ltd has been trying to persuade customers who buy the Classic to purchase the Luxury instead. An analysis of overhead costs for Almarai Company Ltd has provided the following information: (i) the traditional direct-labour-hour based absorption of overheads; (ii) activity-based costing methods. (b) Comment on the managerial implications for Almarai Company Ltd of the results in (a) above. 1 50 Cost driver Number of set-ups Number of special parts Number of invoices Number of batches Labour hours جامعة التقنية والعلوم التطبيقي" Luxury 12,000 OMR 87 50 2.5 OMR 8 OMR32 University of Technology 4 3 1 240 Somenter-Fall-2025-2 Page 5 of
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter15: Lean Accounting And Productivity Measurement
Section: Chapter Questions
Problem 18E: Lean manufacturing uses value streams to produce a family of products that require the same...
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Transcribed Image Text:CASE
Traditional Costing and Activity Based Costing (ABC)
Almarai Company Ltd manufactures two types of Sprizzer - Classic and Luxury. Each product requires the incorporation of a difficult-to-handle special part (one of them for a
Classic and four for a Luxury). Both of these products are made in batches (large batches for Classic and small ones for Luxury). Each new batch requires that the production
facilities are 'set up'. Details of the two products are:
Annual production and sales - units
Sales price per unit
Batch size - units
Direct labour time per unit-hours
Direct labour rate per hour
Direct material cost per unit.
Number of special parts per unit
Number of set-ups per batch.
Number of separate material issues from stores per batch
Number of sales invoices issued per year
Management Accounting-1/Anigament
Overhead cost analysis
Set-up cost
Special part handling cost
Customer invoicing cost
Material handling cost
Other overheads
Required:
شناص
Shinas
Management Accounting-1/Assignment
OMR8 التقنية
2 OMR م التطبيقية
2
University of Technogy
and Applied Sciences
In recent months, Almarai Company Ltd has been trying to persuade customers who buy the Classic to purchase the Luxury instead. An analysis of overhead costs for Almarai
Company Ltd has provided the following information:
BSAC21208/BAAC2204
OMR
73,200
60,000
29,000
63,000
Classic
12,000
OMR65
1,000
108,000
(a) Calculate the profit per unit and the return on sales for Standard and Luxury Sprizzers using
(i) the traditional direct-labour-hour based absorption of overheads;
(i) activity-based costing methods.
Shines.
(b) Comment on the managerial implications for Almarai Company Ltd of the results in (a) above.
2
1
50
BSAC21208/BAAC2204
Cost driver
Number of set-ups
Number of special parts
Number of invoices
Number of batches
Labour hours
جامعة التقنية
والعلوم التطبيقي"
University of Technology
and Applied Sciences
its in (a) above.
Luxury
12,000
OMR 87
50
2.5
OMR 8
OMR32
4
3
Page 4 of 5
1
240
Someter-Fall-2023-24
Page 5 of 5
Semester-Fall-2023-24
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Step 1: CALCULATION PROFIT P.U BASED ON TRADITIONAL DIRECT LABOUR -HOUR BASED ABSORPTION
VIEWStep 2: ALLOCATION OF OVERHEAD BASED ON ACTIVITY BASED ON ACTIVITY BASED COSTING
VIEWStep 3: CALCULATION OF PROFIT PU BASED ON ACTIVITY BASED COSTING
VIEWStep 4: COMMENT ON THE MANAGERIAL IMPLICATION
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