Student Name……………………………………. I.D – No…………………..…

Student Name……………………………………. I.D – No…………………..…

Section Due Date Course Code

1 16/12/2023 ACCT 531

TOTAL MARKS: 10

Cost Accounting

CLOs /PLO Questions Grade Student grade

CLO 6 Q1 10

Total marks

Course Instructor:
Dr. Abdullah Silawi

College of Business Administration
Group Project
Term: Fall 2023

**Submission Due Date: 16/12/2023** 2

Project

Students are required to complete a Final Project as part of the course assessment. The aim of

this project is to help students in improving their research, communication, and teamwork

skills. A detailed discription of the project and its guidelines is given below.

Learning outcomes:
The main purpose of this project is to help students achieving the following learning

outcomes:

• Demonstrate ability to work in teams.

• Demonstrate ability of problem solving and critical thinking.

• Demonstrate ability to communicate effectively orally and in writing.

The following questions must be answered:

QUESTION 1

Write an essay about the following topics:

Ø Explain and discuss the differences between absorption costing and

variable costing methods.

Ø Compare and contrast between Traditional Costing, Activity Based

Costing and Standard Costing.

QUESTION 2

Solve the practical problem shown on page 4.

Instructions:

• Students can form a group of two members (Use the link provided in the Blackboard).

• Each group should have a one leader, who is able to manage the group and to ensure that

each member must contribute in the project.

• Only one copy of the answer should be submitted by the group leader on behalf of the group.

• Use the structure for your essay of question1 as follows:

**Submission Due Date: 16/12/2023** 3

• Introduction

This section contains a summary about the entire report. It provides a brief summary and
introduction of what is included in the report in relation to the selected standards and the
selected companies.

• Body

This section is divided into several subsections according to the selected companies &
standards. It also contains a brief information about the companies including background on
their industry and their business operation. In addition, a thourough information about the
selected standards including (the standard’s definition and disclisure requirements). In this
section, an explaination should be provided whether the standard’s disclosure have been
partially or fully adopted by the company, with clear justifications behind partial disclosure, if
available information are provided.

• Conclusions

The conclusion brings together the main points of the report. It refers back to the key findings
which leaves the reader with a final thought and sense of full understanding by clarifying the
ideas brought up in the report. It may also adress the student(s’) opinion and thoughts a
concluding point. In the conclusion section, new topics or ideas that were not addressed in
the main body should not be introduced.

• References :
List all references that you have used to obtain data and information from various resources
(e.g. books, articles, internet websites, company’s records & reports or any publications, etc.).

Example:

1. Books

Schiffman, L.G. & Kanauk, L.E (2007). Consumer Behavior, New Jersey, Prentice Hall Co.
Quotah , M. and El aasi, S. (2008) How to write a Report. Jeddah, Jarir Co.

2. Articles
Monacelli, T. (2001) New International Monetary Arrangements and the exchange Rate.
International Journal of Finance & Economics, Vol 6 (4) PP. 389 – 400

3. Electronic Sources (WWW document)
Monacelli, T. (2001) New International Monetary Arrangement and the Exchange Rate.
International Journal of Finance & Economics, Vol 6 (4) PP 389 – 400.

[online]. Available from: http:// Proquest. Umi.com/pg dweb

**Submission Due Date: 16/12/2023** 4

Question 2:

TechnoSide, Inc., manufactures and sells a unique electronic part. Operating results for the first
three years of activity were as follows (absorption costing basis):

Year 1 Year 2 Year 3

Sales $ 1,500,000 $ 1,200,000 $ 1,500,000

Cost of goods sold $ 1,200,000 $ 840,000 $ 1,230,000

Gross margin $ 300,000 $ 360,000 $ 270,000

Selling and administrative
expenses

$ 255,000 $ 225,000 $ 300,000

Net operating income (loss) $ 45,000 $ 135,000 $ (30,000)

Sales dropped by 20% during Year 2 due to the entry of several foreign competitors into the
market. TechnoSide had expected sales to remain constant at 100,000 units for the year;
production was set at 100,000 units in order to build a buffer of protection against unexpected
spurts in demand. By the start of Year 3, management could see that spurts in demand were
unlikely and that the inventory was excessive. To work off the excessive inventories, TechnoSide
cut back production during Year 3, as shown below:

Year 1 Year 2 Year 3

Production in units 100,000 120,000 80,000
Sales in units 100,000 80,000 100,000

Additional information about the company follows:

1. The company’s plant is highly automated. Variable manufacturing costs (direct materials,
direct labor, and variable manufacturing overhead) total only $4 per unit, and fixed
manufacturing overhead costs total $500,000 per year.

2. Fixed manufacturing overhead costs are applied to units of product on the basis of each year’s
production (units produced). That is, a new fixed overhead rate is computed each year.

3. Variable selling and administrative expenses are $2 per unit sold. Fixed selling and
administrative expenses total $90,000 per year.

TechnoSide’s management can’t understand why profits tripled during Year 2 when sales
dropped by 20%, and why a loss was incurred during Year 3 when sales recovered to previous
levels.

**Submission Due Date: 16/12/2023** 5

Required:

1. Compute the unit product cost in each year under:

a) Absorption costing (Show how much of this cost is variable and how much is fixed)
b) Variable costing

2. Prepare a contribution format variable costing income statement for each year.
3. Refer to the absorption costing income statements, reconcile the variable costing and

absorption costing net operating incomes for each year.
4. Refer again to the absorption costing income statements, explain why net operating income

was higher in Year 2 than it was in Year 1 under the absorption approach, in light of the fact
that fewer units were sold in Year 2 than in Year 1.

5. Refer again to the absorption costing income statements, explain why the company suffered
a loss in Year 3 but reported a profit in Year 1, although the same number of units was sold
in each year.

6. Assume that the company must obtain additional financing. As a member of top
management, which of the income statements above would you prefer to take with you to
negotiate with the creditor? Why?

Note: You can use Microsoft Excel software to prepare income statement and other calculations.