Q1. Spaghetti is a family-owned restaurant in KSA.The corporate office provides 2 kinds of services (maintenance and personnel) to 3 locations (Riyadh, Jeddah and Dammam).

In a recent accounting period, the cost for maintenance was $25,000 and for personnel was $15,000.  Maintenance costs are allocated on the basis of square feet, and personnel costs are allocated based on the basis of number of employees.

Number of

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If the restaurant uses the direct method and the costs of Riadh location, Jeddah location and Dammam location are $15,000, $12,000 and $10,000 respectively, calculate the total costs allocated to each restaurant location.

Q 2 The cost to produce one unit of the product is:

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The company’s normal capacity is 100,000 units.The figures given above are for 80,000 units.

The company has received a special offer for 20,000 units for a price of $ 36 per unit from a foreign customer.

Advice the manufacturer on whether the order should be accepted.

Q 3 Taha Compagny produces three products: Product A, Product B, and Product C.

During the year the joint costs of processing the three products were $400,000.Production and sales value information were as follows:

Sales Value

ProductUnitsat Split-OffSeparable CostsSelling Price

A400,000 $20 per unit $ 20 per unit$40 per unit

B400,000 $18 per unit $ 15 per unit$28 per unit

C800,000$12 per unit $14 per unit$17 per unit

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a.Allocate the joint costs using the physical output method.

b.Allocate the joint costs using the net realizable value method.

c. Allocate the joint costs using sales value at split- off point method.