Explain how work the Activity-Based Costing (ABC), what is the challenge and how we can resolve it?

Q2.During June, Mushrif Corporation purchased SAR 76,000 of raw materials on credit to add to its raw materials inventory. A total of SAR 81,000 of raw materials was requisitioned from the storeroom for use in production. These requisitioned raw materials included SAR 5,000 of indirect materials.

Required:
Prepare journal entries to record the purchase of materials and their use in production.
Q3.ABC corporation applying normal costing system has provided the following data from its activity-based costing system as follows: (Amounts in SAR)

 

Activities

Estimated Overhead Costs

Expected Cost Drivers Quantities

Cost Drivers

 

Assembly

120,500

10,000

Number of Machine Hours

 

Processing Orders

80,500

7,000

Number of Orders

 

Inspection

75,500

5,000

Number of   Inspection Hours

 

Total

276,000

22,000

Actual Data concerning the company’s product X appears below:

Annual unit production and sales 500 units

Annual machine hours 5,000

Annual number of orders4,500

Annual inspection hours 3,000

Direct material cost150 per unit

Direct labor cost100per unit

Required:

Compute total costs per unit for the product Xusing activity-based costing system