# 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 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:### Production and Sales Details| | Classic | Luxury ||---------------------------|--------------------|-------------------|| Annual production and sales – units | 12,000 | 12,000 || Sales price per unit | OMR 65 | OMR 87 || Batch size – units | 1,000 | 50 || Direct labour time per unit – hours | 2 | 2.5 || Direct labour rate per hour | OMR 8 | OMR 8 || Direct material cost per unit | OMR 22 | OMR 32 || Number of special parts per unit | 1 | 4 || Number of set-ups per batch | 1 | 1 || Number of separate material issues from stores per batch | 1 | 1 || Number of sales invoices issued per year | 50 | 240 |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:### Overhead Cost Analysis| Cost Type | OMR | Cost Driver ||---------------------------|--------|---------------------------------|| Set-up cost | 73,200 | Number of set-ups || Special part handling cost| 60,000 | Number of special parts || Customer invoicing cost | 29,000 | Number of invoices || Material handling cost | 63,000 | Number of batches || Other overheads | 108,000| Labour hours |### Required(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. (ii) Activity-based costing methods

Part-AThe traditional costing system is an accounting method used to determine the cost of making…

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q