Cost management

Assignment Question(s):(Marks 10)

Q1. Examine with suitable examples, how “organization strategy provides valuable contribution in achieving organization vision?” Give an example of a Saudi company and assess two examples of organizational strategies and operating plans.(2 Marks)


Q2. X Ltd. manufactures plastic products and sells them for SAR 350 per unit. The firm’s variable cost per unit is SAR 90, while its total fixed costs are SAR 110,000. The company expects to sell 1,800 units in the coming year. Calculate the following:(2 Marks)

a) Degree of operating leverage

b) Margin of safety in units

c) Margin of safety in SAR value

d) Margin of safety in percentage


Q3. What is regression analysis and how does it help in estimating a cost function? Interpret your results with a numerical example.(2 Marks)


Q4. A plastic product is manufactured by SLT Company. For total costs, the company estimates the cost function. The number of units is the cost driver. The following details were gathered:

(2 Marks)

Month Units Total Cost (SAR)
March 4,370 44,300
April 4,680 44,600
May 5,000 45,000
June 5,300 45,400
July 5,600 47,500
August 5,900 57,500
September 3,400 40,000
October 4,100 40,625

Use the high-low analysis method and answer the following:

a) Calculate Variable Costs and fixed costs.

b) Determine the cost function.


Q5. The following information is related to CTH Corporation which manufactures a single product: (2 Marks)

Selling price per unit: SAR 800

Variable cost per unit: SAR 240

Total fixed cost: SAR 400,000

You are required to calculate:

a) Contribution margin per unit and contribution margin ratio.

b) The break-even point in units and break-even point is sales value SAR.

c) Pretax profit of the company if it sells 1,400 units of the product.

d) The number of units required to sell to reach a target pretax profit of SAR 200,000?

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