Assignemnt II

Maryland International College
Assignment II for Managerial Accounting part

1. Inventories January 1 December 31
Materials Br. 165,000 Br. 210,000
WIP Br. 306000 Br. 290,000
Finished Goods Br. 298,000 Br. 284,000
Additional Information:
Advertising Exp Br. 148,000
Depr. Expe-Office Equip. 41,900 (50% of which is factory dep)
Direct Labor 360,000
Heat, Light, and Power-Factory 8,500
Materials Purchased 325,000 (60% on credit)
Salaries Exp. 195,000 (24% of which is office exp)
Property Taxes 24,800 (70% of which is factory exp)
Sales 1,630,000
Miscellaneous Exp. 4,200 (20% of which is office exp)
Required:
• Prepare the statement of cost of goods manufactured
• Determine the cost of goods sold
• Compute Net income/net loss
2. Consider the following information to answer questions from 33 to 35:

Alem Company manufactures 30,000 units of part X each year for use on its production line.
The following are the costs of making part X:
Total Costs(30,000 Cost per unit
Direct material units) Br. 240,000 Br.4
Direct labor 180,000 3
Variable factory overhead 180,000 3
(FOH)FOH
Fixed 180,000 3
Total manufacturing costs Br. 780000 Br.13
Another manufacturer has offered to sell the same part to Alem for Br.12 each. The fixed
overhead consists of depreciation, property taxes, insurance, and supervisory salaries. The entire
fixed overhead would continue if the Alem Company bought the component except that the cost
of Br.75, 000 pertaining to some supervisory and custodial personnel could be avoided.
1) Determine the relevant cost of making one unit of product X.
A. 12
B. 12.5
C. 13
D. 7
2) What is the relevant Cost of buying one unit of product X
A. 12
B. 12.5
C. 13
D. 7
2. ABC Company produces and sells a single product. The selling per unit of the product is Birr 72
and the contribution margin ratio is 28% .The Company has budgeted to have annual fixed
expenses of Birr 280,000.
Required:
a) Using the equation method determine the breakeven point in units. 13,889
b) Using the contribution margin method, determine the breakeven point in sales birr.
1millon
c) Determine and interpret the absolute and relative margin of safety assuming that the
company is currently selling 16,000 units annually.
152,000, 10%
d) The company’s management set an annual target before tax profit of Birr 56,000.
Determine the number of units and the sales Birr that must be sold to achieve the planned
target before tax profit.
1200,000
e) The company’s management set an annual target after tax profit of Birr 42,000 where the
tax rate is 40%. Determine the number of units and the sales Birr that must be sold to
achieve the planned after tax profit.
3. ABC Ltd. manufactures three products R, S and T. Sales, cost and operating income information
for the preceding month for each separate product line and for the total are given in Birr as
follows.
Product Line
R S T Total
Sales 60,000 50,000 70,000 180,000
Variable costs 40,000 25,000 45,000 110,000
Contribution Margin 20,000 25,000 25,000 70,000
Less Fixed expenses:
Salaries 10,000 8,000 7,000 25,000
Advertising 4,000 3,000 5,000 12,000
Depreciation – Fixture 3,000 4,000 2,000 9,000
Rent 4,000 4,000 5,000 13,000
Insurance 3,000 2,000 1,000 6,000

Total fixed expenses 23,000 19,000 20,000 65,000
Operating income (4000) 4,000 5,000 5,000
ABC Ltd. is concerning about its poor performance and considering whether or not dropping the
production and sells of product R, which incurs losses of Birr 3000.
Additional information:
♦The salaries expense represents salaries paid to employees working directly on a product
♦The advertising expense represents product-advertising specific to each product line.
♦The depreciation expense represents depreciation on fixtures used for display of various product lines
and has no resale value.
♦The rent expense represents rent on the entire building and is allocated to product lines.
The monthly rent Birr 13,000 for total depreciation is fixed under long-term lease agreement.
♦ The insurance expense represents insurance carried on inventories whit in each product line.
Required: Should ABC Ltd. Drop the product line R? Show your calculations.
4. The Award Plus Company (APC) manufactures medals for winners of athletic events and other
contests. Its manufacturing plant has the capacity to produce 10,000 medals each per month.
Current production and sales are 7,500 medals per month. The company normally charges $ 150
per medal. Cost information for the current activity level is as follows:
Variable cost:
Direct materials $ 262,500
Direct labor 300,000
Variable cost ( Set ups, material handling, quality control, etc.
That vary with the number of bathes, 150 bathes * 500 per batch) 75,000
Fixed manufacturing costs 275,000
Fixed marketing costs 175,000
Total costs 1,087,500

The Award Plus Company has just received a one time only special order for 2500 medals at $
100 per medal. Accepting the special order would not affect the company’s regular business.
Award Plus Company makes medals for its existing customers in batch sizes of 50 medals. The
special order requires Award Plus to make the medals in 25 bathes of 100 each.
Required:
1. Should APC accept this special order? Show your calculations
End of the worksheet

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Maryland International College

Assignment II for Managerial Accounting part

2. Consider the following information to answer questions from 33 to 35:

Sales 60,000 50,000 70,000 180,000

Variable costs 40,000 25,000 45,000 110,000

Contribution Margin 20,000 25,000 25,000 70,000

Less Fixed expenses:

Salaries 10,000 8,000 7,000 25,000

Advertising 4,000 3,000 5,000 12,000

Depreciation – Fixture 3,000 4,000 2,000 9,000

Rent 4,000 4,000 5,000 13,000

Insurance 3,000 2,000 1,000 6,000

Operating income (4000) 4,000 5,000 5,000

♦The advertising expense represents product-advertising specific to each product line.

Direct materials $ 262,500

Direct labor 300,000

Variable cost ( Set ups, material handling, quality control, etc.

Fixed manufacturing costs 275,000

Fixed marketing costs 175,000

Total costs 1,087,500

1. Should APC accept this special order? Show your calculations

End of the worksheet

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