College of Business and Economics Department of Accounting and Finance Assignment For The Course Cost and Management Accounting Ii

WOLLO UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
ASSIGNMENT FOR THE COURSE COST AND MANAGEMENT ACCOUNTING II
1. Student’s name………………………………….
2. Id. No…………………………………………….
3. Tutor’s name and signature
PART I- Discussion Qustions
1. What are the assumptions need to be considered in CVP analysis?

2. Compare and contrast flexible budget and static budget.
3. Compare and contrast flexible budget and static budget
4. Explain relations ships among components of master budget.
PART II- Workout Questions
Show the necessary steps and computations for the following questions
1. Pappy Company manufactures a product that sell for birr 20 each. Variable costs are 12 per unit.
Fixed costs for the relevant range of (0-100,000) units amounted to birr 252,000. Sales for the year
ended December 31, 2009 amounted to 40,000 units.
Required:
a) Compute the company’s break even sales in birr and in units using equation, contribution and
graphic approach.
b) For next year, variable costs are expected to increase by 10 %; determine the new break even sales
and the expected income for the coming year if the company can sale 50,000 units.
2. Serra Furniture is an Elite desk manufacture. It manufactures two products.
1. Executive desks – Oak desks
2. Chairman desks – Red Oak desks
The budgeted direct cost inputs for each production in 2008 are as follows:
Particulars Executive line Chairman line
Direct material:
Oak top 16Sqf -----
Red Oak top --- 25Sqf
Oak legs 4 legs ----
Red Oak legs -- 4 legs

Direct Labor: 3 Hr 5 Hr
Unit data pertaining to the direct materials for March 2008 as follows:
Actual beginning direct material’s inventory (2008)
Particulars Executive line Chairman Line
Oak top 320 Sqf -----
Red Oak top --- 150 Sqf
Target ending direct material inventory at March 31, 2008.
Oak top 192Sqf -----
Red Oak top --- 200Sqf
Unit cost data for direct cost inputs pertaining to February 2008 and March 1998 are:
Particulars February 1998 March 1998
Oak top (per sqf) Bir.18.00 Bir.20.00
Red Oak top (per sqf) Bir.23.00 Bir.25.00
Oak top (per leg) Bir.11.00 Bir.12.00
Red oak legs (per leg) Bir.17.00 Bir.18.00
Manufacturing labor (per Hr) Bir.30.00 Bir.30.00
Manufacturing overhead (both variable and fixed) is allocated to each desk on the basis of budgetary
direct manufacturing labor hours per desk. The budgeting variable manufacturing overhead rate for
March 1998 is Bir.35.00 per Direct manufacturing labor Hour. The budgeted fixed manufacturing
overhead for March 1998 is Bir.42, 500. Both variable and fixed manufacturing overhead cost is allocated
to each unit of finished goods.
Data relating to finished goods inventory for March 1998 are
Beginning inventory 20 units 5 units
Beginning inventory Bir.10, 480 Bir.4850
Target ending inventory 30 units’ 15 units
Budgeted sale for March 1998 are 740 units of the executive line and 390 units of the chairman
line. The budgeted selling prices per unit in March 1998 are Bir.1, 020 for an executive line desk
and Bir.1600 for a chairman line desk.
Take the following assumptions in your answer:
a) Works in Process inventories are negligible and ignored.

b) Direct material inventory and finished goods inventory are determined using the FIFO
method.
c) Unit costs of direct material purchased and finished goods are constant in March 1998.
Required:
Prepare the following budget for March, 2008
1. Revenue budget
2. production budget in units
3. Direct material usage budget and direct material purchase budget
4. Direct manufacturing labor budget
5. Ending inventory budget
6. Cost of goods sold budget
3. Zola Company uses standard costs and flexible budget. The purchasing agent is responsible for
material price variance and the production manager is responsible for all other variances. Operating
data for the past week are summarized as follows;
Finished units produced……………………….5,000
Direct material: purchases………………….10,000 pounds at birr 15 per pound; standard allowed per
unit produced, 1 pound at birr 16 per pound and 5,400 pounds are actually used.
Direct labour: actual costs, 8,000 hours at birr 30.50, standard allowed per good unit produced, 1 ½
hours; standard price per direct labour hour, birr 30
Variable manufacturing: actual costs, birr 88,000. Budget formula is birr 10 per standard direct labour
hour.
Required: compute
A. Material purchase price variance

B. Material efficiency variance
C. Direct labour price variance
D. Direct labour efficiency variance
E. Variable manufacturing over head spending variance
F. Variable manufacturing over head spending variance
4. The balance sheet of Adama Super market on Sene 30, 2001 is as follows
Assets
Cash birr……………………………………………………..8,000
A/receivable (net of uncollectible birr 2,000)……………….38,000
Inventory……………………………………………………..6,000
Plant assets………………………birr 100,000
Less:Accumulated Depreciation………60,000 .40,000
Total assets………………………………………………birr 102,000
Liability and capital
A/payable…………………………………………birr, 82,500
Adama Capital………………………………………….19,250
Total liabilities and capital birr……………………..102,000
Additional information;
A) sales are budgeted as follows;
Hamle…………………………………birr 110,000
Nehassie…………………………………....120,000
B) collections are xpected to be 60 % in the month of sale , 38 % the next month, and 2% uncollectible
C) The gross profit is 1/3 of cost of goods sold. Purchases each month are 75 % of the next months
projected sales. The purchases are paid in full the next month.
D) Other costs for each month, paid in cash, are expected to be birr 16,500. depreciation each month is
birr 5,000
Required: determine;
a) the budgeted cash collection for Hamle, 2001
b) the budgeted income(loss) before income taxes for Hamle 2001
c) the projected balance f A/payable on Hamle 30,2001
5. The following standard costs pertains to a component part manufactured by GYB Company. Direct
materials…………………….birr 4
Direct labour……………………………6
Applied factory over head……………..20
Standard cost per unit……………..birr 30
Factory over head is applied at birr 1 per standard machine hour. Fixed capacity cost is 40% of
applied factory over head and is not affected by any make or buys decision. It would cost birr 25 per
unit to buy the 10,000 units of parts from outside supplier. The company can rent the idle facility will
be used to make the parts and earns annual rent income of birr 20,000. the company also will incur
supervisors salary of birr 10,000 if it make the parts.
Required; which option is better? Make or buy? What qualitative factors do you consider before
final make or buy decision is made?

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WOLLO UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

PART I- Discussion Qustions

1. What are the assumptions need to be considered in CVP analysis?

Particulars Executive line Chairman line

Oak top 16Sqf -----

Red Oak top --- 25Sqf

Oak legs 4 legs ----

Red Oak legs -- 4 legs

Actual beginning direct material’s inventory (2008)

Particulars Executive line Chairman Line

Oak top 320 Sqf -----

Red Oak top --- 150 Sqf

Oak legs 100 legs ----

Red Oak legs -- 40 legs

Target ending direct material inventory at March 31, 2008.

Particulars Executive line Chairman Line

Oak top 192Sqf -----

Red Oak top --- 200Sqf

Oak legs 80 legs ----

Red Oak legs -- 44 legs

Particulars February 1998 March 1998

Oak top (per sqf) Bir.18.00 Bir.20.00

Red Oak top (per sqf) Bir.23.00 Bir.25.00

Oak top (per leg) Bir.11.00 Bir.12.00

Red oak legs (per leg) Bir.17.00 Bir.18.00

Manufacturing labor (per Hr) Bir.30.00 Bir.30.00

Data relating to finished goods inventory for March 1998 are

Particulars Executive line Chairman Line

Beginning inventory 20 units 5 units

Beginning inventory Bir.10, 480 Bir.4850

Target ending inventory 30 units’ 15 units

Take the following assumptions in your answer:

a) Works in Process inventories are negligible and ignored.

Prepare the following budget for March, 2008

A. Material purchase price variance

A/receivable (net of uncollectible birr 2,000)……………….38,000

Plant assets………………………birr 100,000

Less:Accumulated Depreciation………60,000 .40,000

Total assets………………………………………………birr 102,000

Liability and capital

Total liabilities and capital birr……………………..102,000

A) sales are budgeted as follows;

a) the budgeted cash collection for Hamle, 2001

b) the budgeted income(loss) before income taxes for Hamle 2001

c) the projected balance f A/payable on Hamle 30,2001

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