Assaye Eshetu ID MBAO-4613-16A

Financial and Managerial Accounting
Assignment 01
By Assaye Eshetu Kamo
ID MBAO/4613/16A
Submitted to: Abraham Amanuel (Ph.D.)

1. Fill in the missing amounts in each of the four case situations below.Each
case is independent of the others.
a. Assume that only one product is being sold in each of the four
following case situations:
Case Units Sold Sales Variable Contribution Fixed Net Income
Expenses Margin per Expenses (Loss)
Unit
1 20,000 $ 220,00 $ 140,000 $A $ 55,000 $ B
2 C 147,000 D 8 34,000 8,000

3 15,000 E 75,000 12 F 14,000
4 8,000 320,000 G H 110,000 (30,000)
Answer:-
Case Units Sold Sales Variable Contribution Fixed Net Income

Expenses Margin per Expenses (Loss)
Unit
1 20,000 $ 220,00 $ 140,000 $4 $ 55,000 $ 1.25
2 1 147,000 146,992 8 34,000 8,000

3 15,000 225,000 75,000 12 166,000 14,000
4 8,000 320,000 240,000 10 110,000 (30,000)
2. ABC Manufacturing Corp. is using 10,OOO units of part no. 300 as a

component to assemble one of its products. It costs the company $19 per unit to
produce it internally, computed as follows:
Direct materials $ 42,000

Direct labor 46,000
Variable overhead 42,000
Fixed overhead 60,000
Total Cost 190,000
An outside vendor has just offered to supply the part for $15 per unit. If
the company stops producing this part, one-third of the fixed overhead
would be avoided. Should the company make or buy? (Show calculation to
support your decision).
Answer:-
10,0000
Out side purchase price Make buy
Direct material $42,000 $150,000($15x10,000)
Direct labor $46,000
Variable overhead $42,000
Fixed overhead avoided $18,000
$148,000
As indicated above, the company is better off making the part.
3. Products A and B are produced jointly in Department Z. Each product can be

sold as is at the split-off point or processed further. During January,
Department Z recorded a joint cost of $150,000. The following data for
January are available:
Product Quantity Selling price per unit Costs after Split-off
At split-off If processed further

A 10,000 Units $5 $8 10,000
B 20,000 Units $ 1.50 $4 20,000
Analyse whether individual products should be processed beyond the

split-off point, using: (That means support your answer with the
followingformat of calculations):
(a) Should the firm sale at split off point or processed further.
Answer;-
For analyzing whether individual product should be processed beyond the split we must
be using
a. The total project approach(or comparative statement approach)
b. The incremental (difference) approach
c. The opportunity cost approach
For product A.
_______a_________ b__________
at split off at completion diffrence (increment)
Sales $50,000 $80,000 $30,000
Costs -------- $10,000 $80,000
__________________________ __________
Net revenue $50,000 $70,000 $(50,000)
_______c_________
If processed
Sales $80,000
Costs --------
Additional $10,000
Opportunity cost of not
Selling at a split off $50,000
__________________________
Gain $20,000
Based on any one of the above three methods, product A should be sold the
split of point.
For product B.
_______a_________ b__________
at split off at completion diffrence (increment)
Sales $30,000 $80,000 $50,000
Costs -------- $20,000 $20,000
__________________________ __________
Net revenue $30,000 $60,000 $30,000
_______c_________
If processed
Sales $80,000
Costs --------
Additional $20,000
Opportunity cost of not
Selling at a split off $30,000
__________________________
Gain $30,000
Product B should be processed further.
4. Relay Corporation manufactures batons. Relay can manufacture 300,000 batons

a year at a variable cost of $ 600,000 and a fixed cost of $400,000. Based on
Relay’s predictions, 240,000 batons will be sold at the regular price of $5
each. In addition, a special order was placed for 60,000 batons to be sold at a
25 percent discount off the regular price. By what amount would income be
increased or decreased as a result of the special order? (Show the step to
support your decision)
Answer;-
Frist, let’s calculate the variable cost per baton
Variable cost per baton= total variable cost/total baton
= $60,000/300,000 =$2.00
Next, let’s calculate the spelling price for the special order
Special order price = Regular price x (1-Discount rate)
= $5 * (1-0.25)=$3.75
Now, let’ calculate contribution margin per baton= selling price – variable cost baton
=$3.75-$2.00 =$1.75
Finally let’s calculate the total increase or decrease in operation income due to the special order.
Change in operating income = contribution margin per baton * Number of special order
= $1.75*60,000=$105,000
So, the campany operating income would be increased by $105,000as a result of the special order.

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Financial and Managerial Accounting

By Assaye Eshetu Kamo

Submitted to: Abraham Amanuel (Ph.D.)

1 20,000 $ 220,00 $ 140,000 $A $ 55,000 $ B

2 C 147,000 D 8 34,000 8,000

Case Units Sold Sales Variable Contribution Fixed Net Income

1 20,000 $ 220,00 $ 140,000 $4 $ 55,000 $ 1.25

2 1 147,000 146,992 8 34,000 8,000

2. ABC Manufacturing Corp. is using 10,OOO units of part no. 300 as a

Direct materials $ 42,000

3. Products A and B are produced jointly in Department Z. Each product can be

At split-off If processed further

Analyse whether individual products should be processed beyond the

4. Relay Corporation manufactures batons. Relay can manufacture 300,000 batons

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