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ACCG70011 Assignment 2 Accounting

The document contains solutions for an accounting assignment, detailing the schedule of cost of goods manufactured, contribution format income statement, and calculations for contribution margin ratio, break-even sales, target operating profit, and margin of safety. It includes specific financial figures for direct materials, labor, overhead costs, and various expenses related to sales and production. The calculations provide insights into the financial performance and cost structure of the business.

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29 views5 pages

ACCG70011 Assignment 2 Accounting

The document contains solutions for an accounting assignment, detailing the schedule of cost of goods manufactured, contribution format income statement, and calculations for contribution margin ratio, break-even sales, target operating profit, and margin of safety. It includes specific financial figures for direct materials, labor, overhead costs, and various expenses related to sales and production. The calculations provide insights into the financial performance and cost structure of the business.

Uploaded by

dishanthakur0077
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ACCG70011 – Finance and Managerial Accounting

Assignment #2 Solutions

Chapter 2

Schedule of cost of goods manufactured: -

Direct Materials:
Beginning raw materials inventory $18,000
Add Purchases of raw materials $102,000
Raw materials available for use $120,000
Deduct Ending raw materials inventory $22,000
Raw materials used in production $98,000

Direct Labor $81,000

Manufacturing overhead:
Insurance, factory $15,000
Indirect labor $92,000
Utilities, factory $20,000
Supplies $1000
Depreciation, factory $26000
Total overhead costs = $154,000

Total Manufacturing Costs $333,000


Add Beginning work in process $5,000
inventory
Deduct ending work in process $24,000
inventory
Cost of goods manufactured = $314,000
Chapter 3

1. Contribution Format income statement for November

House of pianos, Inc.

Income statement

For the month ended November 30th

Total Per Unit

Sales (89 pianos × $2,700 per set) $240,300 $2,700


Variable expenses:
Cost of goods sold 35,600 400
(89 Pianos × $400 per set)
Delivery of Pianos 5,340 60
(89 Pianos × $60 per set)
Sales commissions (4% × $240,300) 9,612 108
Clerical (89 Pianos × $40 per set) 3,560 40
Total variable expenses 54,112 608
Contribution margin 186,188 $ 2,092
Fixed expenses:
Advertising $1,300
Sales salaries $4,000
Utilities $600
Depreciation of sales facilities $6,000
Executive salaries $13,000
Depreciation of office equipment $900
Clerical $2,300
Insurance $590
Total fixed expenses 28,690
Operating income $ 157,498
2. The high-low method to determine the mixed cost equation Sis discussed as
follows: -

Units Costs
40 $3,400
High activity level
Low activity level 24 $2,200
Change 16 $ 1,200

Variable cost = Change in cost / Change in activity

= $1200/16
= $75 units

Fixed cost element = Total cost –variable cost element

= $3,400- (75 * 40)


= $3,400 - $3,000
= $400

The cost formula is Y=a + b X

Y=the total mixed cost


a= the total fixed cost
b= The variable cost per unit of activity
X=The level of activity

Therefore, Y= 400 + 75X


Chapter 4

1. The Contribution Margin Ratio for “You Rang?” is as follows: -

Total sales $160,000


Total variable expenses 96,000
= Total contribution margin $ 64,000
÷ Total sales $1,60,000
= CM ratio 40%
Or 0.4

2. The break-even level of sales in dollars is:

Fixed expenses / CM ratio

= $34,000/ 0.4

=$85,000

Break even points in units = Fixed expenses / CM per unit


= $34,000/ $8
= 4,250 units or boomerangs

3. The Target Operating Profit for “You Rang?” in both units and sales dollars
are as follows: -

Unit sales required to earn before-tax target profit is

(Fixed expenses + Target profit) / CM per unit


= ($80,000+34,000) / $8
= 14,250 units or boomerangs
In sales dollars =

(Fixed expenses + Target Profit) / CM Ratio

= (34,000 + 80,000)/ 0.4

= $285,000

4. The company’s Margin of Safety expressed in units, sales dollars, and as a


percentage is as follows: -

 Total sales - Break even sales= Margin of safety in dollars


1,60,000 - 85,000 = $75,000

 Margin of safety in dollars / total sales = margin of safety in


percentage
= 75,000 / 1,60,000
= 46.88%
 Margin of safety in units = total sales in units – break even sales in
units
= 8,000 – 4,250
=3,750 units or boomerangs.

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