YOM

MBA Students Individual assignments

BY Haile Mariyam Sewagegn, ID No: - GSRB/1551/17

10-Feb-25

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 YOM
MBA Students Individual assignments Questions with
answer
Instruction: Attempt all questions and write the answers clearly

1. Distinguish The Differences Between Financial Accounting and

Management Accounting?

The key differences between financial accounting and management accounting are as follows:

1. Purpose:

• Financial Accounting: Primarily aimed at providing financial information to external

stakeholders (e.g., investors, creditors, regulators) to assess the financial health and
performance of a company.
• Management Accounting: Focused on providing internal management with information
to support decision-making, planning, controlling, and performance evaluation.

2. Users:

• Financial Accounting: External users, such as shareholders, creditors, government

agencies, and investors, rely on financial statements.
• Management Accounting: Internal users, such as company managers, executives, and
department heads, who use it for day-to-day decision-making and strategic planning.

3. Reports:

• Financial Accounting: Prepares standardized financial statements, including the income

statement, balance sheet, and cash flow statement, following regulatory guidelines like
GAAP or IFRS.
• Management Accounting: Prepares customized reports, such as budget forecasts,
variance analysis, cost reports, and performance metrics, tailored to the needs of internal
management.

4. Time Orientation:

• Financial Accounting: Primarily historical in nature, focusing on recording past

transactions and providing a retrospective view of the company's financial position.
• Management Accounting: Often forward-looking, focusing on projections, budgets,
forecasts, and planning to help with future decision-making.

5. Regulatory Requirements:

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 • Financial Accounting: Subject to strict regulatory standards (GAAP, IFRS), ensuring
consistency and comparability in financial reporting for external users.
• Management Accounting: Not regulated by any external standard and is flexible,
allowing companies to tailor reports to suit internal needs.

6. Level of Detail:

• Financial Accounting: Provides an overall summary of the company’s financial

performance at an aggregate level.
• Management Accounting: Provides more detailed, granular information, such as
departmental costs, product costs, and profitability analysis.

7. Frequency:

• Financial Accounting: Typically reports on a quarterly or annual basis as required by

law or accounting standards.
• Management Accounting: Reports can be generated on a daily, weekly, monthly, or as-
needed basis depending on the needs of the management.

8. Focus:

• Financial Accounting: Focuses on the company as a whole, aggregating financial data

into overall reports.
• Management Accounting: Focuses on specific areas of the business, such as
departments, products, or projects, providing insights to improve operational efficiency
and profitability.

9. Accuracy vs. Relevance:

• Financial Accounting: Accuracy is paramount, as the reports need to be consistent and

reliable for external users.
• Management Accounting: Emphasizes relevance, even if it means using estimates or
non-standard measures that are more useful for internal decision-making

2. What are the three primary financial statements with which we

communicate financial accounting information?

The three primary financial statements used to communicate financial accounting information
are:

1. Income Statement (Profit and Loss Statement): Shows the company’s revenues,
expenses, and profits or losses over a specific period, reflecting its financial performance.
2. Balance Sheet (Statement of Financial Position): Provides a snapshot of the company’s
assets, liabilities, and equity at a specific point in time, reflecting its financial position.

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 3. Cash Flow Statement: Details the inflows and outflows of cash from operating,
investing, and financing activities over a period, showing the company’s liquidity and
cash management.

3. Is internal accounting information primarily historical or future-

oriented? How does that compare with financial accounting
information?

Internal accounting information is generally future-oriented, though it may include some

historical data. It is primarily used for planning, decision-making, and performance
evaluation, which focus on forecasting, budgeting, and analyzing future scenarios to guide
management in operational and strategic decisions.

In contrast, financial accounting information is primarily historical, as it reports on the

company's past financial performance and position. The focus is on accurately recording and
presenting past transactions in the form of financial statements for external stakeholders.

So, while internal accounting helps plan for the future, financial accounting primarily reflects
what has already occurred.

4. The major focus of accounting information is to facilitate decision

making.
1. As an investor in a company, what would be your primary
objective?
2. As a manager of a company, what would be your primary objective?
3. Is the same accounting information likely to be equally useful to you
in these two different roles?

As an investor in a company, your primary objective would be to assess the company's

financial health and its profitability potential. You would focus on metrics such as
revenue growth, profitability, return on investment (ROI), and cash flow to determine
whether the company is a good investment opportunity and likely to generate returns on
your investment.

As a manager of a company, your primary objective would be to use accounting

information to optimize operations, make informed decisions, and ensure the company's
financial stability and growth. You would focus on cost management, budgeting,

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 performance analysis, and forecasting to drive operational efficiency and achieve the
company’s goals.

Is the same accounting information likely to be equally useful to you in these two
different roles?

o Not entirely. While both roles rely on accounting information, the focus and the
way they use it are different:
▪ As an investor, you would be more concerned with overall financial
performance and long-term trends in areas like profitability, return on
equity, and debt levels.
▪ As a manager, you would focus more on detailed operational data like
cost analysis, budgets, cash flow projections, and departmental
performance, as this helps you manage day-to-day decisions and drive the
business forward.

Although the same financial data is used in both roles, the perspective and the depth of
analysis differ based on the specific objectives of each role.

5. A term used to describe a cost that jointly belongs to more than one cost
object?

common cost (or shared cost) is a cost that benefits more than one cost object and cannot be
directly attributed to just one. For example, factory electricity costs used by multiple
departments.

6. A term used to describe a cost that can be easily traced to an individual

cost object?

A direct cost is a cost that can be easily traced to an individual cost object, such as materials or
labor directly associated with a product.

7. What is the other name’s of product cost?

Product costs are also known as "inventoriable costs" or "manufacturing costs." These costs
are incurred to produce goods and include direct materials, direct labor, and manufacturing
overhead.

8. The cost of all production labor that can be directly traced to a unit of
manufactured product ?

The cost of all production labor that can be directly traced to a unit of manufactured product is
called "direct labor".

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 9. The labor incurred in support of multiple cost objects?

The labor incurred in support of multiple cost objects is called "indirect labor." This includes
tasks like supervision or maintenance that benefit more than one product or department.

10. Is internal accounting information primarily historical or future-

oriented? How does that compare with financial accounting
information?

Internal accounting information is primarily historical in nature. It focuses on the detailed

recording of past transactions, costs, revenues, and expenses. This type of information is used by
management for decision-making, performance evaluation, and operational control. Internal
reports such as cost reports, budgets, and performance analysis are based on historical data and
are used to manage day-to-day operations efficiently.

In contrast, financial accounting information is generally more historical as well, as it reflects

the company's financial performance over a specific period, typically through financial
statements like the income statement, balance sheet, and cash flow statement. However, it is
oriented toward external stakeholders (investors, regulators, creditors) and must adhere to
standardized principles such as GAAP or IFRS.

That said, internal accounting often includes forward-looking components like budgets,
forecasts, and projections, which help management plan for the future, while financial
accounting tends to be more focused on accurately reporting past performance.

11. The major focus of accounting information is to facilitate decision

making.
1. As an investor in a company, what would be your primary
objective?
2. As a manager of a company, what would be your primary objective?
3. Is the same accounting information likely to be equally useful to you
in these two different roles?

1. As an investor in a company, what would be your primary objective?

As an investor, your primary objective would likely be to maximize your return on

investment. This means you'd want to assess the company's profitability, financial stability, and
growth potential to make informed decisions about whether to buy, hold, or sell your shares.
You'd be interested in information that helps you:

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 • Evaluate the company's past performance: How has the company performed
financially over time? What are its trends in revenue, expenses, and profits?
• Predict future performance: What are the company's prospects for future growth and
profitability? What are the potential risks and opportunities?
• Compare with other investments: How does this company's performance and potential
compare to other investment opportunities?

2. As a manager of a company, what would be your primary objective?

As a manager, your primary objective would likely be to ensure the company's success and
long-term sustainability. This involves making decisions related to:

• Operational efficiency: How can we optimize our processes, reduce costs, and improve
productivity?
• Resource allocation: How should we allocate our resources (financial, human, etc.) to
maximize their effectiveness?
• Strategic planning: What are our long-term goals, and how can we achieve them? This
includes decisions about new product development, market expansion, and competitive
strategy.
• Performance evaluation: How can we measure our progress towards our goals and
identify areas for improvement?

3. Is the same accounting information likely to be equally useful to you in these two
different roles?

While some accounting information is relevant to both investors and managers, the emphasis and
specific details they need can differ.

• Investors primarily focus on financial accounting information, such as financial

statements (income statement, balance sheet, cash flow statement) and key financial
ratios. They use this information to assess the company's overall financial health and
potential for future returns.
• Managers utilize both financial accounting information and managerial accounting
information. Managerial accounting focuses on internal information, such as cost
accounting, budgeting, and performance analysis. This helps managers make operational
decisions and track progress towards goals.

12. If services have been rendered to customers during the current

accounting period but no revenue has been recorded and no bill has
been sent to the customers, why is an adjusting entry needed? What
types of accounts should be debited and credited by this entry?

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 If services have been rendered to customers during the current accounting period but no
revenue has been recorded and no bill has been sent, an adjusting entry is necessary to
comply with the accrual basis of accounting. Under this principle, revenue must be
recognized when it is earned, not when cash is received or a bill is issued. Failing to make
this adjustment would result in understated revenue and accounts receivable, leading to
inaccurate financial statements.

The adjusting entry should debit Accounts Receivable (an asset account) to record the
amount owed by the customer and credit Service Revenue (a revenue account) to
recognize the earned income. This ensures that the financial statements accurately reflect
the company’s revenue and receivables for the period.

15. What is meant by the term unearned revenue? Where should an

unearned revenue account appear in the financial statements? As the
work is done, what happens to the balance of an unearned revenue
account?

Unearned Revenue Definition:

Unearned revenue refers to money received by a business for goods or services that have not yet
been delivered or performed. It is a liability because the company still owes the customer the
product or service.

Examples:

• A subscription service paid in advance (e.g., magazine subscription)

• Advance payment for construction work or event services

Where Should Unearned Revenue Appear in the Financial Statements?

Unearned revenue is reported on the balance sheet as a current liability if the service or
product is expected to be delivered within one year. If it is for a longer period, it may be
classified as a long-term liability.

What Happens to Unearned Revenue as Work is Done?

As the business performs the service or delivers the product, the unearned revenue is reduced,
and the corresponding amount is recognized as revenue in the income statement.

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 • Decrease in Unearned Revenue Account (liability)
• Increase in Revenue Account (income statement)

Example:

• A company receives $10,000 for a 10-month service contract. Each month, $1,000 is
recognized as revenue, and the unearned revenue account decreases by $1,000.

Let me know if you want this in a Word document or an example in journal entry format!

16. Tana manufacturing had the following activities during 2014

Direct materials:
Beginning inventory $ 40,000
Purchases 123,200
Ending inventory 20,800
Direct manufacturing labor 32,000
Manufacturing overhead 24,000
Beginning work-in-process inventory 1,600
Ending work-in-process inventory 8,000
Beginning finished goods inventory 48,000
Ending finished goods inventory 32,000

Required:

a. What is the cost of direct materials used during 2014?

b. What is cost of goods manufactured for 2014?
c. What is cost of goods sold for 2014?
d. What amount of prime costs was added to production during 2014?
e. What amount of conversion costs was added to production during 2014?

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Given Data:

Direct Materials:

• Beginning Inventory: $40,000

• Purchases: $123,200
• Ending Inventory: $20,800

Direct Manufacturing Labor: $32,000

Manufacturing Overhead: $24,000

Work-in-Process Inventory:

• Beginning: $1,600
• Ending: $8,000

Finished Goods Inventory:

• Beginning: $48,000
• Ending: $32,000

Required Calculations:

a. Cost of Direct Materials Used

Formula:
Cost of Direct Materials Used=Beginning Inventory+Purchases−Ending Inventory

Calculation:
40,000+123,200−20,800=142,400

Cost of Direct Materials Used: $142,400

b. Cost of Goods Manufactured (COGM)

Formula:
COGM=Direct Materials Used+Direct Manufacturing Labor+Manufacturing Overhead+Beginni
ng WIP Inventory−Ending WIP Inventory

Calculation:
142,400+32,000+24,000+1,600−8,000=192,000

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Cost of Goods Manufactured (COGM): $192,000

c. Cost of Goods Sold (COGS)

Formula:
COGS=COGM+Beginning Finished Goods Inventory−Ending Finished Goods Inventory

Calculation:
192,000+48,000−32,000=208,000

Cost of Goods Sold (COGS): $208,000

d. Prime Costs

Formula:
Prime Costs=Direct Materials Used+Direct Manufacturing Labor

Calculation:
142,400+32,000 = 174,400

Prime Costs: $174,400

e. Conversion Costs

Formula:
Conversion Costs=Direct Manufacturing Labor+Manufacturing Overhead\

Calculation:
32,000+24,000=56,000

Conversion Costs: $56,000

Summary of Results:

• Cost of Direct Materials Used: $142,400

• Cost of Goods Manufactured (COGM): $192,000
• Cost of Goods Sold (COGS): $208,000
• Prime Costs: $174,400
• Conversion Costs: $56,000

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 17. Season Shoppe sells wedding dresses. The cost of each dress is
comprised of the following: Selling price of $1,000 and variable
(flexible) costs of $400. Total fixed (capacity-related) costs for the
Shoppe are $90,000.

1. What is the contribution margin per dress?

2. What is the total profit when 200 dresses are sold?
3. How many dresses must sell to reach the breakeven point?
4. How many dresses must sell to yield a profit of $60,000?

Given Data:

• Selling price per dress: $1,000

• Variable cost per dress: $400
• Fixed costs: $90,000

A. Contribution Margin per Dress

Contribution Margin per Dress = Selling Price - Variable Cost

1,000−400=6001,000 - 400 = 6001,000−400=600

Contribution Margin per Dress: $600

B. Total Profit for 200 Dresses Sold

Total Profit = (Contribution Margin × Number of Dresses) - Fixed Costs

= (600×200) −90,000=120,000−90,000=30,000

Total Profit for 200 Dresses Sold: $30,000

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C. Breakeven Point (in number of dresses)

Breakeven Point (in units) = Fixed Costs ÷ Contribution Margin per Dress

90,000÷600=15090,000 ÷ 600 = 15090,000÷600=150

Breakeven Point: 150 dresses

D. Number of Dresses to Yield a Profit of $60,000

Number of Dresses Required = (Fixed Costs + Desired Profit) ÷ Contribution Margin per Dress

= (90,000+60,000) ÷600=150,000÷600=250

Number of Dresses Required to Yield $60,000 Profit: 250 dresses

Final Summary:

• Contribution Margin per Dress: $600

• Total Profit for 200 Dresses Sold: $30,000
• Breakeven Point: 150 dresses
• Dresses Required for $60,000 Profit: 250 dresses

18. XY Company sells several products. Information of average revenue

and costs are as follows:

Selling price per unit $20.00

Variable costs per unit:
Direct materials $4.00
Direct manufacturing labor $1.60
Manufacturing overhead $0.40
Selling costs $2.00
Annual fixed costs $96,000

1. Calculate the contribution margin per unit.

2. Calculate the number of units that must sell each year to break even.

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 3. Calculate the number of units that must sell to yield a profit of
$144,000.

Given Data:

• Selling price per unit: $20.00

• Variable costs per unit:
o Direct materials: $4.00
o Direct manufacturing labor: $1.60
o Manufacturing overhead: $0.40
o Selling costs: $2.00
• Total annual fixed costs: $96,000

1. Contribution Margin per Unit

Contribution Margin per Unit = Selling Price - Total Variable Costs

Total Variable Costs=4.00+1.60+0.40+2.00=8.00

Contribution Margin per Unit=20.00−8.00=12.00

Contribution Margin per Unit: $12.00

2. Number of Units to Break Even

Break-Even Units = Fixed Costs ÷ Contribution Margin per Unit

=96,000÷12.00=8,000 units96,000 ÷ 12.00 = 8,000

Break-Even Units: 8,000 units

3. Number of Units to Yield a Profit of $144,000

Required Units = (Fixed Costs + Desired Profit) ÷ Contribution Margin per Unit

= (96,000+144,000) ÷12.00=240,000÷12.00=20,000 units

Units Required for $144,000 Profit: 20,000 units

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Final Summary:

• Contribution Margin per Unit: $12.00

• Break-Even Units: 8,000 units
• Units Required for $144,000 Profit: 20,000 units

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