ACC2103 MANAGERIAL ACCOUNTING 2022
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DIPLOMA IN MANAGEMENT STUDIES (JANUARY – MARCH 2022)
ACC2103 MANAGERIAL ACCOUNTING
CA1: INDIVIDUAL ASSIGNMENT
QUESTION 1 (12 MARKS)
Extrema Company supplied the following data for January 2022.
Purchase ofmaterials $ 5,000
Materials inventory (beginning balance) A
Materials inventory (ending balance) 1,000
Materials used B
Direct labour 7,000
Factory supervision 1,500
Factory supplies 1,250
Total manufacturing costs 15,500
Work in process inventory (beginning balance) 1,200
Work in process inventory (ending balance) C
Cost ofgoods manufactured 14,600
Sales 37,500
Selling expenses 4,000
Administrative expenses E
Finished goods inventory (beginning balance) 4,500
Finished goods inventory (ending balance) 5,000
Cost ofgoods sold D
Operating income 8,700
Required:
Solve for the missing amounts (A, B, C, D, E), by present the above information in the following properly classified financial statements:
(a) Statement of cost of goods manufactured
(b) Statement of cost of goods sold
(c) Income statement
(Highlight /label the solved missing amounts clearly in thefinancial statements.)
QUESTION 2 (16 MARKS)
ENZ Manufacturing Company manufactures water filters at a selling price per unit of $60.
The following information is available regarding costs at 7,000 units and 10,000 units of monthly production for 2021:
Production volume 7,000 10,000
Factory supervisors' salaries $12,000 $12,000
Direct labour 56,000 80,000
Indirect labour and materials 21,000 30,000
Depreciation on machinery 10,000 10,000
Electricity 15,000 21,000
Direct materials 70,000 100,000
Rental of factory 16,000 16,000
Total $200,000 $269,000
Required:
(a)(i) Classify the cost (variable, fixed, or mixed) by writing the name of each cost under one of the following headings:
Variable Cost Fixed Cost Mixed Cost
xx xx xx
(a)(ii)Explain the cost behaviour of the costs classified under each of the above respective headings.
(6 marks)
(b) Develop a monthly cost formula for each of the mixed cost identified in part (a) above.
Show all workings.
(4 marks)
(c) Calculate the expected total costs for the first quarter of 2022 if ENZ forecasts to produce a total production volume of 28,000 units.
(6 marks)
QUESTION 3 (22 MARKS)
Y2L Ltd is a new company which has been set up to specialise in manufacturing a new type of tent for sale to youth groups using a recently developed synthetic material.
The forecast annual sales for 2022 are 2,560 tents. Production levels would be the same as the sales estimates.
The Sales Manager predicts that the tents can be sold at a price of $318 each.
Variable production costs, together with the overhead costs, are set out below:
Variable costs of production: Per tent ($)
Synthetic material ($2 per sq. metre) 20
Poles and pegs 6
Labour ($8 per hour) 40
Overheads:
Rent of factory premises $160,000 per year
Lease ofmachine $136,000 per year
Other overheads $87,000 per year plus $2 per tent
Required:
Calculate:
(a)
(i) Break-even point (in units and sales dollars); (ii) Margin of safety, MOS (in units);
(iii) Operating profit based on forecast yearly sales for 2022.
(Show all workings clearly.)
(8 marks)
(b) The Sales Manager makes the following proposal:
He forecasts that annual sales would increase by 10% if Y2L Ltd incurs an additional annual advertising expenditure of $45,490.
With the increase in marketing effort, he forecasts that the selling price could be increased to $329 per tent. Y2L Ltd is planning to source for cheaper raw materials from another supplier and expects material cost will reduce to $1.50 per square metre.
To meet the increase in production from the additional sales and to further improve the profitability, Y2L Ltd plans to increase the direct wage rate from $8 to $12 per hour as part of a productive deal that could cut the labour hours needed from 5 hours to 3 hours per tent for all units to be produced and sold.
The Sales Manager is confident that the company is able to achieve the 10% increase in sales forecast for 2022 if his proposal is implemented.
Assume all other costs remain unchanged.
Required:
(i) Re-compute the requirements as in part (a)(i) to (iii).
(7 marks)
(ii) Briefly explain the significance of the break-even point and margin of safety with
reference to Y2L Ltd.
Analyse and comment on your answers by comparing the calculations in parts (a)(i) to (iii) and (b)(i).
Based on your analysis, should Y2L Ltd accept the Sales Manager’s proposal?
(7 marks)
2022-01-18