ACCG70011 Assignment 2 Accounting
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.