Assignment Question(s):(Marks 15) Q1. What Assignment Question(s):(Marks 15)
Posted: January 13th, 2023
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Assignment Question(s):(Marks 15)
Q1. What Assignment Question(s):(Marks 15)
Q1. What information is relevant for decision-making? Differentiate between relevant and irrelevant information for decision-making. Support your answer by explaining the information in the context of an organization.
(3 Marks)
Note: Your answer must include suitable examples of relevant and irrelevant information for decision-making. (Week 2, Chapter 1)
Answer:
Q2. A&D Ltd. is in the manufacturing of wooden products and makes several wooden items. The following values are related to a particular wooden item:
Particulars
Selling price per unit
SAR 1,100
Variable cost per unit
SAR 400
Total fixed costs
SAR 500,000
Estimated next year’s budgeted sales
1,200 units
You are required to calculate:(4 Marks)
BEP in units and BEP in sales SAR
Degree of operating leverage
Margin of safety in units
Margin of safety in SAR (Week 4, Chapter 3)
Answer:
a)
= 500,000 / (1,100 – 400) = 714.29
Variable cost per unit (V) = 400
Selling price per unit (P) = 1,100
= 500,000 / [(1,100 – 400) / 1,100] = 785,714.29
b)
First, compute contribution margin and profit at 1,200 units:
Contribution margin = (1,100 – 400) x 1,200 = 840,000
Profit = 840,000 – 500,000 = 340,000
Degree of operating leverage:
= Contribution margin / Profit = 840,000 / 340,000 = 2.47
c)
Margin of safety in units = Actual or estimated units of activity – BEP in units = 1,200 – 714.29 = 485.71
d)
Margin of safety in revenues = Actual or estimated sales SAR – BEP in sales SAR = (1,100 * 1,200) – 785,714.29 = 1,320,000 – 785,714.29 = 534,285.71
Q3. The information below was derived from the 2018 records of HCS Company:(4 Marks)
Month
Units Produced
Total Cost (SAR)
May
4,350
44,200
June
4,700
44,700
July
5,000
45,000
August
5,400
45,400
September
5,650
47,500
October
5,900
57,150
November
3,450
40,000
December
4,100
40,600
Using the high-low method of analysis, calculate
Variable cost
Fixed cost, and
Determine a cost function. (Week 3, Chapter 2)
Answer:
Use the high – low method to determine a cost function:
The highest level took place in on October (number of units produced 5,900; total cost 57,150)
But the lowest activity occurred on November (number of units 3,450; cost 40,000)
Use the data for November and October: –
VC per unit = difference between two costs / difference between two number of units produced
= (57,150 – 40,000) / (5,900 – 3,450) = 17,150 / 2,450 = 7
Use the data for November: –
TC = FC + VC (VC = VC per unit * number of units produced)
40,000 = FC + 7 * 3,450
FC = 40,000 – 24,150 = 15,850
TC = 15,850 + 7 * Q (cost function)
Q4. The following transactions are related to a particular job. You are required to make the necessary journal entries.(4 Marks)
The materials storeroom receives a shipment of direct and indirect materials that cost SAR 50,000.
Materials are sent to the stamping and assembly areas.The cost of the direct materials is SAR 5,600 and the cost of the indirect materials is SAR 3,200.
Wages totaling SAR 7,000 are accrued; 60% of these costs are direct labor and 40% are indirect labor.
Overhead costs are allocated to work in process using an allocation rate of 250% of direct labor costs.
Job no. 25, with a total cost of SAR 8,500 is completed.
Job no. 25 is shipped to the customer, who is billed for SAR 15,000.
(Week 5, Chapter 5)
Answer:
Accounts
DR
CR
Raw materials inventory
50,000
Accounts payable
12,000
(Receiving materials that cost SAR 50,000)
Accounts
DR
CR
Work in process inventory
5,600
Overhead cost control
3,200
Raw materials inventory
8,800
(Materials sent to stamping and assembly direct materials costs is SAR 5,600 and indirect materials is SAR 3,200.)
Accounts
DR
CR
Work in process inventory
4,200
Overhead cost control
2,800
Wages Payable
7,000
(Wages totaling SAR 7,000 are accrued; 60 % of these costs are direct labor and 40% are indirect labor)
Accounts
DR
CR
Work in process inventory
17,500
Overhead cost control
17,500
(Overhead costs are allocated to work in process using an allocation rate of 250% of direct labor costs)
Accounts
DR
CR
Finished goods inventory
8,500
Work in process inventory
8,500
(Job with a total cost of SAR 8,500 is completed)
d)
Accounts
DR
CR
Accounts receivable
15,000
Cost of goods sold
8,500
8,500
Sales
15,000
Finished goods inventory
8,500
(Job is shipped to the customer who is billed for SAR 15,000)
information is relevant for decision-making? Differentiate between relevant and irrelevant information for decision-making. Support your answer by explaining the information in the context of an organization.
(3 Marks)
Note: Your answer must include suitable examples of relevant and irrelevant information for decision-making. (Week 2, Chapter 1)
Answer:
Q2. A&D Ltd. is in the manufacturing of wooden products and makes several wooden items. The following values are related to a particular wooden item:
Particulars
Selling price per unit
SAR 1,100
Variable cost per unit
SAR 400
Total fixed costs
SAR 500,000
Estimated next year’s budgeted sales
1,200 units
You are required to calculate:(4 Marks)
BEP in units and BEP in sales SAR
Degree of operating leverage
Margin of safety in units
Margin of safety in SAR (Week 4, Chapter 3)
Answer:
a)
= 500,000 / (1,100 – 400) = 714.29
Variable cost per unit (V) = 400
Selling price per unit (P) = 1,100
= 500,000 / [(1,100 – 400) / 1,100] = 785,714.29
b)
First, compute contribution margin and profit at 1,200 units:
Contribution margin = (1,100 – 400) x 1,200 = 840,000
Profit = 840,000 – 500,000 = 340,000
Degree of operating leverage:
= Contribution margin / Profit = 840,000 / 340,000 = 2.47
c)
Margin of safety in units = Actual or estimated units of activity – BEP in units = 1,200 – 714.29 = 485.71
d)
Margin of safety in revenues = Actual or estimated sales SAR – BEP in sales SAR = (1,100 * 1,200) – 785,714.29 = 1,320,000 – 785,714.29 = 534,285.71
Q3. The information below was derived from the 2018 records of HCS Company:(4 Marks)
Month
Units Produced
Total Cost (SAR)
May
4,350
44,200
June
4,700
44,700
July
5,000
45,000
August
5,400
45,400
September
5,650
47,500
October
5,900
57,150
November
3,450
40,000
December
4,100
40,600
Using the high-low method of analysis, calculate
Variable cost
Fixed cost, and
Determine a cost function. (Week 3, Chapter 2)
Answer:
Use the high – low method to determine a cost function:
The highest level took place in on October (number of units produced 5,900; total cost 57,150)
But the lowest activity occurred on November (number of units 3,450; cost 40,000)
Use the data for November and October: –
VC per unit = difference between two costs / difference between two number of units produced
= (57,150 – 40,000) / (5,900 – 3,450) = 17,150 / 2,450 = 7
Use the data for November: –
TC = FC + VC (VC = VC per unit * number of units produced)
40,000 = FC + 7 * 3,450
FC = 40,000 – 24,150 = 15,850
TC = 15,850 + 7 * Q (cost function)
Q4. The following transactions are related to a particular job. You are required to make the necessary journal entries.(4 Marks)
The materials storeroom receives a shipment of direct and indirect materials that cost SAR 50,000.
Materials are sent to the stamping and assembly areas.The cost of the direct materials is SAR 5,600 and the cost of the indirect materials is SAR 3,200.
Wages totaling SAR 7,000 are accrued; 60% of these costs are direct labor and 40% are indirect labor.
Overhead costs are allocated to work in process using an allocation rate of 250% of direct labor costs.
Job no. 25, with a total cost of SAR 8,500 is completed.
Job no. 25 is shipped to the customer, who is billed for SAR 15,000.
(Week 5, Chapter 5)
Answer:
Accounts
DR
CR
Raw materials inventory
50,000
Accounts payable
12,000
(Receiving materials that cost SAR 50,000)
Accounts
DR
CR
Work in process inventory
5,600
Overhead cost control
3,200
Raw materials inventory
8,800
(Materials sent to stamping and assembly direct materials costs is SAR 5,600 and indirect materials is SAR 3,200.)
Accounts
DR
CR
Work in process inventory
4,200
Overhead cost control
2,800
Wages Payable
7,000
(Wages totaling SAR 7,000 are accrued; 60 % of these costs are direct labor and 40% are indirect labor)
Accounts
DR
CR
Work in process inventory
17,500
Overhead cost control
17,500
(Overhead costs are allocated to work in process using an allocation rate of 250% of direct labor costs)
Accounts
DR
CR
Finished goods inventory
8,500
Work in process inventory
8,500
(Job with a total cost of SAR 8,500 is completed)
d)
Accounts
DR
CR
Accounts receivable
15,000
Cost of goods sold
8,500
8,500
Sales
15,000
Finished goods inventory
8,500
(Job is shipped to the customer who is billed for SAR 15,000)
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