COC MODEL LEVEL IV THEORY

PROJECT ONE
Maintain inventory records
Sunshine trading has the following data of items S-26 for the
month January
Jan.1. Inventory,100 units at Br 20
10. Purchase 80 units at Br 21
30. Purchase 100 units at Br 22
The physical count on January 31 shows that 150 units are on
hand and the Unit selling price was 24 Br
Task 1.1 if the company uses period inventory system determine
COGS ending inventory and gross profit, using:
A. FIFO method
B. LIFO method
C. Average cost method
Solution
A. FIFO method
Most recent, Jan.30 purchas 100 units at Br 22 = 2,200
Next recent, Jan 10 purchase 50 units at Br 21 = 1,020
Ending inventory, January 31 150 units Br 3,250
To calculate cost goods sold
Beginning inventory, Jan 31........Br 2,000
Add: purchase (1,680+2,200)..................3,880
Cost goods available for sales in
January......................................5,880
Less: Ending inventory Jan................3,250
Cost of goods sold ...............Br 2,630
Gross profit = sales - COGS
= [(130*24)-2,630]
= 3,120-2,630
Gross profit = 490
 B LIFO METHOD
The cost of the 150 units in ending inventory is determined as
follows:
Beginning inventory,Jan1, 100 units at Br 20 = 2,000
Next earliest costs,Jan 10 50 units at Br 21 = 1,050
Ending inventory Jan 31, 150 units = 3,050
To calculate cost of goods sold
Beginning inventory,Jan 1,..............2,000
Add: purchases (1,680+2,200)..............3,880
Cost of goods available for sale.......5,880
Less: ending inventory........................(3,050)
Cost of goods sold..............................2,830
Gross profit = sales - COGS
[(130*24)-2,830]
3,120-2,830
Gross profit = 290
C. Average cost method
The weighted average units cost is determined as follows:
Average unit cost = total cost of unit available for sales
Units available for sales
Average units cost = 5,880Br/280

Average units cost = 21 Br

The cost of ending inventory
= 150 units * 21 Br = 3,150 Br
To calculate cost of goods sold
Beginning inventory........................2,000
Add: purchases(1,680+2,200)...................3,880
Cost of goods available for sales....5,880
Less: ending inventory.....................(3,150)
Cost of goods sold ...........................2,730
Gross profit = sales-COGS
 =[(130*24)-2,730]
Gross profit = 390 Br
PROJECT TWO
Cost accounting and planning
Eyoha advertising and events is planning to prepare 2019 new
year trade exhibition at two different venues.
A. Addis Ababa exhibition center which has the following fixed
cost of 2,000 Br 3,500 Br and 2,500 Br for rent administration and
marketing and music band plus a charge of Br 80 per person for its
own catering of meals and drinks
B. Millennium hall with a fixed rental cost of Br 6,000. Eyoha
advertising and events hire caterer for meals and waiters to serve
drinks and meals at Br 60 per person
The enterprise has also budget a fixed cost of Br 3,500 for
administration and marketing. The music band will cost Br 2,500
(fixed). Tickets will be sold at Br 120 per person for both venues.
Required
Task 2.1 the breakeven points for each location in terms of tickets
sold
Task 2.2 compute the operating income on the event if there are
A. 150 attendant
B. 300 attendant
Task 2.3 How many tickets should be sold for the two venues to
have the same operating income?
Solution
Addis Ababa exhibition center
Task 2.1. Calculate the break even quantity?
Units contribution margin = unit selling price- unit variable cost
UCM at A.A Exhibition center 120-80 = 40Br
Millennium hall
Calculate units contribution margin = USP- UVC
 = 120-60 = 60

Addis Ababa Exhibition center Millennium Hall

Fixed Cost Fixed Cost
Rental cost 2,000 Rental cost 6,000
Marketing cost 3,500 Marketing cost 3,500
Band cost 2,500 Band cost 2,500
Total 8,000 Total 12,000
Calculate break even quantity in terms of tickets
Break even quantity = total fixed cost
unit contribution margin
BEQ at A.A Exhibition center = 8,000/ 40= 200 tickets
BEQ at Millennium hall = 12,000/60 = 2,00 tickets
Task 2.2 operating income?
A. 150 attendants
Addis Ababa exhibition center
Operating income = TR-TC
= [PQ-(UVC+TFC)]
= [(120*150)-(60*150+12,000)]
= [18,000-(9,900+12,000)]
= (3,000) loss
Millennium hall Operating income
= [(120*150) -{(80*150+8,000}]
= 18,000 - 20,000 =(2,000)loss
B 300 attendants
Addis Ababa exhibition center
Operating income
= [(120*300) - {(80*300) +8,000}]
= 36,000 - 32,000 = 4,000 profit
Millennium hall
= [(120*300) - {(60*300) + 12,000}]
=. 36,000 -30,000
 6,000 profit
Task 2.3
120Q - 80Q - 8,000 = 120Q - 60Q - 12,000
40Q-8,000 = 60Q - 12,000
60Q - 40Q = 4,000
Q = 4,000/20
Q = 200 Tickets
PROJECT THREE
Maintain inventory system
For the Month of March Waliya company has record of the
following inventory information.
March 1, inventory 200 units @ Br 9
>> 10, purchase 200 units @ Br 10
>> 21,purchase 400 units @ Br 11
>> 30, purchase 100 units @ Br 12
At the end of the month the physical count shows 300 units are on
hand. The company uses periodic inventory system and FIFO
costing Method.
Required
Task 3.1 What will be the cost of goods sold and inventory on
hand.
Task 3.2. Assuming sales price of Br 15 for merchandise inventory
calculate the gross profit for the month.
Task 3.3. The company has incurred general expense of 2,500 Br
including 900 Br entertainment expense during the physical year.
Calculate business profit tax using 30% tax rate.
Solutions
Task 3.1. To calculate cost of inventory on hand using periodic
FIFO
Most recent, purchase jan 30....100 units @ 12 = 1,200
Next recent purchase, Jan 21.....200 units @11 = 2,200
 Cost of ending inventory January 30, 3000 units = 3,400 Br
To calculate cost of goods sold
Beginning inventory, March 1.............1,800
Add: (2,000+4,400+1,200).............................7,600
Cost of goods available for sales...........9400
Less: Ending inventory..........................(3,400)
Cost of goods sold.............................6,000
Task 3.2. Gross proftGross profit = sales - COGS
= (600*15)- 6,000 Gross profit = 9,000 - 6,000
Gross income =3,000
Task 3.3. Business profit tax?
Gross profit...........................3,000
Less general expense...................(2,500)
Profit before tax............. .....500
Add entertainment expense..........900
Profit before tax..................1,400
Business profit tax (0.3*1,400)...420Br
PROJECT FOUR
The following transactions occurs at the month of June to produce
products A,B,and C.
1. Raw materials
A. Timber...................Br 650
B. Metal....................Br 900
C. Leather.................Br 4,650
2. Materials issued and direct labour charged to production
Product Direct Material Direct Labour
Table 1 377.5 310
Table 2 930 360
Table 4,050 325

3 factory over head is 80% of direct labour cost

 4 finished goods were sold for Br 8,200
5 all goods produced were sold
Required
Task 4.1. Record the necessary journal entries
Task 4.2. Calculate cost of each product
Task 4.3. Calculate the cost of goods sold
Task 4.4. Calculate gross profit
Solutions
Task 4.1 Journal entries?
1 Raw materials purchase
Timber.................650
Metal..................900
Leather...............4,650
Cash.......................6,200
2 Direct materials issued for production
Work in process
Table 1...............377.50
Table 2...............930
Table 3...............4,050
Material inv.................5,357.50
3 direct labour charged to production
Work in process
Table 1................310
Table 2................360
Table 3................325
Wages payable.........995
4 Factory over head
Table 1 (310*83).......257.30
Table 2 (360*83)......298.80
Table 3 (325*83)......269.75
Factory over head............825.85
 5 Finished goods
Finished goods inventory........7,178.35
Work in process..................7,178.35
6 selling finished goods
Cash 8,200
Sales 8,200

7
COGS 7,178.35
Finished goods 7,178.35
inventory

COGS 7,178.35
Finished goods inventory 7,178.35
Task 4.2. Calculate cost of each product
Job Direct Direct FOH Total
Material Labour
Table 1 377.5 310 257.3 944.8
Table 2 930 360 298.8 1,588.80
Table 3 4,050 325 269.75 4,644.79

Task 4.3. Calculate cost of goods manufactured

Direct material used.....................5,357.50
Add: direct labour cost..........................995
Add: factory over head..........................825.85
Total manufacturing cost...............7,178.35
Cost of goods manufactured.........7,178.35
Task 4.4. Calculate gross profit?
Gross profit = sales - COGS
Gross profit = (8,200 - 7,178.35) = 1,021.65 Br
PROJECT FIVE
 Prepare operational budget
Zerga Company manufacture two products, Table and chair
Desired inventory Table Chair
Desired ending inv. For each month 2,000 1,000
Estimated ending inv For January. 1,000 1,500
Sells price per units 120 80
Estimate sales unit
January February March. Total
Table. 4,000. 2,000. 1,000. 7,000
Chair. 4,000. 1,500. 4,000. 9,500
Desirred Inventory Timber Metal
for raw materials
Desired ending 8,000 4,000
inv,for each month
Estimated Beginning 6,000 3,000
inv,of January

Desired inventory for raw material Timber Metal

Desired ending inventory for each month 8,000 4,000
Estimated beginning inventory of January 6,000 3,000
To manufacture products,the company uses the following raw
materials
.
Materials Unit Cost Table Chair
Timber 5 Br 8 Units 5 Unit
Metal 15 Br 8 Units 6 Unit

Required
Task 5.1. Prepare sales budget for the 1st quarter.
Task 5.2. Prepare production budget for the 1st quarter
Solution
Task 5.1 Zerga company
Table Sales budget for the 1st quarter
January February March Total
Estimated 4,000 2,000 1,000 7,000
Sales Unit
❌ Unit 120 120 120
Selling
Price
Total Sales 480,000 240,000 120,000 840,000
Revenue

Zerga Company
Sales budget for the 1st quarter
January February March Total
Estimated 4,000 1,500 4,000 9,500
Sales Unit
❌ Unit 80 80 80
Selling
Price
Total Sales 320,000 120,000 320,000 760,000
Revenue

Task 5.2. Production budget?

Zerga Company
Table. Production budget for the 1st quarter
January February March Total
Estimated 4,000 2,000 1,000 7,000
Sales unit
Add ending 2,000 2,000 2,000
finished inv
Total Units 6,000 4,000 3,000
required
Less (1,000) (2,000) (2,000)
Beginning
finished inv
Scheduled 5,000 2,000 1,000
production

Zerga Company
Chair. Production budget for the 1st quarter
January February March Total
Estimated 4,000 1,500 4,000
Sales Unit
Add ending 1,000 1,000 1,000
finished inv
Total Units 5,000 2,500 5,000
required
Less (1,500) (1,000) (1,000)
Beginning
finished inv
Scheduled 3,500 1,500 4,000
production

ETHIOPIAN BARA BARAAN

DAGAAGDE HAA JIRAATU!!

ENDED !!