Assignment on

Management Accounting

Md. Showkat Islam 4/9/23 Reg No-2021200387

 Ans to The Question no-1

Particulars TK TK
Prevention Cost
Quality Circles
46,000
Quality Training 140,000
94,000
Appraisal Cost
Depreciation of test material
75,000
Test and inspection of incoming material 139,000
64,000
Internal Failure Cost
Rework labor and overhead
11,000
Net cost of scrap
12,000
Re-entering data because of keying errors 75,000
52,000
External Failure
Cost
Product recalls
71,000
Cost of field servicing and handling complaints 96,000
25,000
Total
450,000

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 Ans to The Question no-2

Particulars For 4000 unit For 5000 unit

Direct Material 99.20 99.20
Direct Labor 45.50 45.50
Manufacturing Overhead 94.00 77.60
Total Manufacturing overhead 376,000.00 388,000.00

Variable cost per unit = (388000-376000)/1000

=12
Fixed cost =Total Cost-Total Variable cost
=388000-(5000*12)
=328000

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 Ans to The Question no-3

a. At the break-even, the total contribution margin equals total fixed expenses.

b. Contribution margin ratio =unit contribution margin / Selling price

= ($20 - $12) ÷ $20
= 40%
c. Increase in sales $20,000 20000
CM Ratio 40%
net operating income 8000

d. Increase in advertising expenses 6000

Desired increase in net operating income 2000
Total required contribution margin 8000
= Total required contribution margin/ contribution
Required unit sales
margin per unit
=8000/1000
=8

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 Ans to The Question no-4

a
1. Capital-intensive
Unit sales to break even =Fixed expenses/unit CM
= (2440000+500000)/(30-14-2)
=2940000/14 Units
=210000 Units
2. Labor-intensive
Unit sales to break even =Fixed expenses/unit CM
= (1320000+500000)/(30-17.6-2)
=1820000/10.40 Units
=175000 Units

b.
Profit =Sales-variable expenses-Fixed expenses
Capital-intensive:
Profit = 30Q-16Q-2940000
= 14Q-2940000
Labor-intensive: = 30Q-19.60Q-1820000
= 10.40Q-1820000
The Profits equals
when:
14Q-2940000= 10.40Q-1820000
3.6Q=1120000
Q=1120000/3.60
Q=311111
c.
Capital-intensive:
Sales (250000units*30 per unit) =7500000
Variable expenses (250000units*16 per unit) =4000000
Contribution Margin =3500000
Fixed expenses =2940000
Net operating income =560000

Degree of operating leverage= Contribution margin/ Net operating

income
=3500000/5600000
=6.25
Labor-intensive
Sales (250000units*30 per unit) =7500000
Variable expenses (250000units*19.60 per unit) =4900000
Contribution Margin =2600000
Fixed expenses =1820000
Net operating income =780000

Degree of operating leverage= Contribution margin/ Net operating

income
=2600000/780000
=3.33

The decision hinges upon the expected sales of the new product. If
management is confident that sales will be in excess of 311,111 units,
then the capital-intensive method should be used. If sales are likely to
fall below this number, then the labor-intensive method should be used.
Management should also be aware that net operating income will be
more volatile with the capital-intensive method since it has higher
d. operating leverage.

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 Ans to The Question no-5

a) Variable costing method

Sales =91*1400 127400
Cost of goods sold =64*1400 89600 Cost of goods sold per unit:
Manufacturing Margin 37800 Direct material 49
Selling Expenses =7*1400 9800 Direct Labor 13
Contribution Margin 28000 Variable manufacturing overhead 2
Fixed Expenses: 64
Overhead 14400
Selling Expenses 7000
Operating Income 6600

b) Absorption costing method

Sales =91*1400 127400 Cost of goods sold per unit:
Cost of goods sold =72*1400 100800 Direct material 49
Gross margin 26600 Direct Labor 13
Variable manufacturing
Selling & Administrative expenses: overhead 2
Variable seling &
administrative 9800 Fixed Manufacturing overhead 8
Fixed seling &
administrative 7000 16800 72
9800

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 Ans to The Question no-6

Preparation of Production budget for Bledsoe Supply Corporation for Quarter 3

Particulars July August September Total Q3

(a)Expected sales 40,000 50,000 38,000 128,000

(b)Planned Closing Inventory of Finished goods 12,500 9,500 7,500 7,500

(c)Total production Required (a)+(b) 52,500 59,500 45,500 135,500

(d)Opening Inventory of Finished goods 10,000 12,500 9,500 10,000

(e)Units to be produced (c)-(d) 42,500 47,000 36,000 125,500

Explanation with working notes-

The above table is calculated using the following formula

Units to be produced = Expected Sales + Closing inventory- Opening inventory
Closing inventory is to maintained at 25% of the following month’s expected sales and it is calculated for
each month as follows
For the Month of July = Expected sales of August * 25%
= 50,000*25%
= 12,500
For the Month of August = Expected sales of September * 25%
= 38,000*25%
= 9,500
For the Month of September = Expected sales of October* 25%
= 30,000*25%
= 7,500
For the Inventory for Quarter 3 =Closing inventory of September month
= 7,500

Opening inventory each month determined as follows

Opening inventory of July = Closing inventory of June
= Expected Sales of July * 25%
= 40000*25%
 = 10,000
Opening inventory of August = Closing inventory of July
= 12,500
Opening inventory of September = Closing inventory of August
=9,500
Opening inventory of Q3 = Opening inventory of July
=10,000

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 Ans to The Question no-7

a.
Particulars November December

Sales 360,000 380,000

Schedule of Expected Cash Collections

Accounts Receivable 74,000

November sales 270,000 72,000

December sales - 285,000

Total Cash collections 344,000 357,000

b
Particulars November December January

Cost of goods sold 234,000 247,000 227500

Merchandise Purchase Budget

November sales 93,600.0

December sales 148,200.00 98,800.0

January sales - 136500

Total purchases 241,800.0 235,300.0

Disbursements for merchandise 240000 241,800

c.
November December

Cash receipts 344,000 357,000

Cash disbursements:

Disbursement for merchandise 240000 241,800.0

Other monthly expenses 21900 21900

Total Cash disbursements 261900 263,700.0

Excess (deficiency) of cash available over
disbursements 82,100 93,300
d.
Particulars November December
Sales 360000 380000
Bad debt expenses 18000 19000

Cost of goods sold 234,000.00 247,000.00

Gross Margin 108,000.00 114,000.00

Other monthly expenses 21900 21900
Depreciation 20000 20000

Net operating income 66,100.00 72,100.00

e.
Statement of Financial Position
31-Dec
Assets:
Cash 191400 Opening Balance+ Excess cash of Nov & Dec
Sales*Receivable percentage in the following
Accounts receivable 76000 month
(Net of allowance for uncollectible accounts)
Inventory 136500
Property, plant and equipment 1026000 Depreciation minus
(Net of $540,000 accumulated depreciation)

1,429,900.0
Total Assets 0 -

Liabilities and Stockholders’ Equity

Accounts payable 235300 December purchase
Common stock 640000 Remain Still

Retained earnings 554,600.00

Total Liabilities and Stockholders’ 1,429,900.0

Equity 0

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