This document contains three accounting problems. Problem I involves variable and absorption costing for a new product. It requires calculating unit product costs and preparing income statements under both costing methods. Problem II is a contribution margin analysis and break-even calculation for a company with different product lines. It involves preparing income statements and calculating a new break-even point. Problem III is a comprehensive profit planning problem involving preparing a cash budget for a company over a quarter based on budgeted income statements, sales and collection information, inventory purchases and payments, cash balances, planned purchases and dividends.
This document contains three accounting problems. Problem I involves variable and absorption costing for a new product. It requires calculating unit product costs and preparing income statements under both costing methods. Problem II is a contribution margin analysis and break-even calculation for a company with different product lines. It involves preparing income statements and calculating a new break-even point. Problem III is a comprehensive profit planning problem involving preparing a cash budget for a company over a quarter based on budgeted income statements, sales and collection information, inventory purchases and payments, cash balances, planned purchases and dividends.
This document contains three accounting problems. Problem I involves variable and absorption costing for a new product. It requires calculating unit product costs and preparing income statements under both costing methods. Problem II is a contribution margin analysis and break-even calculation for a company with different product lines. It involves preparing income statements and calculating a new break-even point. Problem III is a comprehensive profit planning problem involving preparing a cash budget for a company over a quarter based on budgeted income statements, sales and collection information, inventory purchases and payments, cash balances, planned purchases and dividends.
This document contains three accounting problems. Problem I involves variable and absorption costing for a new product. It requires calculating unit product costs and preparing income statements under both costing methods. Problem II is a contribution margin analysis and break-even calculation for a company with different product lines. It involves preparing income statements and calculating a new break-even point. Problem III is a comprehensive profit planning problem involving preparing a cash budget for a company over a quarter based on budgeted income statements, sales and collection information, inventory purchases and payments, cash balances, planned purchases and dividends.
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I.
Theory (30%) 1. Please explain the meaning of managerial accounting. 2. Please describe the comparison of Financial Accounting and Managerial Accounting 3. Please explain the meaning and the uses of cost, and also the cost bahavior
II. Problem (70%)
Problem I : Variable & Absorption Costing Unit Product Costs and Income Statements (20%). Hign Country, Inc., produces and sells many recreational products. The company has just opened a new plant to produce a folding camp cot that will be marketed throughout the United States. The following cost and revenue data relate to May, the first month of the plant’s operation : Beginning inventory 0 Units produced 10,000 Units sold 8,000 Selling price per unit $75
Selling and administrative expenses
Variable per unit $6 Fixed (total) $200,000 Manufacturing cost Direct materials cost per unit $20 Direct labor cost per unit $8 Variable Manufacturing overhead cost per unit $2 Fixed Manufacturing overhead cost (total) $100,000 Management is anxious to see how profitable the new cam cot will be and has asked that an income statement be prepared for May. Required : 1. Assume that the company uses absorption costing. a. Determine the unit product cost. b. Prepare an income statement for May 2. Assume that the company using variable costing. a. Determine the unit product cost b. Prepare a contribution margin income statement for May
Problem II : CVP Analysis (20%)
Gold Star, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice ----Fragrant, White, and Loonzain. Budgeted sales by product and in total for the coming month are shown below :
Product White Fragrant Loonzanin Total Percentage 20% 52% 28% !00% of total sales Sales $150,000 100% $390,000 100% $210,000 100% $750,000 100% Variable 108,000 72% 78,000 expenses Contribution $42,000 28% $312,000 80% $126,000 60% $480,000 64% margin Fixed 449,280 expenses Net $30,720 operating income
Dollar sales to break even = Fixed Expenses / CM ratio = $449,280/0.64 = $ 702,000
A shown by these data, net operating income is budgeted at $ 30,720 for the month and break even sales at $ 702,000. Assume actual sales for the month total $750,000 as planned. Actual sales by product are White, $300,000; Fragrant , $180,000; and Loonzanin, $ 270,000. Required : 1. Prepare a contribution margin format income statement for the month based on actual sales data. Present the income statement in the format shown above. 2. Compute the break-even point in dollar sales for a month based on your actual data. 3. Considering the fact that company met its $750,000 sales budget for the month, the president is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in dollar sales are different from what was budgeted. Problem III : Profit Planning-Master Budget (40%) Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter :
a. Budgeted monthly absorption costing income statements for April – July are :
Selling adm expenses : Selling expenses 79,000 120,000 62,000 51,000 Administrative 45,000 52,000 41,000 38,000 expense * Total selling and 124,000 172,000 103,000 89,000 administrative expenses Net Operating $56,000 $98,000 $47,000 $31,000 income *includes $20,000mof depreciation each month
b. Sales are 20% for cash and 80% on account.
c. Sales on account are collected over a three-month period with 10% collected in the month of sale; 70% collected in the first month following the month of sale; and the remaining 20% collected in the second month following the month of sale. February’s sales totaled $200,000 and March’s sale totaled $300,000. d. Inventory purchases are paid for within 15 days. Therefore, 50% of a month’s inventory purchases.are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for inventory purchases during Marchbtotal $126,000.. e. Each month’s ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $84,000. f. Dividens of $49,000 will be declared and paid in April. g. Land costing $16,000 will be purchased for cash in May. h. The Cash balance at March 31 is $52,000; the company must maintain a cash balance of at least $40,000 at the end of each month. i. The company has an agreement with a local bank that allows the company to borrow increments of $ 1,000 at the beginning of each month, up to a total loan balance of $200,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.
Required : 1. Prepare a schedule of expected cas collection for April, May and June, and for the quarter in total. 2. Prepare the following for merchandise inventory : a. A merchandise purchases budget for April, May and June b. A schedule of expected cash disbursements for merchandise purchases for April, May and June and for the quarter in total. c. Prepare a cash budget for April, May and June as well as in total for the quarter.
3. If the critical path is longer than 60 days, what is the least amount that Dr. Watage can spend and still achieve the schedule objective? How can he prove to the Pathminder Fund that this is the minimum cost alternative?
