ACT 212 Principles of Accounting II

 

 

ACT 212

Principles of Accounting II

Spring, 2019-2020

 

Assignment 2

 

Course Code: ACT212	Course Name: Principles of Accounting II
Date:	Instructor:
Location:	Time:
Number of Students: 40	Pages: 10

 

No	Course Learning Outcomes	PLO
1	Illustrate accounting for liabilities and equity of corporations.	4
2	Employ tools and methods to analyze the financial statement data to guide investment and lending decisions.	4
3	Explain the major cost and managerial accounting concepts.	1
4	Apply the cost-volume-profit analysis to determine break-even- point and plan profit.	4	X
5	Prepare operating budgets and discuss their processes for the purposes of planning and doing differential analysis and product pricing.	2

 

NAME OF STUDENT: ________________________________________ ID: ________________________

 

INSTRUCTIONS – READ CAREFULLY

• Write your answer on this booklet.
• Programmable calculators with graphing capabilities are not allowed.
• Mobile phones, books, or other communication devices are not permitted in the examination room.
• Use of unauthorized material and attempts to cheat or plagiarize will automatically result in a grade of zero for this examination and appropriate disciplinary measures.

 

 

Q1 (15marks)	Total: (15 marks)

 

 

 

 

Question 1

 

Part 1

1. In the following equations, based on the variable costing income statement, identify the items designated by X:
2. Net Sales – X = Manufacturing Margin

 

 

 

 

 

 

 

 

 

 

 

1. Manufacturing Margin – X = Contribution Margin

 

 

 

 

 

 

 

 

 

 

 

 

1. Contribution Margin – X = Income from Operations

 

 

 

 

 

 

 

 

 

 

 

Part 2

 

The previous year DOU Inc. had sales of $2,400,000, based on a unit-selling price of $600. The variable cost per unit was $440, and fixed costs were $544,000. The maximum sales within Dou’s relevant range are 5,000 units. DOU is considering a proposal to spend an additional $80,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.

 

Instructions

 

1. Construct a cost-volume-profit chart indicating the break-even sales for last year.

Verify your answer, using the break-even equation.

 

 

 

 

 

 

 

 

 

 

 

 

2. Using the cost-volume-profit chart prepared in part (1), determine

(a) the income from operations for last year and

(b) the maximum income from operations that could have been realized during the year.

Verify your answers arithmetically.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Construct a cost- contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs. Verify your answer, using the break-even equation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. Using the cost-volume-profit chart prepared in part (3), determine

(a) The income from operations if sales total 4,000 units and

(b) The maximum income from operations that could be realized during the year.

Verify your answers arithmetically.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5. Interpret your answers in 1, 2, 3,and 4. Provide a conclusion.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Part 3

 

S.H. Products Inc. expects to maintain the same inventories at the end of 2018 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments

during 2018. A summary report of these estimates is as follows:

 

 

 

It is expected that 20,000 units will be sold at a price of $100 a unit. Maximum sales within

the relevant range are 25,000 units.

 

Instructions

1. Prepare an estimated income statement for 2018.
2. What is the expected margin of safety in dollars and as a percentage of sales?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

Direct materials

Direct labour

Factory overhead

Cost of goods sold

Gross profit

Expenses:

Selling expenses:

Sales salaries and commissions

Advertising

Travel Miscellaneous

selling expense

Total selling expenses

Administrative expenses:

Office and officers’ salaries

Supplies

Miscellaneous administrative expense .

Total administrative expenses

Total expenses

Income from operations