Professional Documents
Culture Documents
Fall 2009
School of Administrative Studies, York University
ADMS 2510-Introduction to Management Accounting
Indicate Section:____________
Total: /40
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Name:____________________ Student Number:____________
Bal. 6/30
21,000
To bring Mr. Grass to justice, the company must reconstruct its activities for June. You
have been assigned to perform the task of reconstruction. After interviewing selected
employees and sifting through charred fragments, you have determined the following
additional information:
a. According to the company's treasurer, the accounts payable are for purchases of
raw materials only. The company's balance sheet, dated May 31, shows that
Accounts Payable had a $20,000 balance at the beginning of June. The company's
bank has provided photocopies of all cheques that cleared the bank during June.
These photocopies show that payments to suppliers during June totalled $119,000.
(All materials used during the month were direct materials.)
d. Cost sheets kept in the production superintendent's office show that only one job
was in process on June 30, at the time of the explosion. The job had been charged
with $6,600 in materials, and 500 direct labour hours at $8 per hour had been
worked on the job.
e. A log is kept in the finished goods warehouse showing all goods transferred in
from the factory. This log shows that the cost of goods transferred into the
finished goods warehouse from the factory during June totalled $280,000.
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Name:____________________ Student Number:____________
f. The company's May 31 balance sheet indicates that the finished goods inventory
totalled $36,000 at the beginning of June.
g. A charred piece of the payroll ledger, found after sifting through piles of smoking
debris, indicates that 11,500 direct labour hours were recorded for June. The
company's Personnel Department has verified that as a result of a union contract,
there are no variations in pay rates among factory employees.
REQUIRED:
From the T account of Manufacturing Overhead Control, we know the actual overhead is
$79,000; from condition c, we know that this company over-applied overhead by $6,100.
Therefore, the Applied overhead should be 6,100 greater than the actual overhead. That
is, $85,100 (79,000+6,100).
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Name:____________________ Student Number:____________
Work in Process
Beginning balance: 7,200 Cost of goods finished and
transferred out: 280,000
(from condition e)
DM usage (unknown)
DL (from condition d and g) = 11,500 hours *8=92,000
MOH (from requirement 1 and condition g)=7.4*11,500
hours =85,100
Ending balance: 14,300 (from requirement 2)
So, DM usage = ending balance + cost of goods completed and transferred – beginning
balance – DL – MOH applied
=14,300+ 280,000-7,200-92,000-85,100
= 110,000
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Name:____________________ Student Number:____________
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Name:____________________ Student Number:____________
REQUIRED:
Support your answers with appropriate schedules.
Please round your answers to the nearest dollar.
a) Identify the relevant revenue and cost items in order for management
to prepare an effective equipment replacement decision analysis. (3 marks)
b) What is the monthly break-even point in units for each machine. (2 marks)
c) Determine the monthly sales level in units at which total company
income will be equal for either the old or new machine. (5 marks)
d) Explain which machine represents a lower risk if demand is
uncertain in the short run? (4 marks)
e) Determine the sales level in dollars and in units at which the new
machine will achieve a 10% after tax target income-to-sales ratio.(6 marks)
SUGGESTED SOLUTIONS
a).
- Change in Sales price per unit will impact the decision.
- Change in Variable cost per unit will impact the decision.
- Change in Monthly fixed costs will impact the decision.
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Name:____________________ Student Number:____________
( 2 Marks ).
c).
( 5 Marks ).
d).
If demand is uncertain, the old machine represents less risk because of its
lower fixed costs to recover and the lower break even units at 30,000 units
versus the new machine with its higher fixed costs to recover and a higher
level of break even units at 35,000 units. This is the concept of operating
leverage. For every unit short of its break-even point, the new machine
results in a greater loss per unit, and for every unit past its break-even
point, the new machine results in a greater profit per unit.
( 4 Marks ).
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Name:____________________ Student Number:____________
e).
10% after tax target profit is equal to 20% before tax target
profit when the corporate tax rate is 50%.