MBA Intake 1

ACC501 Business Accounting & Finance

ASSIGNMENT 1
Question 1
A.
Contribution Margin per Unit = 180 - (22 + 35 + 15 + (10% x 180))
= 180 90
= $90
Contribution Margin Ratio =

Q break-even point =

Contribution Margin per Unit

90
x 100 =
x 100 =50
Unit Selling Price
180

Total Fixed Costs

1,125,000
=
=12,500(Units)
Contribution Margin per Unit
90

Sales break-even point =

Total Fixed Costs

1,125,000
=
=$ 2,250,000
Contribution Margin Ratio
50

B.
Q Target Net Income =

Total Fixed Costs + Target Net Income 1,125,000+63,000

=
=13,200(Units)
Contribution Margin per Unit
90

Margin of safety (in Units) = 13,200 12,500 = 700 (Units)

Margin of safety (in dollars) = (13,200 x 180) 2,250,000 = $126,000
C.
Contribution Margin at a selling price of $180 each and sell 16,000 pairs
Contribution Margin = 16,000 * $90 = $1,440,000

Contribution Margin at a selling price of $160 each and sell 19,000 pairs

Contribution Margin per Unit = $160 ($22+$35+$15+$16) = $72

Contribution Margin at a selling price of $160 = Quantity x Contribution Margin per Unit = 19,000 x
$72 = $1,368,000
Conclusion: Company sells 16,000 pairs at a selling price of $180 each better than the company
sells 19,000 pairs
D.
Required Sales in Dollars = ($1,125,000 + $63,270) + $36,000/50% = $2,448,540
E.
Net income before tax = $37,800/(100%-30%) = $54,000
Required Sales in Units = ($1,125,000 + $54,000)/ $90 = 13,100 (units)

Question 2
(a)
Materials Price Variance

= Actual Quantity x Actual Price Actual Quantity x Standard Price

= 10,600 x $2.25 10,600 x $2,10
= $1,590 U

Materials Quantity Variance = Actual Quantity x Standard Price Standard Quantity x Standard Price
= 10,600 x $2.1 10,000 x $2,10
= $1,260 U
Total Materials Variance

= Materials Price Variance + Materials Quantity Variance

= 1,590 + 1,260
= $2,850 U

Labor Price Variance

= Actual Hours x Actual Rate Actual Hours x Standard Rate

= 14,400 x ($120,960 14,400) 14,400 x ($120,000 15,000)
= $5,760 U

Labor Quantity Variance = Actual Hours x Standard Rate Standard Hours x Standard Rate
= 14,400 x ($120,000 15,000) 15,000 x ($120,000 15,000)
= -$4,800 F
Total Labor Variance

= Labor Price Variance + Labor Quantity Variance

= 5,760 - 4,800
= $960 U

(b)
Total Overhead Variance = Actual Overhead Overhead Applied
= $189,500 193,500
= - $4,000 F

Question 3
(a)

Direct labor ($1,0)

60,000,000

Net Income
Increase
(Decrease)
60,000,000

Direct material ($1,4)

84,000,000

84,000,000

Variable factory overhead ($0,8)

48,000,000

48,000,000

Fixed factory overhead direct ($0,4)

Fixed factory overhead allocated
($0,5)
Drepreciation ($75,000,000/ 5 years)

24,000,000

24,000,000

15,000,000

15,000,000

Opportunity cost

2,500,000

2,500,000

Make

30,000,000

Cost of purchasing
Total annual cost

263,500,000

Buy

30,000,000

300,000,000

-300,000,000

330,000,000

66,500,000

This analysis indicates that Manga Motors would incur $66,500,000 of additional costs by buying the
new machine rather than making them. Therefore, Manga Motors should continue to make the motors
for the cars
(b)
A.
Relevant costs per 1 unit for the special order:
Direct material

$12

Direct labor

$4

Variable factory overhead

$24

Extra direct material

$5

Depreciation of new machine

= (120,000/12,000) = $10

The relevant cost per unit

$55

The relevent cost per unit ($55) < price per unit ($120)

 The company should accept the special order.

B.
Profit increase = (120 55) x 12,000 = $780,000
When the company accepts the order , its profits would increase by $780,000