Managerial Accounting with Microsoft Excel solutions

[kingue1983]

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QUESTION ONE (20 Marks)<o:p></o:p>

Best Shirts Ltd. operates a chain of shirt stores that carry many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary. <o:p></o:p>

The following information contains cost and revenue data for Store Number 36. The data is typical of the company’s many outlet<o:p></o:p>

	$
Selling Price	60
Variable Expenses:
Special Packaging	15
Invoice cost	18
Sales commission	7
Total Variable Expenses	40
Fixed Expenses:
Rent	80000
Advertising	150000
Salaries	70000
Total Fixed Expenses	300000

 

The company has asked you, as a member of its planning group, to assist in some basic analysis of its stores and company policies.

Required:

1.  Calculate the annual break-even point in dollar sales and in unit sales for Store no. 36. (4Marks)

2.  Prepare a CVP graph showing cost and revenue data for Store no.36 from zero shirts up to 50,000 shirts sold each year. Clearly indicate the break-even point on the graph. (5 marks)

3.  The company is considering eliminating sales commissions entirely in its stores and increasing fixed salaries to $180,000 annually and replacing the special packaging with a standard packaging of $10 per shirt. This will lead to a reduction of selling price to $ 56 per shirt.

 a)  If these change are made, what will be the new break-even point in dollar sales and in unit sales in Store no.36? (6 Marks)

 b) Would you recommend that the change be made? Why. (1 marks)

 c) Explain the assumptions of CVP analysis (4 Marks)

 

QUESTION TWO (20 Marks)

a. Explain the following terms used in process costing system;

I. Scrap (1 mark)

II. Normal Loss (1 Mark)

III. Abnormal Loss (1Mark)

IV. By products (1 Mark)

V. Joint Product (1 Mark)

 

Double Diamond Skis has a Shaping and Milling Department.  The Company uses a process costing system in its manufacturing plant. The following information for the Month of May 2020 relates to the Shaping and Milling department

Beginning Work in Progress on May 1, 2021 was 200 units costing ₤ 15,175 of which 9600 was material and 5,575 was conversion. The level of completion of these units were Material 55% and Conversion 30%

 During the month of May 2021 5,000 units of material costing £368,600 was put into the process. The conversion costs incurred was ₤ was 350,900.

Output from the process during the month of May 2021 were 4,800 units that were completed and transferred to stock, and 400 partially completed units whose level of completion were Material 40% and Conversion 25%.

Double Diamond Skis uses weighted average method to assign manufacturing costs to units of output

Required

a) Prepare a statement of equivalent units of production (5 Marks)

b) Prepare statement of costs for the period (5 Marks)

c) Distribute cost to the units of output (5 Marks)