Accounting for business decision making assignment 1

MASTER OF BUSINESS ADMINISTRATION

INTERNATIONAL PROGRAM






ACCOUNTING FOR BUSINESS DECISION
MAKING ASSIGNMENT





LECTURER : Dr. TRAN ANH TUAN
STUDENT : VO VAN LOAN
CLASS : MBAOUM 1113-K12C
COURSE : 2013 - 2015




Ho Chi Minh, 21/6/2014


Accounting for business decision making assignment 2

Contents
Task 1. ABC System .................................................................................................................. 3
Task 2. Marginal and Absorption costing .................................................................................. 4
Task 3. Special order, accepted or abandoned production line and scarce resource ................. 5
Task 4. Standard costing and variance analysis ......................................................................... 6
Task 5. Process costing .............................................................................................................. 8
Task 6. Job Order Costing ....................................................................................................... 10
Task 7. Process costing ............................................................................................................ 11
Task 8. CVP analysis ............................................................................................................... 12
Task 9. CVP analysis and cost behavior .................................................................................. 13
Task 10. Budgeting .................................................................................................................. 15




Accounting for business decision making assignment 3

Task 1. ABC System
1. Total cost and product unit cost.
Quantity of order: 80
No Cost Item Quantity Unit
1 Direct material 36,950 USD
2 Purchased parts 21,100 USD
3 Direct labor hours 220 Hour
4 Average direct labor pay rate per hour 15 USD
5 Overhead cost 8,910 USD

The Total cost: DM cost + Purchased parts + Direct Labor cost + Overhead cost
= 36,950+21,100+220x15+8,910=70,260 USD
Product unit cost: Total cost/ Quantity = 70,260/80 = 878.25 USD
2.&3. Using the cost hierarchy, identify each activity as unit level, batch level,
product level, or facility level and Bill for activity cost:

Acitvity Cost Driver Activity cost rate Activity Usage
Cost
Activity
Unit level
Parts production Machine hours
$26 per machine
hours
134 machine
hours
3,484.00
Product testing Number of tests $32 per test 52 tests 1,664.00
Packaging Number of packages
$4.675 per
package
80 packages 374.00
Batchs Level
Setup Number of setups $29 per setup 11 setup 319.00
Product Level
Electrical
engineering
design
Engineering hours
$19 per
engineering
hour
32 engineering
hours
608.00
Facility level
Building
occupancy
Machine hours
$9.80 per machine
hour
134 machine
hours
1,313.20
Assembly Direct labor hours
$15 per direct
labour
hour
220 direct labour
hour
3,300.00



Accounting for business decision making assignment 4

4. Total cost and product cost as ABC:
Total cost = 11062.2 USD
Product cost: total cost/quantity = 11062.2/80 = 138.28 USD
5. The result of two computed cases, the total cost, and unit cost of traditional is higher than
the ABC system. Because the Manufacture overhead cost of the Traditional computed is used
for all order of XYZ, and in the ABC system, the overhead cost is only assigned to each
order.
Task 2. Marginal and Absorption costing
With:
Selling price per unit 8 $
Variable costing perunit 4 $
Fixed costing per unit 2 $
Standard quanlity of Quarter 26,000 $

The Profit follows the Marginal and Absorption costing as the below table.

Particulars
Quarter 1 Quarter 2
Quantity Cost Sale Quantity Cost Sale
Opening stock (units)
-
Production (units)
26,000 30,000
Closing stock (units)
6,000
Sales (Units)
26,000

208,000
24,000

192,000
Variable cost


104,000


96,000

Fixed cost


52,000


60,000

Cost of good sold


104,000


96,000

Profit under marginal costing


104,000


96,000
Profit Under Absorption
costing


52,000


36,000
Reconciliation of profit


52,000


60,000



Accounting for business decision making assignment 5

Particulars
Quarter 3 Quarter 4
Quantity Cost Sale Quantity Cost Sale
Opening stock (units)
6,000 2,000
Production (units)
24,000 30,000
Closing stock (units)
2,000
Sales (Units)
28,000

224,000
32,000

256,000
Variable cost


112,000


128,000

Fixed cost


48,000


60,000

Cost of good sold


112,000


128,000

Profit under marginal costing


112,000


128,000
Profit Under Absorption
costing


64,000


68,000
Reconciliation of profit


48,000


60,000

Particulars
Quarter 5
Quantity Cost Sale
Opening stock (units)

Production (units)
110,000
Closing stock (units)

Sales (Units)
110,000

880,000
Variable cost


440,000

Fixed cost


220,000

Cost of good sold


440,000

Profit under marginal costing


440,000
Profit Under Absorption
costing


220,000
Reconciliation of profit


220,000

Task 3. Special order, accepted or abandoned production line and scarce
resource
1.
The manager should accept the order because:


Accounting for business decision making assignment 6

The remain capacities of company: 1000x20% = 200 unit. If manager accepts this order, the
cost for production is 200x40=8000 USD, company has paid 100% fixed cost. The sale of
order is 200x20=12000 USD. The company will get more 4000 USD profit. So the Manage
should accept this order.
2.
There are cost and Income of two courses.

Word processing
($000)
Office Skills
($000)
Tuition fee income 485 500
Variable costs 200 330
Fixed costs 120 220

If the company takes only the Word processing course:
Total cost = Total fixed cost (120 + 220) + Variable cost ( 200 ) = 540
Total Income: 485.
The company loss: 485 540 = 55
If The company take both courses:
Total cost = Total fixed cost (120 + 220) + Variable cost ( 200 + 330 ) = 870
Total Income: 485 + 500 = 985.
The company has profit: 985 870 = 115.
So The CEO should take more the Office Skills courses.
3.
Task 4. Standard costing and variance analysis
The cost system of ABC company.
Cost standard cost Unit
Direct materials (3 yards at $12.50 per yard) 37.50 $
Direct labour (2 hours at $9.00 per hour) 18.00 18.00 $
Variable overhead (2 hours @ 5.00 per direct labour
hour) 10.00 10.00 $


Accounting for business decision making assignment 7

Standard variable cost per unit $65.50 65.50 $
Actualy cost cost Unit
Capacity direct labour hour 10,000.00 Hour
budgeted Fixed overhead cost 44,000.00 $
Quantity sold 4,900.00 Unit
Direct material purchased 15,000.00 yard
Cost of yards 12.40 $
Labour rate 9.10 $
Direct labour worked 10,050.00 Hour
Actual variable overhead cost 48,900.00 $
Fixed cost 45,000.00 $

The data of company as below:
Items Value Description
1. Direct materials cost variances:
a. Direct materials price variance 12.40 Cost of yards
b. Direct materials quantity variance 15,000.00 Direct material purchased
c. Total direct materials cost variance 186,000.00
Direct materials cost variance per unit 37.96
2. Direct labour cost variance
a. Direct labour rate variance 9.10 Labour rate
b. Direct labour efficiency variance 10,050.00 Direct labour worked
c. Total direct labour cost variance 91,455.00
Direct labour cost variance per unit 18.66
3. Variable overhead variances
a. Variable overhead spending
variance 48,900.00 Actual variable overhead cost
b. Variable overhead efficiency
variance 49,000.00
= Quantity sold x Variable overhead
cost
c. Total variable overhead variance 48,900.00


Accounting for business decision making assignment 8

4. Fixed overhead variance
a. Fixed overhead budget variance 44,000.00 budgeted Fixed overhead cost
b. Fixed overhead volume variance 45,000.00 Fixed cost
c. Total fixed overhead variance 45,000.00 Fixed cost

Task 5. Process costing
1. Prepare a cost of production report for the Sifting Department for August:

Total units = Beg. INV + Started
= 12,000 + 320,000 = 332,000 units
Started & completed in August = Transferred out Beg.INV
= 323000 12000 = 311,000 units

Material equivalent units:

Material Equivalent Units Total units
Percent
added
Equivalent
units
INV in process, August 1 12,000 0 0
Started & Completed In August 311000 100% 3
Transferred out 323000
INV in process, 30 August 9,000 100% 9000
Total units to be assigned costs 332,000 32000

Conversion equivalent units:

Conversion Equivalent Units Total units
Percent
added
Equivalent
units
INV in process, August 1 (3/5 completed) 12,000 40% 4,800
Started & Completed In August 311,000 100% 311,000
Transferred out 323,000
INV in process, 30 August (4/5
completed) 9,000 80% 7,200
Total units to be assigned costs 332,000 323,000

Allocate costs:
Conversion costs in August = DL + FOH = 179,000 + 30,950 = $209,950
Conversion costs per EU = $209,950/323,000 = $0.65/unit


Accounting for business decision making assignment 9

Direct material cost per actual units = $2.45

Actual
units
%
Equivalent
units
Direct Materials
Conversion
costs
Total costs
Beg. INV 12,000 40 4,800 $28,200
=0.65*4,800 =
$3,120
$31,320
Started &
Completed
311,000 100 311,000
$311,000x2.45 =
$761,950
0.65*311,000 =
$202,150
$964,100
End. INV 9,000 80 7,200
$9000*2.45 =
$22,050
0.65*7200 =
$4,680
$26,730
Total 323,000 $812,200 $209,950 $1,022,150

2. Journalize the entries for costs transferred from Milling to Sifting and the costs
transferred from Sifting to Packaging:
(i) Costs transferred from Milling to Sifting:
= DM + DL + FOH = 784,000 + 179,000 + 30,950 = $993,950
(ii) Costs transferred from Sifting to Packaging:
= 323,000 x (2.45 + 0.65) = $1,001,300
3. Determine the increase or decrease in the cost per equivalent unit from July to
August for direct materials and conversion costs:

4. Discuss the uses of the cost of production report.
The cost of production report provides the following quantity and cost data:
- The unit for which the department is accountable and the position of those units.
- The production costs incurred by the department and allocation of those costs between
completed and partially completed units.
A cost of production report also is used to control costs.



Accounting for business decision making assignment 10

Task 6. Job Order Costing
a. Supporting Calculator (USD)
Job
No.
Quantity
July 1
Work in
Process
balance
Direct
Materials
Direct
Labor
Factory
Overhead
Total
Cost
Unit
Cost
Units
Sold
Cost of
Goods
Sold
No. 21 200 6,000 20,000 15,000 24,000 65,000 325 160 52,000
No. 22 400 16,000 34,000 26,000 41,600 117,600 294 320 94,080
No. 23 200

14,000 8,000 12,800 34,800 174 - -
No. 24 250

30,000 25,000 40,000 95,000 380 210 79,800
No. 25 180

22,000 17,500 28,000 67,500 375 150 56,250
No. 26 140

8,000 4,500 7,200 19,700 141 - -
Total 1,370 22,000 128,000 96,000 153,600 399,600

282,130

A: Materials requisitions = Total Direct material + In direct material = 128,000 + 16,000 =
144,000 USD
B: July 1 work in process balance: 22,000
C: Work in process material: 128,000
D: Work in process Direct labor: 96,000
E: Work in process overhead: 153,000
F: Job completed: No21 + No22 + No24 + No25 = 65,000+117,000+95,000+67,500 =
345,100
G: Cost of goods sold: 282,130
H: Indirect labor overhead: 120,000 96,000 = 24,000

b. Inventory accounts and factory overhead:
Inventory accounts:
- Material balance: 30,000 + 120,000 128,000 16,000 = 6,000 USD.
- Working process: No23 + No26 = 34,800 + 19,700 = 545,000 USD


Accounting for business decision making assignment 11

- Finished goods: No21, 22, 24, 25 = (65,000-52,000) + 117,600- 94,080 +95,000 -
79,800 + 67,500 - 56,250 = 62,790 USD
- Factory overhead: 22,000 + 24,000 + 16,000 + 95,000 153,600 = 3,400 USD.

Task 7. Process costing
Input data
Date Data Debit credit
Balance
Debit credit
Mar 1 Balance, 8,000units, 2/5 completed

15,360
31 Direct materials, 145,000 units

232,000

247,360
31 Direct labor

66,400

313,760
31 Factory overhead

37,060

350,820
31 Goods finished, 148,000 units

340,720

10,100
31 Balance, units, 3/5 completed

10,100

a.
1. Direct materials cost per equivalent unit:
232,000/145 = 1.6
2. Conversion cost per equivalent unit
Number completed units at beginning work in process: 8000*2/5 = 3,200
Number balance unit at beginning work in process: 8000*3/5 = 4,800
Total Equivalent unit in Mar: 145,000+8,000*3/5 = 149,800
Total cost in process: 232,000+66,400+27,060 = 335,460
Cost EU = 149,800/335,460 = 2.4
3. Cost of the beginning work in process completed during March:
= 4,800*2.4 + 15,360 = 26,109
4. Cost of units started and completed during March:
148,000*2.4 = 331,429
5. Cost of the ending work in process: 10,100


Accounting for business decision making assignment 12


b. Assuming that the direct materials cost is the same for February and March, did the
conversion cost per equivalent unit increase, decrease, or remain the same in March?
If the conversion cost of February the same March, Total cost in Process of February
is the same March. But the Balance of Completed unit at beginning WIP of March (2/5)
smaller than completed of April (3/5). So the Equivalent of March bigger than equivalent
of February -> The Conversion cost per equivalent in March will decrease.

Task 8. CVP analysis
Income statement for 2010 of SACCO is as follows (Unit USD):

Sales: 16,920,000
Cost of goods sold 6,000,000
Gross profit 10,920,000
Expenses:
Selling expenses 3,000,000
Administrative expenses 1,800,000
Total expenses 4,800,000
Income from operations 6,120,000

The division of costs between fixed and variable is as follows:

Fixed Variable
Cost of sales 40% 60%
Selling expenses 50% 50%
Administrative expenses 70% 30%

1. Determine for 2010 the total fixed costs and the total variable costs.
Total fixed cost: 6,000,000*40% + 50%*3,000,000 + 70%*1,800,000 = 5,160,000
Total Variable cost: Total cost total fixed cost:
6,000,000 + 4,800,000 5,160,000 = 5,640,000
2. a. Unit variable cost: 5,640,000/112,800 = 50
b. The unit contribution margin: 150-50 = 100

3. Compute the break-even sales (units) for 2010.

5,160,000/100=51,600 Units


Accounting for business decision making assignment 13

4. Compute the break-even sales (units) under the proposed program.
Total fixed cost under proposed program: 5,160,000+200,000 = 5,360,000
The breck-even: 5,3600,000/100 = 53,600 Units
5. Determine the amount of sales (units) that would be necessary under the proposed
program to realize the $6,120,000 of income.
Under program:
Variable cost/Sale = (sale-Income Fixed cost)/sale = 5,160,000/16,920,000
1 - (6,120,000+5,360,000)/sale = 5,160,000/16,920,000 -> sale = 17,220,000
Number of unit sale: 17,220,000/150 = 114,800
6. Determine the maximum income from operations possible with the expanded plant:
Maximum sale: 16,920,000 + 1,500,000 = 18,420,000
Contribution margin: 18,420,000*(16,920,000 5,640,000)/16,920,000 = 12,280,000
Maximum income = Contribution Margin Fixed cost:
12,280,000 - 5,3600,000 = 6,920,000 $
7. If the proposal is accepted and sales remain at the 2010 level:
Contribution margin = 16,920,000 -5,640,000 = 11,280,000
Income: 11,280,000- 5,360,000 = 5,920,000 $
8. With the data given, I recommend accepted the proposed program. Because the
company will get more sales and more income.

Task 9. CVP analysis and cost behavior
Summary reports of Steamboat Co:
Estimated Fixed Cost
Estimated Variable Cost (per
unit)
Production costs:
Direct materials

15.00
Direct labor

10.00
Factory overhead 210,000.00

4.50
Selling expenses:
Sales salaries and
commissions 41,500.00

2.20
Advertising 14,500.00
Travel 3,500.00
Miscellaneous selling 2,500.00


Accounting for business decision making assignment 14

expense 1.80
Administrative expenses:
Office and officers
salaries 70,000.00
Supplies 6,000.00

0.75
Miscellaneous
administrative expense 11,000.00

1.75
Total 359,000.00

36.00

Sale: 30,000,000 unit, price 60 $
1. Prepare an estimated income statement for 2010 (USD):

No Description Value (USD)
1 Sale 1,800,000
2 Cost of goods sold 1,095,000
3 Gross profit 705,000
4 Selling expenses 182,000
5 Overhead expenses 162,000
6 Net Income 933,000

2. Expected contribution margin ratio:
Variable cost: 1,080,000
Fixed cost: 359,000
Contribution margin: 720,000
Conitrution margin ratio (CM): 0.40

3. Determine the break-even (BRE) sales in units.

BRE = fixed cost/CM = 359,000/0.4 = 897,500 $
BRE in units: 897,500/60 = 14,985 units
4. Construct a cost-volume-profit chart indicating the break-even sales.


Accounting for business decision making assignment 15



5. What is the expected margin of safety in dollars and as a percentage of sales.

- The expected margin of safety ($) = sale Break even = 1,800,000 897,500 =
902,500 ($)
- The expected margin of safety (%) = (sale Break even)sale
= 902,500/1,800,000 *100% = 50.14%.
6. Determine the operating leverage:

Operation leverage = Contribution margin/net income = 720,000/933,000 = 0.77

Task 10. Budgeting
1. Sales budget for December.

Items Quantity Price Values ($)
Bird House 32,500 50 1,625,000
Bird Feeder 21,300 85 1,810,500
Total sale

3,435,500


2. Production budget for December
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
0.00 14,958.33 30,000.00 45,000.00
Cost-Volume-Profit chart
Expenses Sale
Break even
point


Accounting for business decision making assignment 16


Item
Bird house Bird Feeder
Quantity
(Unit)
Price Value ($)
Quantity
(Unit)
Price Value ($)
Budget sale 32,500 26 845,000 21,300 40 852,000.0
Inventories at December 1 3,100 26 80,600 1,900 40 76,000.0
Inventories at December 31 3,600 27 97,200 1,800 41 73,800.0
Require production December 33,000

828,400 21,200

854,200.0
Total

1,682,600

3. Direct material Budget for December
Items
Wood Plastic
Bird
house
Bird
feeder total
Bird
house
Bird
feeder Total
Inventories at December 1

2,400.00

3,600.00
Inventories at December 31

2,900.00

3,400.00
Direct materials used in
production:

26,400

25,440

51,840.00

16,500

15,900

32,400.00
Direct materials require in
December (Unit)

52,340.00

32,200.00
Price of material ($)

6.00

0.80
Direct materials purchases
in December ($)

314,040.00

25,760.00
Total DM purchases: 339,800.00
4. Direct labor cost budget for December
Items
Bird house Bird feeder
Total
(hour)
Wage
Rates
Value ($)
Hours
Total
Hours Hours
Total
Hours
Fabrication Department

0.20

6,600.00

0.40

8,480.00

15,080.00

15.00

226,200.00
Assembly Department

0.30

9,900.00

0.35

7,420.00

17,320.00

11.00

190,520.00
Total Direct labor
Cost

416,720.00

5. Factory overhead cost budget for December.
Items Values ($)
Indirect factory wages 750,000
Depreciation of plant and equipment 185,000
Power and light 47,000


Accounting for business decision making assignment 17

Insurance and property tax 15,400
Total 997,400

6. Cost of goods sold budget for December
Items Values ($)
Direct material Budget 339,800
Direct labor cost budget for December. 416,720
Factory overhead cost budget for December. 997,400
Work in process at the beginning of December (add) 27,000
Work in process at the end of December (less) 32,400
Cost of goods sold budget for December 1,748,520

7. Prepare a selling and administrative expenses budget for December
Items Values ($)
Sales salaries expense 465,000
Advertising expense 149,700
Office salaries expense 211,100
Depreciation expenseoffice equipment 5,200
Telephone expenseselling 4,800
Telephone expenseadministrative 1,500
Travel expenseselling 41,200
Office supplies expense 3,500
Miscellaneous administrative expense 5,000
Selling and Administrative expenses budget for December 887,000

8. Budget income statement for December
Item Values ($)
Sale 3,435,500
Cost of goods sold 1,748,520
Gross profits 1,686,980
Other income 5,300
Interest revenue 16,900
Interest expense 11,600
Selling and administration expenses 887,000
Profit before Taxes 805,280
Taxes 281,848
Net Income 605,152