Final Exam (Take-Home) Fall - 2020

Student Name: Reg. ID:

Instructor: Dr Nadeem Khan /Fahim Qazi / Mr. Naveed Program : BBA
Alam / Ms.Mona Shamim
Subject: Management accounting Max. Marks:25
Last date of submission: 28th
Nov 2020

Q. No. 1 2 3 Total
Total Marks 15 04 06 25
Obtained Marks

Department of Business Administration

Please follow the instructions carefully:

1. Write your answers in a Word file and upload the file before the due date on black
board .
2. Write your name and registration ID on the first page of your Word file.
3. Answer scripts can be uploaded on black board any time before its deadline.
Therefore, do not wait for the last hour to avoid any unforeseen problems.
4. Submission of answer copy will be considered acceptable through black board only.
Therefore, do not submit your document through email or any other medium.
5. Use 12 pt. font size and Times New Roman font style along with 1-inch page
margins.
6. Follow the requirements of the word limit and the marking criteria while writing your
answers.
 7. Provide relevant, original and conceptual answers, as this exam aims to test your
ability to examine, explain, modify or develop concepts discussed in class.
8. Do not copy answers from the internet or other sources. The plagiarism of your answers
may be checked through Turnitin.
9. Recheck your answers before the submission on black board to correct any content or
language related errors.

Q# 1 (15 marks) “We really need to get this new material – handling equipment in operation just
after the new year begins. I hope we can finance it largely with cash and marketable securities,
but if necessary we can get a short term loan down at Metro bank”. This Statement by Beth
Davies –Lowry president of Global Electronics Company, concluded a meeting she had called
with the firm ‘s top management. Global is a small, rapidly growing wholesaler of consumer
electronic products. The firm’s main product lines are small kitchen appliances and power tools.
Maria Wilcox, Global Electronics general manager of marketing has recently completed a sales
forecast. She believes the company’s sales during the first quarter of 2021 will increase by 10%
each month over the previous month s’ sales. Than Wilcox expects sales to remain constant for
several months. Global ‘s projected balance sheet as of Dec 31 2020 is as follow:
Cash 70,000
A/c receivable 540,000
Marketable securities 30,000
Inventory 308,000
Building and equipment (net of accumulated depreciation) 1,252,000
Total assets 2,200,000
A/c payable 352,800
Bonds interest payable 25,000
Property tax payable 7,200
Bonds Payable ( 10% due in 2026 ) 600,000
Common stock 1,000,000
Retained earnings 215,000
Total liabilities and stockholders’ equity 2,200,000
Jack Hanson the assistant controller is the preparing a monthly budget for the first quarter of
2021. In the process the following information has been accumulated
1. Projected sales for December 2020 are 800,000. Credit sales typically are 75% of total sales.
Company credit experience indicates that 10% of the credit sales are collected during the
month of sales and the remainder are collected during the following month.
2. Company cost of goods sold generally runs at 70% of sales. Inventory is purchase on account
and 40% of each month ‘s purchase is paid during the month of purchase. The remainder is
paid during the following month. In order to have adequate stocks of inventory on hand the
firm attempts to have inventory at the end of each month equal to half of the next moth’s
projected cost of goods sold.
3. Hasson has estimated that Company monthly expense will be as follow:
Sales salaries 42,000
Advertising and promotion 32,000
Administrative salaries 42,000
Depreciation 50,000
Interest on bonds 5,000
Property taxes 1,800
In addition, sales commission run at the rate of 1% of sales.
4. Company president has indicated that the firm should invest 250,000 in an automated
inventory handling system to control the movement of inventory in the firm s’ warehouse just
after the new year begins. These equipment purchase will be finance primarily from the firm
cash and marketable securities. However, president believes that the company needs to keep
minimum cash balance of 50,000. If necessary, the remainder of the equipment purchase will
be financed using the short term credit from local bank. The minimum period for such a loan
is three months. Hanson believes short – term interest rate will be 10% per year at the time of
equipment purchase. If a loan is necessary President has decided it should be paid off by the
end of the first quarter if possible.
5. Company board of directors has indicated an intention to declare and pay dividends of
100,000 on the last day of each quarter
6. The interest on any short – term borrowing will be paid when the loan is repaid. Interest on
bonds is paid semiannually on January 31 and July 31 for the preceding six- month
7. Property taxes are paid semiannually on February 28 and August 31 for the preceding six –
month
Required: Prepare Global Electronics Company ‘s master budget for the first quarter 2021
by completing the following schedules and statements.

1. Sales budget (01 marks)

2. Schedule of expected cash collection (1.5 marks)
3. Purchase budget (01 marks)
4. Schedule of expected cash disbursement for inventory purchase (1.5 marks)
5. Schedule of expected cash disbursement for operations expense (1.5 marks)
6. Cash budget (03 marks)
7. Budgeted income statement for the first quarter (02 marks)
 8. Budgeted statement of retained earnings for the first quarter (1.5 marks)
9. Budgeted balance sheets for the first quarter (02 marks)

Q No.# 2 (04 marks) The following data were taken from the records of a company.

Period 1 Period 2 Period 3

Production(units) 30,000 38000 27000
Sales 30,000 27000 38000
Opening stock 11,000
Closing stock ------ 11,000 -------

Per unit cost are as follows:

Direct material $ 1.5
Direct labor 1.0
Production overhead 3.0
Selling price per unit $9
Administrative overheads are fixed at $25000 and one third of the production overheads are
fixed.
Required
Prepare separate income statements for all three year

Q#3 ( 06 marks ) HASF Corporation began operations at the beginning of the current year. one
of the year company product a compressor sells for 370 per unit’s information related to the
current year activities follows
Variable cost per unit
Direct material 40
Direct labor 74
Manufacturing overhead 96
Annual fixed cost
Manufacturing cost 1,200,000
Selling and administrative 1,720,000
Sales and production
Sales in units 20,000
Production 24,000
Required -
Cost of the December 31 finished goods inventory
Net income for the current year Dec 31
If next year production decrease to 22,500 units and general cost behavior patterns do not change
what is the likely effect on
 The direct labor cost of 74 per units? why?
 The fixed manufacturing overhead of 1,200,000? why?
 The fixed selling and administrative cost of1,7200,000? why?
 Per unit cost production why?