1.

Introduction
This module is specially designed as a teaching resource for Managerial Accounting at Kelas
Unggulan, with students under the problem based learning (PBL) system. This module refers to the
planned learning semester (Rencana Pembelajaran Semester – RPS) and the textbook adopted is like
in regular class in accounting department at Faculty of economics and Business – Trisakti University.
In general, managerial accounting is for manufacturing industry. The major process for
managerial accounting is to compute total production cost and cost per unit, and then this output
can be used for making decisions for all business aspects.
This managerial accounting includes the interesting topics for making decisions such as standard
costing (Materials, Labor, Overhead), cash budget, absorption costing and variable costing,
Managerial performance tools (Return on Investment, Economic Value Added, Residual Income and
etc ), cost volume profit analysis (breakeven point) and transfer pricing.
Management accounting focuses how to produce information for internal users, such as
managers, top executives and workers. Thus, management accounting could also be called as
internal accounting and financial accounting as external accounting. Specifically, management
accounting identifies, collects, measures, classifies, and reports information that is useful for
planning, controlling and decision making.
The current business environment now has changed fast, this condition demands more available
information to make decisions at the right time and the right place. Now through the Internet is
making to get access more information about companies, available both at company own website
and stock exchange website. Analysis about company information is no problem as long as they
know the methods and techniques used to analyze this information.
New management accounting practices has also developed such as activity based management,
transfer pricing, balanced score card, just in time and many more. This module mixed classic
theories with the new theories. For example, when discussing about budgeting, there will have two
approaches: classic approach and activity based approach. To make performance evaluation in the
decentralized firm, there are two approaches, i.e. return on investment (ROI) and Economic Value
Added (EVA).
Even new theories in management accounting have been used in practices but classic theories
still proves useful and practices in business environment. Many business practices still find classic
approaches useful for planning, performance evaluation and control purposes. That’s why, this
module contains classic management accounting theories that students must know well such as
budgeting, standard cost, direct costing and cost volume profit analysis.
All topics covered in this module must be delivered in PBL approach. Every student will deal
with study tasks and make discussion with their peer to find the solutions. In order to get knowledge
about management accounting practices in a real world, students should do field study in a
company to learn about its management accounting and filly make a report in a group about what
they’ve gained. Every group must make presentations in front of the class at the end of the
semester.

2. Objectives
This subject has main objectives to make the students to be able to:
a. Prepare functional and Activity-Based Budgeting.
b. Use standard costing as a managerial control tool.
c. Evaluate performance using activity and strategic based responsibility accounting.
d. Evaluate performance using Return On Investment and Economic Value Added.
e. Prepare segmented reporting using Absorption Costing and Variable Costing method.
f. Analysis relationship of cost volume profit in a managerial planning.
3. Structures and Organization
3.1 Introduction
This module has one theme, Management Accounting. The sub-themes will be functional and activity
based budgeting, standard costing, balanced scorecard, performance evaluation, segmented reporting
and cost volume profit analysis.
These sub-themes will be dealt within several educational activities. There are three main educational
activities:
 PBL sessions.
 Interactive Lectures.
 Module Assignment
 Assistance
 Final Examination.
The overview for these activities can be found on the following pages.

3.2 PBL
Problem Based Learning is the method that will deliver the knowledge to the students. There are two
main activities that should be followed by all the students:
a. Active participation in discussion of the tasks.
b. Prepare report of the tasks.

3.3 Interactive Lectures.

To start the new topics, lecturer will firstly explain and describe the theories about the topics and give
examples of topics. Students are required to be active and critical all class hour day long. This time will
be useful to PBL to make some discussions and tasks. The time table of the lectures as follows:

Week 01 : Introduction
Week 02 : Profit Planning
Task 01 : Master Budget and pro forma Income statement and Balance sheet
Task 02 : Purchasing budget
Week 03 : Cash Budget
Task 03 : Cash budget
Week 04 : Standard Costing: A managerial control Tool
Task 04 : Materials and Labor: Variance analysis
Task 05 : FOH variance: Variance analysis
Week 05 : Standard Costing: a Managerial control Tool
Task 06 : Materials and labor variances: Journal entries
Task 07 : FOH variance: Journal entries
Week 06 : Performance Evaluation and Decentralization
Task 08 : Flexible budget
Week 06 : Quiz 1 (Operating Budget, Cash budget & Standard Costing)
Week 07 : Performance Evaluation and Decentralization (Review)
Task 09 : Standard costs
Week 08 Midtest
Week 09 : Absorption costing vs variable costing and Transfer pricing
Task 10 : Absorption costing versus variable costing
Task 11 : Segmented Income statements
Week 10 : Transfer pricing in the decentralized firms
 Task 12 : Decentralized and Responsibility
Week 11 : Return on investment, EVA and Residual Income and Transfer price
Task 13 : Residual income, EVA and RI
Task 14 : Transfer pricing
Week 12 : Breakeven point
Task 15 : Single breakeven point
Week 13 : Breakeven point
Task 16 : Multiple product breakeven point
Week 14 : Quiz 2
Week 15 : Report Presentation (Module Assignment)
Week 16 : Report Presentation (Module Assignment)
Text Books:
- Hansen and Mowen, “Cornerstone of Managerial Accounting”, South Western Cengage
Learning, 7thedition, 2018.
- Horngren, CT., George F. and SrikandMD.”Cost Accounting: A managerial emphasis”, Prentice
Hall International, 16 edition, 2018.
3.4 Module Assignment
Students are required to do field study and learn about management accounting practices in real world.
Field study will be done in group. Every group should have the different sector but still in the sub theme
that already learned in class. It should start at the middle of the semester. There will be supporting
lecture to help students with problems that may occur during making this project. Project report
deadline is in week 13. Every report will be presented in front of the class to get review from the
lecturer and peer group.
3.5 Evaluations
At the mid of the semester, students will have evaluation through mid examination. This examination
will be held parallel with the regular class and with the same material.
3. Assessment
The assessment of students attending the class of Management Accounting consist of six parts:
a. Interactive lecture class participation : 20%
b. Quiz : 15%
c. Report assignment : 10%
d. Module assignment : 25%
e. Mid test : 30%
4.1 Criteria for Participation
The participation assessment is continuously scored by the lecturer. During most of the scheduled
classroom activities, the students should demonstrate that they are well prepared and actively
participated. During the problem-based learning sessions and interactive lectures, the teaching staff will
assess the knowledge skills and professional attitude of the students related to the learning process and
the group process.
In PBL class and interactive lecture class, the students need to fulfill the following requirements:
- Present
- In time
- Well prepared for the report phase.
4.2 Quiz
Quiz will be held twice, first in week 6 th, and the second one in week 12th. It will consist of two to three
short exercises or a number of theoretical questions. The combination of one exercise and some
theoretical questions is also possible.
4.3 Report assignment
Every week after discussion of one topic, the lecturer will give home work from the module to the
students. The students should give report of the home work in the following week after this topic has
delivered to the class.
4.4 module assignment
Students in group should conduct field study and this activity will be assessed through the report and
the presentation in front of the class during the last two weeks before the end of this semester period.
4.5 Mid examination
The final examination will be held in week 8 th. It will consist of three problems and several theoretical
questions. The total scores of the final examination will be distributed 80% to the problems and
remaining to the theoretical questions.

Week 2
Task 1.1
The Honda Co in Japan has a division that manufactures two-wheel motorcycles. Its budgeted sales for
model 300G (300 cc) in 2020 is 825,000 units. Honda’s target ending inventory is 80.000 units, and its
beginning inventory is 20,000 units more than ending inventory. The company’s budgeted selling price
to its distributor and dealers is based on 25% above cost, yen per motorcycle. Total production cost per
motorcycle is estimated at $348,000 yen.
Honda co buys all its wheels from an outside supplier. No defective wheels are accepted. (Hokkaido’s
needs for extra wheels for replacements parts are ordered by a separate division of the company). The
company’s target ending inventory is 85,000 wheels, and its beginning inventory is 70,000 wheels. The
budgeted price is 16,000 yen per wheel.
Instructions:
1. Compute the budgeted revenues in yen
2. Compute the number of motorcycles that Honda should produce.
3. Compute the budgeted purchases of wheels in units and in yen.
4. What action can Honda‘s managers to take to reduce the budgeted purchasing costs of wheels
assuming the same budgeted sales for model 300G?

Task 2.2
Rocky Company makes and sells wood chair. Bima Perkasa, the controller, is responsible for preparing
Rocky’s master budget and has accumulated the following information for 2021:
January February March April May
Estimated sales in units 12,000 15,000 13,000 10,000 11,000
Selling price per unit $53 $50 $52 $53 $54
Direct labor hours per unit 2,5 2,5 2,3 2,2 2,0
Wage per direct labor hour $10 $11 $11 $12 $12
In addition to wages, direct manufacturing labor-related costs include pension contributions of $1 per
hour, worker’s compensation insurance of $0.50 per hour, employee medical insurance of $0.40 per
hour and Income taxes. The income taxes for employees paid by Rocky Company (5% flat from wage per
direct labor hour) and treated as a direct manufacturing labor cost.
Rocky company has a labor contract that calls for a wage increase to $12 per hour on April 1, 2021. New
labor-saving machinery has been installed and will be fully operational by March 1, 2021. Rocky Co
expects to have ending inventory (wood chair) at December 31, 2020 the same policy while to prepare a
master budget in 2021. The policy of ending inventory for 2021 is carrying an end-of-month inventory of
100% of the following month’s sales plus 60% of the second following month’s sales.

Instructions:
1. Prepare a production budget and a direct manufacturing labor budget for Rocky Co by month
and for the first quarter of 2021. You may combine both budgets in one schedule. The direct
manufacturing labor budget should include labor hours and show the details for each labor cost
category.
2. What actions has the budget process prompted Rocky’s management to take?
3. How might Rocky’s managers use the budget developed in instruction 1 to better manage the
company?

Week 3
Task 3.1
On December 1, 2020, the Panda Company is attempting to project cash receipts and disbursements
through January 31, 2022. A note will be payable in the amount of $107,000 with a 5% per annum
interest rate and will be due on January 15, 2022 (interest on this note paid when due). Cash balance
per 1 December 2020 is $152,500.

Sales terms call for a 3% discount if payment is made within the first 10 days of the month after sales
(2/10, n/90), with the balance due by the end of the month after sales. Experience has shown that 50%
of the billings will be collected within the discount period, 30% by the end of the month after purchase,
and 15% in the following month. The remaining 5% will be uncollectible. Cash sales per month is 40% of
credit sales.
The average selling price of the company’s products is $180 per unit. Actual and projected sales on
account are:
October, actual $324,000
November, actual $666,000
December, estimated $594,000
January, estimated $648,000
February, estimated $540,000
Total estimated credit sales for year $6,480,000

All purchases are credits with a purchase term 2/10, n/60. Approximately 60% of the purchases in a
month are paid that month and the rest the following month. The average unit purchase cost is $150.
Target ending inventories are 580 units plus 25% of the next month’s unit sales.
Total budgeted marketing, distribution, and customer service costs for one year are $1,229,200. Of this
amount, $250,000 is considered fixed (and include depreciation of $48,000). The remainder varies with
total sales. Both fixed and variable marketing, distribution, and customer service costs are paid as
incurred.
Instructions:
1. Prepare a cash budget for December 2020 and January 2021. Supply supporting schedules for
collections of receivables, payments for merchandise and marketing, distribution and customer
service costs.
2. Why Panda Co’s managers prepare a cash budget in addition to the operating income budget?

Week 4
Task 4.1
Best Co produces a well-known bottle. The standard manufacturing cost of the bottle is described by the
following standard:
Direct materials 4.80 unit x $0.50 $2.40
Direct labor 0.25 hours x $18 $4.50
Variable FOH 0.25 hours x $6 $1.50
Fixed FOH 0.25 hours x $4 $1.00
Standard cost per unit $9.40
Management has decided to investigate only those variances that exceed the lesser of 8% of the
standard cost for each category or $28.000.
During the past quarter, 300,000 units of bottle were produced. Descriptions of actual activity for the
quarter as follows:
a. A total of 1.450.000 million materials was purchased, mixed and processed. The price paid for
materials averaged $0.52 per unit.
b. Exactly 300.000 bottles were used.
c. Direct labor hours totaled 72.000 hours, with a total cost of $1,332,000.
Instructions:
1. Calculate upper and lower control limits for materials and labor.
2. Compute the total material variance and break it into price and usage variance.
3. Make an analysis of the materials price variance and price usage variance, then who is
responsible for this materials variances? Explain.
4. Prepare journal entries to record material and labor transactions above.
5. Make an analysis of the labor rate variance and labor usage variance, then who is responsible
for these labor variances? Explain.

Task 5.1
Brown Co produces school bag. The unit for costing purposes is a case of 18 school bags. The following
standards for producing one school bag have been computed as follows:
Direct materials (75 cm @$0.80 per meter) $0.60
Direct labor (1.50 hours @$2 per hour) $3.00
Standard prime cost $3.60
During January 2021, 12.000 meters of materials were purchased and used in production. There were
15.000 school bags produced, with the following actual prime costs:
Direct materials 12,000 meters $10,800
Direct labor 25,000 hours $56,250
Instructions:
1. Compute the materials variances
2. Compute the labor variances
3. Prepare journal entries to record material and labor transactions above.
4. Why does the company use the standard costing system?

Week5
Task 6.1
Roma Co produces chemicals for large biotech companies. It has the following data for manufacturing
overhead costs during July 2021:
1. The standard cost sheet for overhead cost as follows:
Variable overhead cost $10 x 1,80 hours $18
Fixed overhead cost $6 x 1.80 hours $10.80
Total standard overhead cost per unit $28.80
 2. Actual production for the period is 50.000 units
3. The company used 85.000 hours for the period
4. Actual variable cost $890.000 and actual fixed overhead $575,000.
5. Normal capacity is 50.000 units, but practical capacity used is 20% larger than normal capacity.
6. Standard overhead rates are computed based on practical measured in standard direct labor
hours.
Instructions:
1. Compute the variable overhead spending and efficiency variances (both fixed and variable
overhead variances)
2. Prepare journal entries to record overhead cost including variances.
3. How to evaluate the performance of overhead cost above and why these variances could
happen and who is responsible for these variances?

Task 7.1
Exotic Co produces monitors. Exotic Co uses a standard costing system. The standard costing system
relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates
that four direct labor hours should be used for every unit produced. The normal production volume is
120,000 units. The budgeted overhead for the coming years is as follows:
Fixed overhead costs (at normal volume) $1,488,000
Variable fixed overhead costs (at normal volume) $1,050,000
Exotic company applies overhead cost on the basis of the direct labor hours. During the year, Exotic Co
produced 112,000 units, worked 487,900 direct labor hours, and incurred actual fixed overhead costs of
$1,5 million and actual variable overhead costs of $935,080.
Instructions:
1. Calculate the standard fixed overhead rate and the standard variable overhead rate.
2. Compute the applied fixed overhead and the applied variable overhead. What is the total fixed
overhead variance? Total variable overhead variance?
3. Break down the total fixed overhead variance into a spending variance and a volume variance.
4. Compute the variable overhead spending variance and efficiency variances.

Week6
Task 8
Budgeted overhead costs for two different levels of activity follows:
Direct labor hours
1,000 2,000
Maintenance $10,100 $13,100
Depreciation $7,000 $7,000
Supervision $16,000 $16,000
Supplies $2,400 $4,800
Power $1,000 $2,000
Other $12,940 $14,240
Instructions:
1. Prepare a flexible budget for an activity level of 1,800 direct labor hours.
2. Evaluate performance for April 2021,indicate either favorable or unfavorable, with the following
actual data for March :
Maintenance $12,775
Depreciation $7,000
Supervision $16,000
 Supplies $4,280
Power $1,925
Other $14,100
Actual direct labor hour 1,800 direct labor hours

Week 7
Task 9
Danny is a cost accountant and business analysts for DDC, which manufactures expensive brass
doorknobs. DDC uses two direct cost categories; direct materials and direct manufacturing labor. James
feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates
manufacturing overhead to production based upon pounds of materials used.
At the beginning of 2021, DDC budgeted annual production of 400,000 doorknobs and adopted the
following standards for each doorknob:
Input Cost/Doorknob
Direct material (brass) 0.3 lb. @$10/lb. $3
Direct manufacturing labor 1.2 hours @$20/hour $24
Manufacturing overhead:
Variable $6/lb. x 0.3 lb. $1.80
Fixed $15/lb. x 0.3 lb. $4.50
Standard cost per doorknob $33.30
Actual results for April 2021 were as follows:
Production 35,000 doorknobs
Direct materials purchased 12,000 lb. at $11/lb.
Direct materials used 10,450 lb.
Direct manufacturing labor 38,500 hours for $808,500.
Variable manufacturing overhead $64,150
Fixed manufacturing overhead $152,000
Instructions:
1. For the month of April 2021, compute the following variances whether each is Favorable (F) or
Unfavorable (U):
a. Direct materials price variance
b. Direct materials efficiency variance
c. Direct manufacturing labor price variance
d. Direct manufacturing labor efficiency variance.
e. Variable manufacturing overhead spending variance.
f. Variable manufacturing overhead efficiency variance.
g. Production volume variance.
h. Fixed manufacturing overhead spending variance.
2. Can James use any of the variances to help explain any of the other variances? Give examples.

Week 8
Task 10.1
The following information pertains to Chain Co for last year:
Beginning inventory in units 5,000 units
Units produced 60,000 units
Units sold 38,500 units
Costs per unit:
Direct materials $8.75
Direct labor costs $3.85
Variable overhead cost $2.45

Total overhead costs per year $76.000

Normal capacity for the year 40.000 units
Variable selling expenses per unit $3
Variable general and administrative per unit $2
Fixed selling expense total $225,000
Fixed general and administrative expenses total $168,000
The unit fixed overhead is based on 40,000 units produced, which is normal capacity.
Corporate income tax rate is 25% flat.
Instructions:
1. Prepare income statements under absorption costing
2. Prepare income statements under variable costing
3. Prepare a schedule to show reconciliation the difference operating income between absorption
costing and variable costing.
4. Compute ending inventory per unit under absorption costing
5. Compute ending inventory per unit under variable costing.

Task 11
Vision 2020 Co produces three lines of television: Flat 50, Curve 50 and Big Screen. Segmented income
statements for the year are as follows:
Flat 50 Curve 50 Big Screen Total
Sales $80,000 $95,000 $80,000 $255,000
Variable expenses $32,000 $38,000 $32,000 $102,000
Contribution margin $38,000 $57,000 $48,000 $153,000
Direct fixed expenses $12,000 $15,000 $13,000 $40,000
Segment margin $26,000 $42,000 $35,000 $113,000
Common fixed expenses $75,000
Operating income (loss) $38,000
Christ, president of Vision 2020 Co, is concerned about the financial performance of her firm and is
seriously considering expanding all product lines. However, before making a final decision, he consults
Julius, Vision 2020’s vice president of marketing.
Instructions:
1. Julius believe that by increasing advertising by $5,000 ($2.500 for Flat 50 and $1,750 for Curve
50 , the remaining for big screen), sales of those three lines would increase by 10 percent. If you
were Christ, how would you react to this information?
2. Julius warns Christ that expanding the Flat 50 and Curve 50 lines, would increase the sales of
both products by 20 percent but will decrease the sales of Big Screed by 10%. Given this
information, would it be profitable to expanding the Flat 50 and Curve 50 lines?
Week9
Task 12
Superior Motor Company makes electric cars and has only two products, the Simplegreen and the
Superiorgreen. To produce the Simplegreen, Superior Motor employed assets of $13,500,000 at the
beginning of the period, and $13,400,000 of assets at the end of the period. Other costs to manufacture
the Simplegreen include the following:
Direct Materials $3,000 per unit
Setup $1,300 per setup hour
 Production $415 per machine hour
General administration and selling costs total is $7,340,000 for the period. In the current period,
Superior Motor produced 10,000 Simplegreen cars using 6,000 setup-hours and 175,200 machine-hours.
Superior Motor sold these cars for 12,000 each.
Instructions:
1. Assuming that Superior Motor defines investment as average assets during the period, what is
the return on investment for the Simplegreen division?
2. Calculate the residual income for the Simplegreen if Superior Motor has a required rate of
return of 12% on investments.
Task 12.1
Frozen Co has 11 million shares of common stock outstanding. The current share price is $68 and the
book value per share is $6. Frozen co also has two bond issues outstanding. The first bond issue has a
face value of $70 million, has 7% coupon and sells for 93% of par. The second issue has a face value of
$55 million, has an 8% coupon, and sells for 104% of par. The first issue matures in 21 years, the second
in 6 years. Suppose the most recent dividend was $4.10 and the dividend growth rate is 6%. Assume that
the overall cost of debt is the weighted average of that implied by the two outstanding debt issues. Both
bonds make semiannual payments. The tax rate is 35%.
Instructions:
a. What are Frozen Co‘s capital structure weights on a market value basis?
b. What is the company’s WACC?

Week 10
Week 13
Summit Equipment specializes in the manufacture of medical equipment, a field that has become
increasingly competitive. Approximately two years ago, Benard, president of Summit, decided to revise
the bonus plan (based, at the time, entirely on operating income) to encourage division managers to
focus on areas that were important to customers and that added valued without increasing cost. In
addition to a profitability incentive, the revised plan includes incentives to reduced rework costs,
reduced sales returns, and on-time deliveries. Bonuses are calculated and awarded semiannually on the
following basis: A base bonus is calculated at 2% of operating income; this amount is then adjusted as
follows:
a. (i) Reduced by excess rework costs over and above 2% of operating income.
(ii) No adjustment if rework costs are less than or equal to 2% of operating income.
b. (i) Increased by $5,000 if more than 98% of deliveries are on time and by $2,000 if 96% to 98%
of deliveries are on time.
(ii) No adjustment if on-time deliveries are below 96%.
c. (i) Increased by $3,000 if sales returns are less than or equal to 1.5% of sales.
(ii) Decreased by 50% of excess of sales returns over 1.5% of sales.
Note: if the calculation of the bonus results in a negative amount for a particular period, the manager
simply receive no bonus, and the negative amount is not carried forward to the next period.
Result for Summit’s Charter division and Mesa Division for 2016, the first year under the new bonus
plan, follow. In 2016, under the old bonus plan, the Charter division manager earned a bonus of $27,060
and the Mesa division manager, a bonus of $22,440.
Charter Division Mesa Division
January 1, 2016 July 1, 2016 to Jan 1, 2016, July 1, 2016 to
To June 30, 2016 Dec 31, 2016 to June 30, 2016 Dec.31, 2016
Revenues $4,200,000 $4,400,000 $2,850,000 $2,900,000
Operating income $462,000 $440,000 $342,000 $406,000
On-time delivery 95.4% 97.3% 98.2% 94.6%
Rework costs $11,500 $11,000 $6,000 $8,000
Sales returns $84,000 $70,000 $44,750 $42,500
Instructions:
1. Why did Benard need to introduce these new performance measures? That is, why does Benard
need to use these performance measures in addition to the operating-income numbers for the
period?
2. Calculate the bonus earned by each manager for each six-month period and for 2016?
3. What effect did the change in the bonus plan have on each manager’s behavior? Did the new
bonus plan achieve what Benard desired? What changes, if any, would you make to the new
bonus plan?

Task 13.1
Korea Products is a division of Panda co. During the coming year, it expects to earn income of $385,000
based on sales of $3,850,000. Without any new investments, the division will have average operating
assets of $4,250,000. The division is considering a capital investment project – adding new machines to
produce more products – that requires an additional investment of $600,000 and increases net income
by $58,800 (sales would increase by 15% of existing sales). If made, the investments would increase
beginning operating assets by $600,000 and ending operating assets by $400,000. Assume that the
actual cost of capital for the company is 8%.
Instructions:
1. Compute the ROI for the division without the investment.
2. Compute the margin and turnover ratios without the investment. Show that the product of the
margin and turnover equals the ROI computed in instruction (1).
3. Compute the ROI for the division with the new investment. Do you think the divisional manager
will approve the investment? Explain your reasons.
4. Compute the EVA of the division with and without the investment. Should the manager decide
to make the new machine investment? Explain your reasons.

Task 14.1
Petrochemical Co has two divisions. Butane Division makes butane, which is transferred to the Propane
Division. The butane is further processed by Propane division and is sold to customers at a price of $185
per kg. The Butane Division is currently required by Petrochemical to transfer its total yearly output of
210.000 kg of butane to the Propane division at 115% of full manufacturing cost. Unlimited quantities of
butane can be purchased and sold on the outside market at $95 per kg.
The following table gives the manufacturing cost per unit in the Butane and Propane divisions for 2014:
Butane Division Propane Division
Direct material costs $14 $8
Direct manufacturing labor cost $20 $25
Manufacturing overhead cost $41 $30
Total manufacturing cost per unit $75 $63
Additional information
1. Manufacturing overhead cost in the Butane Division are 40% fixed and 60% variable.
2. Manufacturing overhead costs in the Propane Division are 55% fixed and 45% variable.
3. Corporate income taxes 25% flat.
Instructions:
 1. Calculate the operating income for the Butane and Propane Divisions for the 210,000 units of
butane transferred under the following transfer-pricing methods (a) market price and (b) 115%
of full manufacturing costs.
2. Suppose Petrochemicals rewards each division manager with a bonus, calculated as 2% of
division operating income (if positive). What is the amount of bonus that will be paid to each
division manager under the transfer-pricing methods in instruction 1? Which transfer-pricing
method will each division manager prefer to use?
3. What arguments would Kobe Bryant, manager of the Butane division, make to support the
transfer-pricing methods that he prefers?

Week 11
Task 15
Prime Bowl Co, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for
the past five years. However, increased competition has led Mr. Jordan, the president, to believe that an
aggressive marketing campaign will be necessary next year to maintain the company’s present growth.
To prepare for next year’s marketing campaign, the company’s controller has prepared and presented
Mr. Jordan with the following data for the current year, 2016:
Variable cost (per bowl)
Direct materials $3.25
Direct manufacturing labor $8.00
Variable overhead (manufacturing, marketing, distribution, and customer service) $2.50
Total variable costs $13.75
Fixed costs:
Manufacturing $25,000
Marketing, distribution, and customer services $110,000
Total fixed costs $135,000
Selling price $25
Expected sales, 20,000 units $500,000
Income tax rate 40%
Instructions:
1. What is the projected net income for 2016?
2. What is the breakeven point in units for 2016?
3. Prime Bowl Co set the revenue target for 2017 at a level of $550,000 (or 22,000 bowls)
The company believes an additional marketing cost of $11,250 for advertising in 2017, with all
other costs remaining constant, will be necessary to attain the revenue target. What is the net
income for 2017 if the additional $11,250 is spent and the revenue target is met?
4. What is the breakeven point in revenues for 2017 if the additional $11,250 is spent for
advertising?
5. If additional $11,250 is spent, what are the required 2017 revenues for 2017 net income to
equal 2016 net income?
6. At a sales level of 22,000 units, what maximum amount can be spent on advertising if a 2017 net
income of $60,000 is desired?

Task 15.1
Medan Co produces a single product. The projected income statement for the coming year is as follows:
Sales 89.500 units x $525 $46,987,500
Total variable costs $20,137,500
Contribution margin $26,850,000
Total fixed costs $17,500,000
Operating income $ 9,350,000
Income tax rate 25% flat.

Instructions:
1. Compute the breakeven sales dollars.
2. Compute the margin of safety in sales dollars
3. Compute the degree of operating leverage
4. Compute the new operating income if sales are 20% higher than expected.
5. If the Medan Co plans to increase advertising costs by $2,500,000 and could increase 10% of
existing sales. Show the calculations to adopt or reject this policy to increase advertising cost by
$2,500,000
6. If the Medan Co plans to book net income 10% of total sales, compute number of units must be
sold in order to achieve such objectives.

Task 16
Star Company retails two products: a standard and a deluxe version of a luggage carrier. The budgeted
income statement for next period is as follows:
Standard Carrier Deluxe Carrier Total
Units sold 187,500 62,500 250,000
Revenue at $28 and $50 per unit $5,250,000 $3,125,000 $8,375,000
Variable cost at $18 and $30 per unit $3,375,000 $1,875,000 $5,250,000
Contribution margins at$20 and $20 $1,875,000 $1,250,000 $3,125,000
Fixed costs $2,250,000
Operating income $875,000
Instructions:
1. Compute the breakeven point in units, assuming that the planned sales mix is attained.
2. Compute the breakeven point in units (a) if only standard carriers are sold and (b) if only deluxe
carriers are sold?
3. Suppose 250,000 units are sold but only 50,000 of them are deluxe. Compute the operating
income. Compute the breakeven point in units. Compare your answer with the answer to
requirement 1. What is the major lesson of this problem?

Task 17
Beat Company produces two types of audio players: Basic Audio and High-end Audio. The projected
income for the coming year, segmented by product line, follows:
Basic Audio High End Audio Total
Sales $3,000,000 $2,400,000 $5,400,000
Total variable cost $1,000,000 $1,000,000 $2,000,000
Contribution margin $2,000,000 $1,400,000 $3,400,000
Direct fixed costs $778,000 $650,000 $1,428,000
Product/segment margin $1,222,000 $750,000 $1,972,000
Common fixed cost $198,900
Operating income $1,773,100
The selling prices are $30 for Basic Audio and $60 for the High-end Audio.
Instructions:
1. Compute the number of units of each product that must sold for Beat Company to break even.
 2. Assume that the marketing manager changes the sales mix of two products that the ratio is five
basic audio to three High-end audio. Repeat requirement 1
3. Refer to the original data. Suppose that Beat Company can increase the sales of Basic audio with
increase advertising. The extra advertising would cost an additional $195,000, and some of the
potential purchasers of the basic Audio would switch to high end audio. In total, sales of High-
end audio would increase by 12,000 units and sales of basic audio would decrease by 5,000
units. Would Beat Company be better off with this strategy?

Week 13 and week 14

Module Assignment
Prepare and collect data from annual report of manufacturing companies listed. The module assignment
must be prepared with the following terms:
1. Download financial statements from Indonesia Stock Exchange for 5 years from idx.co.id, or
directly from the company website. Data from public companies not only Indonesia stock
exchange, could be from other countries which be available from finance.yahoo.com.
2. Each task team could be module assignment team.
3. Each module assignment team prepares for computing and analysis return on investment,
economic value added, beta of shares, using Dividend Growth Model or Security Market Line
(SML) and Capital Asset Pricing Model (CAPM). The financial numbers presented in the module
assignment could be in millions Rupiah. Analysis of financial statements from your team is a
must.
4. Each module assignment team must prepare and analyze the point 3 differently using share
sector, such as agriculture, Mining, Basic industries and chemical, miscellaneous industry,
consumer good industry, property and real estate, infrastructure, utility and transportation,
financial and trade, service sectors.
5. Presentation using power point and all data computations using excel must be attached for
analysis and explanation during Modas Presentation.
6. During presentation all camera participants must be on and dress up formally.