East West College of Business and Technology

Assignment

Name____________

Question 1- (10 marks)

Answer:

  Font Color of the Answer: Red          

  Company  
Formula
  A B C D  
$ $ $ $
  Purchases a 1,415 344 840 5,860  

  Trasportation-In b 25 6 15 10  

  Total Purchases c=a+b 1,440 350 855 5,870  

  Opening Inventory d 500 184 112 750  

  COGAS e=c+d 1,940 534 967 6,620  

  (Ending Inventory) f 340 200 135 880  

  COGS g=e-f 1,600 334 832 5,740  

   
               
Question 2 – 10 marks

Pass the journal entries for the above transactions.

Answer:

Date Account and Description Debit Credit

2015  

Jul-02 Cash 5,000.00  

  Share Capital 5,000.00

To record the issuance of share for
  cash    

Jul-02 Inventory 3,500.00  

  Accounts Payable 3,500.00

  To record the purchase on account from Blic Pens. 2/10, n30  

Jul-02 Accounts Receivable 2,000.00  

  Sales 2,000.00
   

  Cost of goods sold 1,200.00  

  Inventroy 1,200.00
  To record the Sales on account and Cost to sell to Spellman Chair Rentals Inc.
Jul-03 Rent Expense 500.00  

  Cash 500.00
  To record the payment made of the rent for the month  

Jul-05 Equipment 1,000.00  

  Cash 1,000.00
  To record the purchase of equipment    

Jul-08 Cash   200.00  

  Sales 200.00
   

  Cost of goods sold 120.00  

  Inventory 120.00
  Collection of cash sales made to Ethan Matthews Furniture Ltd and to record the Cost to sell

Jul-08 Inventory 2,000.00  

  Accounts Payable 2,000.00

  To record the purchase on account from Shaw Distributions Inc.. 2/15, n30

Jul-09 Cash   1,960.00  

  Sales Discount 40.00  

    Accounts Receivable 2,000.00

  To record the received cash from the sales on account on July 2.  
  Sales Discount: 2,000*2%= 40    

Jul-10 Accounts payable 3,500.00  

    Cash 3,430.00

    Inventory 70.00
  To record the payment made on the purchase on account on July 2  
  Discount: 3,500*2%= 40    

Jul-10 Inventory 200.00  

  Accounts Payable 200.00

  To record the purchase on account from Peel Products Inc. n30  
Question 3 – 50 marks

GK Ltd. has a sales revenue of $ 650,300 for May 2021. GK Ltd. produces a flat screen TV for

$700 per unit. GK has calculated the total variable cost $ 379,961 for May 2021 and the annual

fixed cost is $1,955,520.

1. Prepare a Contribution Income Statement for month May, 2021

Including: How many units did GK Ltd. sell in the month of May?

What is the variable cost per unit?

What is the total contribution margin for May, 2021

What is the fixed cost for May 2021?

What is the fixed cost per unit?

Requirement 1    
   
  GK Ltd.  
  Contribution Income Statement  
  For the month May 2021  
   
$
  Sales Revenue 650,300  

  Less: Total Variable Cost 379,961  

  Contribution Margin 270,339  

  Less: Monthly Fixed Cost 162,960 *

$
  Net Income 107,379.00  
   
   
$
  *Annual Fixed Cost: 1,955,520.00  

  12 months 12  
$
  Monthly Fixed Cost 162,960.00  
       
   (a) How many units did GK Ltd sell in the month of May?  
  (b) Variable Cost per unit?  
  (c ) Total Contribution Margin?  
  (d) Total Fixed Cost for the month?  
  (e ) Fixed Cost per unit?  
   
   
Unit
  s   $/unit   Total  
  Sales Revenue 929 (a) $ 700.00 $ 650,300  

(b
  Less: Variable Cost 929 $ 409 ) $ 379,961  
  Contribution Margin 929   $ 291.00   $ 270,339 (c )

(e
  Less: Monthly Fixed Cost 929   $ 175.41 ) $ 162,960 (d)
  Net Income         $ 107,379  
   
   
   
               

2. What is the break-even point? How many units must GK Ltd. sell to cover only its

expenses?

Requirement 2        
  What is the Breakeven Point?  
   
  Formula to compute :  
  Break even point in units : Fixed Cost/Contribution Margin per unit
   
  Solution:  

  Fixed Cost for the month 162,960  

   
  Sales Price per unit 700  
$
  Variable Cost per unit 409  
$
  Contribution Margin per Unit 291  
    
  Break even point in units : 560 (162,920/291)  
           
  Formula to compute :  
  Break even point in dollars : Fixed Cost/Contribution Margin ratio
   
  Solution:  

  Fixed Cost for the month 162,960  

   
  Sales Price per unit 700  
$
  Variable Cost per unit 409  
$
  Contribution Margin per Unit 291  
(291/700
  Contribution Margin Ratio 42% )  
   
$
  Break even point in dollars : 392,000.00 (162,920/42%)  

3. What will be the sales revenue and net operating income if GK Ltd. sells 1400 per

month? (Calculate using the break-even point

Requirement 3              
  What will be the Sales Revenue and Net Operating Income ?  
  If sold units for the month is 1400  
   
  Units $/unit Total  
$
$ 980,00
  Sales Revenue 1400 700.00 0 Sales Revenue  
$
$ 572,60
  Less: Variable Cost 1400 409.00 0  
$
$ 407,40
  Contribution Margin 1400 291.00 0  
$
162,96
  Less: Monthly Fixed Cost   0  
  Net Income     $ Net Operating Income  
244,44
 0
   
  * Variable Cost is constant per unit and Fixed Cost constant per Total  
   
   
                 

o Prepare a presentation based on the assignment or assume a company, product,

sales revenue, and expenses.

o Prepare a monthly income statement

o Find Break-Even point

o Set a higher sales reveue goal, discuss a strategic decision to reach the goal

ASSUMED SCENARIO              
   
  Harry Pott Company sells collectible item: Wand, sells $50 per unit costing $30 per wand and  
$800 for the month of June 2021. For the said month , 200 sold units.
   
   
  Monthly Income Statement (Contribution)  
   
  Harry Pott Company  
  Contribution Income Statement  
  For the month of June 2021  
   
  Sales Revenue (200x$50) 10,000  

  Variable Cost (200x$30)   6,000.00  

  Contribution Margin 4,000.00  

  Fixed Cost   800  

  Net Operating Income   3,200.00  

                 
  Break-even Points              
   
  BEP in units=FC/Unit Cm  
  $800/(50-30)  
  40 units  
   
  BEP in Dollar=FC/CMR  
  $800/40%  
  $2000  
                 
  Target Sales Revenue for month sales is to triple the amonth for the month of june, therefore  
  one of the strategic decision to reach this goal is to expand or add product lines : like broom and  
  hat that are all toy collectible, with the same price per unit and estimated variable cost, with the  
  estimate of additional half for the fixed cost