National College of Business Administration & Economics

(NCBA&E)
School of Business Administration (SBA)
Name: _________________________________________________ Reg.
No.:__________________________________

Examination: Mid Term Marks: 25

Course Title: Management Accounting Program: MBA/BBA

Semester: Fall-2021 Date: 24/01/2022

Instructor Name: Intizar Javed Time: 75 Minutes

Attempt All Questions

Q#1

Lynch Company manufactures and sells a single product. The following costs were incurred during the
company’s first year of operations:

Variable costs per unit:

Direct material $6

Direct labor $9

Variable manufacturing overhead $3

Variable Selling and administrative costs $4

Manufacturing fixed cost: $300000

Fixed selling and administrative $190000

During the year, the company produced 25000 units and sold 20000 units. The selling price of the
company’s product is $50 per unit.

Required:

1. Assume company uses absorption costing.

a) Compute product cost.

b) Prepare an income statement for the year.

1. Assume company uses marginal costing:

a) Compute product cost.

Q#2

Snow Leopard Daycare provides daycare for children Mondays through Fridays. Its monthly variable
costs per child are as follows.

Lunch and snacks $150

Educational supplies 60

Other supplies (paper products, toiletries, etc. 20

Total $230

Monthly fixed costs consist of the following:

Rent $2,150

Utilities 200

Insurance 250

Salaries 2,350

Miscellaneous 650

Total $5,600

Snow Leopard charges each parent $580 per child.

REQUIRED:

1. Calculate the breakeven point.

2. Snow Leopard’s target operating income is $10,500 per month. Compute the number of children who
must be enrolled to achieve the target operating income.

Q#3
Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance
cost for budgeting purposes. Howard collects the following data on machine hours worked and
maintenance costs for the past 12 quarters:

Quarter Machine-Hours Maintenance Costs

1 100,000 $205,000

2 120,000 240,000

3 110,000 220,000

4 130,000 260,000

5 95,000 190,000

Required

1. Estimate the cost function for the quarterly data using the high-low method.

2. Howard anticipates that KMW will operate machines for 100,000 hours in quarter 13. Calculate the
predicted maintenance costs in quarter 13 using the cost function estimated in requirement 1.