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Managerial Accounting Assessment: 1 Individual






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Managerial Accounting
Assessment:  1 Individual


Name: ______________________________________________

Student ID: __________________________________________




Managerial Accounting: Assessment 1                                                 40 Marks

Note: This is individual assessment. Group work is not allowed.

Question 1 (15 Marks)

ABC Tools has identified the following overhead costs and cost drivers for next year:
                                                                                       Expected Actual
       Overhead Item          Expected Cost             Cost-Driver  Transactions
Setup costs......................    $ 90,000          Number of setups.............................            400
Ordering costs.................        50,000          Number of orders..............................         4,000
Maintenance costs...........      150,000          Machine hours...............................        25,000
Power..............................        30,000          Kilowatt hours...............................        75,000

The following are two of the jobs completed during the year:
                                                      Job 700            Job 701
Direct materials..........................      $1,200              $600
Direct labor................................         $900              $400
Units completed.........................           250                100
Direct labor hours.......................            40                  20
Number of setups.......................              2                    1
Number of orders.......................            10                    4
Machine hours...........................            50                  40
Kilowatt hours............................            60                  25

The company’s practical activity is 5,000 direct labor hours.

Required:

1.1 Determine the activity overhead rates (ABC rates). (10 marks)
1.2 Determine the unit cost for each job using ABC. Round answers to two deci­mal places. (5 marks)













Question 2  (15 Marks)

Blessed Company manufactures and sells adjustable covers that attach to motor homes and trailers. Blessed developed its budget for the current year if the covers would sell at a price of $400 each.

The variable expenses for each cover were forecasted to be $200 and the annual fixed expenses were forecasted to be $100,000.

Blessed had targeted a profit of $400,000. For the first 5 months of the year, only 350 units had been sold at the established price, with variable expense as planned, and it was clear that the target profit for the year would not be reached unless some actions were taken

Required:

2.1 Calculate the Break-Even Point in Units and in Dollars. (5 Marks)
2.2 Calculate the Current Net income for the first 5 months of the year. (5 Marks)
2.3 If no changes are made to the selling price or cost structure, estimate the number of units that must be sold during the year to attain the target profit of $400,000.  (5 Marks)

























Question 3 (10 Marks)
Al Huma Construction Company has three divisions that operate autonomously. Their results for 2015 are as follows:
A
B
C
Sales
$8,000,000
$10,000,000
$6,000,000
Contribution  margin
3,000,000
6,000,000
2,500,000
Operating  income
2,200,000
7,200,000
3,500,000
Investment  base
10,000,000
12,000,000
14,000,000

The company's desired rate of return is 20%. The company is planning an expansion, which will require each division to increase its investments   by $3,000,000 and its income by $1,000,000.

Required:

3.1   Compute the current return on Investment (ROI) and Residual Income (RI) for each division. (6 marks)                                                                              
3.2   Compute the Return on Investment (ROI) and Residual Income for each division after expansion. (4 marks)

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