RIFT VALLEY UNIVERSITY
Department of Business and Management
Fourth Year, Extension
Assignment of Cost and Management Accounting II
Assignment Weight: 20%
Assignment 1
Group Members
1. SAMSON DAMISSIE
0066/19
2. MAHDI ABDULKERIM
0249/19
3. PENIEL MULGETA
0455/19
4. FIREHIWOT ABAY
0097/19
5. ASTER SISAY
0005/19
Submitted To: INSTRUCTOR
MEKONIN
Submitted On: January 15, 2023
1. Use the following given information to answer the under listed questions the related
with BB- Company which is produce product “ xx” :
 Variable cost per unit is birr 40
 Fixed cost of the company to maximum production capacity of 5,000 units is birr 60,000
 The Selling price of the product per unit is birr 60
I. What at is the breakeven point of the company’s operation? ( in Sales
value/revenue and unit of product to sold )

Assume that the if management of the company wants to have an operating income before
tax birr 12,000.
A. How many units must be produced and sold to earn the target profit?
 Suppose the management of the company is considering a promotion campaign that
would cost birr 12,000, and also the management will expects that the promotion will
increase sales from existing sales 3,500 units per year to 4,000 units per year.
B. Should the product promotion is acceptable or profitable?
 Assume that if the management is considering reducing of the selling price of the
product from birr 60 to birr 55 per unit instead of advertising of the product. In this case
also the management anticipated that, the sale will increase to 4,000 units from existing
sales 3,500 units per year.
A. Should management’s selling price decreasing decision is acceptable?
B. Which one of the above alternatives is more preferable than the other (continue
with existing, undertaking of the promotion of the product or Selling price cut off?
2. What is the relevant information in production decision to produces 10,000 liter liquid
soup in soup manufacturing factory? List and explain the necessary information required
and the main sources of those information
Relevant Information
Amount of soup to be manufacturing
Amount of
Sources of this Information
Sales department
3. In Jan 2021, ABC Company has a plan to produce and sell 8,000 units of its product
(leather bag) for $20 selling price per unit. Variable manufacturing cost per unit is $10.
Total fixed manufacturing costs (up to the maximum capacity of 10,000 units) are
$40,000. If one loyal customer of ABC Company placed a special order for 1,500 units
similar leather bags for $15 purchase prices per bag. The customer is willing to shoulder
the delivery costs; hence the business will not incur additional variable operating costs.
Required - Should the company accept or reject the special order?
4. Company A has three product lines, A, B, and C. The performance of all products can be
seen below:
Item
Sale
Variable Cost
Fixed Cost
Net Income
A
100,000
(60,000)
(20,000)
20,000
B
80,000
(60,000)
(35,000)
(15,000)
C
130,000
(60,000)
(40,000)
30,000
Total
310,000
(180,000)
(95,000)
35,000
The company considers stopping production of product B which is making lose around $
15,000 every month.
 Required - As the cost and management accountant, what would you advise the
company if they should drop produce Product B.
Solution:
By dropping product Y, we will lose both revenue and variable cost from this product.
However, if product B is discontinued the total income of this company will be
35,000 -15,000 =20,000
If product B is discontinued the total Cost of this company will be
Total Cost Before = 180,000 + 95,000 =275,000
Total Cost After = 120,000 + 60,000 = 180,000
If the product B is dropped the sales of this company will drop from 310,000 total sales
to 230,000 total sales
Even though product B has good contribution margin dropping this product is advisable,
as there is a high fixed cost compared to other product lines. As a result dropping this
product is more advisable than continuing it.
5. The following data/ information show production cost and related issues of XZY company that produce student arm chair for next 2 years. The company has a plan to
produce 500 chairs and 750 chairs in next two years 2023 & 2024
Raw materials
Quantity per chair
X cost per unit year1 birr
R/m cost per unit year2 birr
Wood
Steel
Fixture
Paint
1.25 m2
6.5
16 pce
0.5 lit
120.00
60
1.5
150
130
65
1.75
140
The production one chair required 2.5 hrs when total labor rate per is estimated to birr
20 in year and birr 25 in year 2 Other variable over head cost estimated to birr 2.5 per
chair and fixed over hed cost in year 1 will be birr 90,000 and in year 2 estimated to birr
105,000 Selling price of a chair will be in year 1, birr 1,100 and birr 1,150 in year 2
 Required - prepare operational Master Budget for year 2023 & 2024 for XYZ
Company
Operational Master Plan
Product
2023
Arm Chair
Q’tity Unt Price
500
1100
2024
Ttl Sales
550,000
Total Sales Forcasted
Q’tity
750
Unt Price
1150
550,000
Year 1 and 2
Ttl Sales
862,500
Total Sales
1,412,500
862,500
1,412,500
Total Rm
Cost
28,750
3125
195,000
226,875
Expense, Labor, and Raw Material Cost
Expenses –
Labor,
Material
Labor
VOH
FOH
2023
2024
Q’tity Unt Cost
500
500
Ttl Cost
20
2.5
10,000
1250
90,000
Total Costs 101,250
Year 1 and 2
Q’tity
Unt Cost
Ttl Cost
750
25
2.5
18,750
1875
105,000
125,625
Total Cost and Revenue
Description
Total Revenue
Total Cost
Year 1
550,000
101,250
Profit
Year 2
862,500
125,625
448,750 736,875
Total Profit in percent per Year =
82%
Year 1 and 2
1,412,500
226,875
1,185,625
83%