Independent University Bangladesh
Name: Tasmium Abedin Momo
ID: 2020253
Course Name: Management of Accounting
Course Code: ACN202
Section: 3, Spring 2022
Submitted to: Mr. Ashraful Arefin
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Contents
Ans to the Question No. 1 .......................................................................................................................... 3
Ans to the Question No. 2 .......................................................................................................................... 3
Ans to the Question No. 3 .......................................................................................................................... 3
Ans to the Question No. 4 .......................................................................................................................... 4
Ans to the Question No. 5 (a) .................................................................................................................... 4
Ans to the Question No. 5 (b) .................................................................................................................... 5
Ans to the Question No. 5 (c) .................................................................................................................... 5
Ans to the Question No. 5 (d) .................................................................................................................... 5
Ans to the Question No. 5 (e) .................................................................................................................... 6
Ans to the Question No. 5 (f) ..................................................................................................................... 6
Ans to the Question No. 5 (g) .................................................................................................................... 7
Ans to the Question No. 5 (h) .................................................................................................................... 8
Ans to the Question No. 5 (i) ..................................................................................................................... 8
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Ans to the Question No. 1
The fixed costs of Aussie Pie = Rent + Cooking Equipment + Fixture + Chefs
Salary + Sales Assistance + Lighting
= $11,900+8,000+5,000+3,600+1,200+300
=$30,000
So Aussie pie’s fixed cost is $30,000.
**Working: two full time chefs = 1800*2 = $3600
Ans to the Question No. 2
Variable cost per unit of Aussie Pie = Food supply + Packaging cost + Utilities
= $1.2+0.02+0.03
= $1.25
So Aussie pie’s variable cost per unit is $1.25
Ans to the Question No. 3
The monthly profit/loss Aussie pie would generate if the sales were 6000
units is calculated below,
Profit/loss = CM*units – fixed cost
= $ (2*6000) – $30,000
=$12,000 – 30,000 = ($18,000)
By selling 6000 units, Aussie pie will have a loss of $18,000.
**Working: Contribution margin (CM) per unit = Sales per unit – variable
cost per unit = $3.25 – 1.25 = $2
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Ans to the Question No. 4
Break even in units (Q),
P= CM per unit * Q – FC
0= 2Q – $30,000
$30,000 = 2Q
Q = $30,000/2
Q = 15,000 units
Break even dollar = BEP unit* sales per unit
= 15,000 * $3.25
= $48,750
So, in break-even point, Aussie pie’s sales would be 15,000 pies in $48,750.
Ans to the Question No. 5 (a)
The monthly fixed manufacturing overhead cost to produce meat pies is
calculated below,
FMOH = Rent + Chefs Salary + Utility Bill + Cooking Equipment + Fixture +
Supplies
= $ 11,900+3,600+300+8,000+5,000+200
= $29,000
So, the fixed manufacturing overhead would be $29,000.
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Ans to the Question No. 5 (b)
The monthly fixed selling and administrative cost of Aussie Pie is calculated
below,
Fixed S&A = Rent (New) + Sales Assistant Salary + Owners’ Salary +
Depreciation Cost
= $ 1,000+1,200+2,000+200
= $4,400
So, the fixed selling and administrative cost would be $4,400.
**Working-1: two owners, each will take $1,000 salary so, owners’ salary =
$1000*2 = $2000
**Working-2: 10 sets of chair and table set, each set cost $1200, total=
1200*10 = 12,000. These table and chair sets are expected to last 5 years.
So, the monthly depreciation will be = 12,000/5*12 = $200
Ans to the Question No. 5 (c)
The variable per unit cost of production of meat pies = Raw materials + Utility
cost
= $ 1.2+0.03
= $1.23
Ans to the Question No. 5 (d)
The per unit selling and administrative cost = Sales Commission + Packaging
= $ 0.5+0.02
= $0.52
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Ans to the Question No. 5 (e)
The calculation of the new break-even is given below,
unit = FC/CM per unit
= $33,400/$1.5
=22,267 units
**Working-1: Fixed cost (29,000 + 4,400) = $33,400
**Working-2: Contribution margin = $3.25-($1.23+0.52) =$3.25-1.75=$1.5
Ans to the Question No. 5 (f)
In the next year the owners have decided to sell 25,000 pies in the first month
of operation. So, the margin of safety percentage of this new operation is,
Margin of safety = (Actual units – BEP units)/ Actual Units x 100%
= (25,000 – 22,267)/25,000 x 100%
= 10.932%
The margin of safety is the excess of budgeted or actual sales dollars over the
break-even volume of sales dollars. It is the amount by which sales can drop
before losses are incurred. The higher the margin of safety, the lower the risk
of not breaking even and incurring a loss.
This margin of safety means that at the current level of sales and with the
company’s current prices and cost structure, a reduction in sales of 10.932%
would result in just breaking even.
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Ans to the Question No. 5 (g)
Total production cost of January = VC+FMOH = $1.23 + 1.18 = $2.41
Total production cost of February = VC+FMOH = $1.23 + 1.12 = $2.35
**Working:
FMOH per unit of January,
FMOH/Unit Produced = $29,000/24,500 = $1.18
FMOH per unit of February,
FMOH/Unit Produced = $29,000/26,000 = $1.12
Income statement (Variable Costing)
Explanation
Sales (25,000*$3.25)
Less: Variable cost:
Variable COGS (25,000*$1.23)
Variable S&A (25,000*$0.52)
Total variable cost:
Contribution margin
Less: Fixed Cost
Fixed MOH
Fixed S&A
Total fixed cost:
Net operating income:
$
$
81,250
30,750
13,000
(43,750)
37,500
29,000
4400
(33,400)
4,100
Income statement (Absorption Costing)
Explanation
$
Sales (25,000*$3.25)
Less: COGS ($2.41*500) + ($2.35*24500)
Gross Profit:
Selling and Admin cost:
Fixed S&A
4,400
Variable S&A (25,000*$0.52)
13,000
Total S&A:
Net operating income:
$
81,250
(58,780)
22,470
(17,400)
5,070
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Ans to the Question No. 5 (h)
Explanation
NOI under Variable costing
Deferred (ending in AC) (1500*1.12)
Deferred (beginning in AC) (500*1.18)
$
4,100
1680
(590)
5190
Ans to the Question No. 5 (i)
Absorption method will show higher operating income.
Because when the unit produced exceed, the unit sold, the fixed
manufacturing overhead deferred to inventory. And when the unit sold
exceed, unit produced the manufacturing overhead cost release from
inventory. The net operating income under variable costing is always higher
than absorption costing when inventory decrease.
The net operating income under absorption costing is always higher than
variable costing when the inventory increase.
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