ACT502 Management Accounting, Semester 1, 2025
Assignment
90 Marks - Weight 20%
Due Date: Sunday 18th May 2025 (week 10)
Instructions:
➢ This assignment consists of two questions. The due date and time are noted in the
unit information document as well as above.
➢ It is your responsibility to ensure you factor in any time difference between
Darwin and other locations when submitting your assignment.
➢ Please construct your answer to question 1 in a worksheet in Excel file, answer to
question 2 in a word file and upload both files using the submission point for the
assignment on Learnline.
➢ Marks will be given for the quality of your calculation formats (evident from the
formulas on the Excel spreadsheet) even if your final calculations are not correct.
Show your calculations clearly.
➢ Assignments submitted via e-mail will NOT be accepted.
➢ There is no need to complete a university cover sheet but DO please include your
name, Student Number, and your tutor’s name.
➢ Do not include the actual question in your submitted assignment. You need to only
include your answers to the questions.
Ethics:
➢ This is not a group assignment, it is an individual assessment. Your solutions will
likely be different from other students. If portions of your assignment are copied
or close to copying, all parties will be penalised for copying. Copying would be
considered plagiarism and CDU has strict policies in this regard (please see
https://www.cdu.edu.au/academic-integrity for details).
ACT502 Assignment, Semester 1, 2025
Page 1
Question One
(80 Marks)
Lolly Pops Inc. makes really big lollypops in two sizes, large & giant. The company sells
lollipops to convenience stores, fairs, schools for fund raising and in bulk on the internet.
Summer is approaching & the company is preparing its budget for the month of
December. The lollypops are handmade, mostly out of sugar and attached to wooden
sticks. Expected sales are based on past experience.
Other information for the month of December follows:
Input prices:
Direct materials
Sugar
Sticks
Direct manufacturing labour
$0.50 per kg
$0.30 each
$8 per direct manufacturing labour hour
Input quantities per unit of output:
Direct material
Sugar
Sticks
Direct manufacturing labour hours (DMLH)
Set up hours per batch
Large
Giant
0.25 kg
1
0.2 hours
0.08 hours
0.5 kg
1
0.25 hours
0.09 hours
Sugar
125 kgs
240 kg
$64
Sticks
350
480
$105
Inventory Information, direct materials:
Beginning inventory
Target ending inventory
Cost of beginning inventory
Note: Lolly Pops Inc. accounts for direct materials using FIFO cost flow assumption.
Sales and inventory information, finished goods:
Expected sales in units
Selling price
Target ending inventory in units
Beginning inventory in units
Beginning inventory in dollars
ACT502 Assignment, Semester 1, 2025
Large
3000
$3
300
200
$500
Giant
1800
$4
180
150
$474
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Note: Lolly Pops Inc. uses a FIFO cost flow assumption for finished goods inventory.
All the lollipops are made in batches of 10. The company incurs manufacturing overhead
costs, and marketing and general administration costs, but customers pay for shipping.
Other than manufacturing labour costs, monthly processing costs are very small. The
company uses activity-based costing and has classified all overhead cost for the month of
December as shown in the following table:
Cost type
Manufacturing:
Set-up
Processing
Non- manufacturing
Marketing & Administration
Activity Base
Rate
Set up hours
DMLH’s
$20 per set up hour
$1.70 per DMLH
Sales Revenue
10%
Other information:
Eighty percent of sales are on account, of which half are collected in the month of trade,
49% are collected in the following month and 1% are never collected & written off as
bad debt.
All purchases of materials are on account. The company pays for 70% of purchases in the
month of purchase and 30% in the following month.
All other costs are paid in the month incurred.
The company is making monthly interest payments at 12% p. a. on a $20,000 long term
loan.
The company plans to pay the $500 of taxes as of 30 November in the month of December.
Income tax expenses for December are zero
Forty percent of processing costs and 30% of marketing & general administration costs ,
are depreciation.
Lolly Pop Inc.
Balance Sheet
As at 30 November
Assets
Cash
A/c Receivable
4 800
Less: Allowance for bad debt (96)
Inventories
DM
Finished Goods
ACT502 Assignment, Semester 1, 2025
$587
4 704
169
974
Page 3
Fixed Assets
Less: Accumulated Depreciation
Total Assets
190 000
(55 759)
Liabilities & Equity
Accounts payable
Taxes payable
Interest payable
Long term debt
Ordinary Shares
Retained Earnings
Total liabilities & equity
134 241
140 675
$696
500
200
20 000
10 000
109 279
140 675
Required:
Prepare each of the following for December:
a. Revenue budget ( 2 marks)
b. Production budget (4 Marks)
c. Direct material usage budget and direct material purchase budget
(9 marks)
d. Direct manufacturing labour cost budget (3 marks)
e. Manufacturing overheard cost budget for setup & processing activities
(9 marks)
f. Budgeted unit cost of ending finished goods inventory and ending
inventory budget. (10 marks)
g. Cost of goods sold budget (5 marks)
h. Marketing & general administration budget. (1 mark)
i. Cash budget for December (20 marks)
j. Budgeted income & expenditure statement for December (5 marks)
k. Budgeted balance sheet as at 31 December (12 marks)
Question Two
(10 Marks)
Baskota Ltd. produces a moulded plastic casing MP356 for desktops. Summary data for
2025 income statement are as follows:
Revenue
Variable costs
Fixed costs
Operating profit
$5 000 000
3 000 000
2 160 000
$(160 000)
James Woodruff, CEO, is very concerned about the company’s poor profitability. He asks
Matt Vogue, production manager, and Laila Homes, management accountant, to see if
there are ways to reduce costs.
ACT502 Assignment, Semester 1, 2025
Page 4
After two weeks, Matt returns with a proposal to reduce variable costs to 52% of
revenues by reducing the costs the company currently incurs for safe disposal of wasted
plastics. Laila is concerned that this would expose the company to potential
environmental liabilities. She tells Matt: “We would need to estimate some of these
potential environmental costs and include them in our analysis.” “you can’t do that” Matt
replies. “We are not violating any laws. There is some possibility that we may have to
incur environmental costs in the future, but if we bring it up now, this proposal will not
go through because our senior management always assumes these costs to be larger than
they turn out to be. The market is very tough, and we are in danger of shutting down the
company. We don’t want all our colleagues to lose their jobs. The only reason our
competitors are making money is because they are doing exactly what I am proposing”.
Required:
a. What is Baskota’ s break-even revenue for 2025? (2 marks)
b. What is Baskota’ s break-even revenue if variable costs are 52% of revenues?
(1 marks)
c. What is Baskota’ s profit for 2025 if variable costs had been 52% of revenues?
(1 marks)
d. Given Matt’s comments, what do you think Laila should do? Give reasons for your
answer. (6 marks)
ACT502 Assignment, Semester 1, 2025
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