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MAS 2017 01 Management Accounting Concepts Techniques For Planning and Control - 2 PDF
MAS 2017 01 Management Accounting Concepts Techniques For Planning and Control - 2 PDF
After reviewing its cost structure (variable costs of P6.00 per unit and monthly fixed cost of P120,000) and potential market,
Jolina C. Romcris Company established what is considered to be a reasonable selling price. The company expected to sell
50,000 units per month and planned its monthly results as follows:
SALES P 500,000
VARIABLE COSTS 300,000
CONTRIBUTION MARGIN P 200,000
FIXED COSTS 120,000
INCOME BEFORE TAXES P 80,000
INCOME TAXES (40%) 32,000
NET INCOME P 48,000
(A) What is the contribution margin ratio?
Contribution Margin (CM) = Total Sales – Total Variable Costs
Contribution Margin per Unit (CM per unit) =Selling price per unit – Variable Cost per Unit
Contribution Margin Ratio (CM%) = CM ÷ Total Sales
-or-
= CM per unit ÷ Selling price per unit
(I) If the company wants an after-tax return on sales of 9%, how many units must it sell?
(J) If the company wants an after-tax profit P45,000 on its expected sales volume of 50,000 units, what price must it
charge?
(K) If the company wants a before-tax return on sales of 16% on its expected sales volume of 50,000 units, what price
must Jolina charge?
(L) The company is considering offering its salespeople a 5% commission on sales. What would be the total peso-sales
required in order to implement the commission plan and still earn the planned pre-tax income of P80,000?
(M) What is the margin of safety in peso sales and the margin of safety ratio at the expected sales of 50,000 units?
Margin of Safety (MOS) = Actual Sales – BEP Sales
HIGH OL LOW OL
Low VC High VC
High FC Low FC
High CM Low CM
High BEP Low BEP
Sales after BEP have Sales after BEP have lesser
greater impact on profits impact on profits
Note: DOL X MOS% = 100%, thus,
MOS% = 1 ÷ DOL
(P) Assuming that the cost structure and the selling price remains constant, what is the percentage of change in profit and
the new expected profit after tax if the company can sell 55,000 units?
-or-
Nose-to-Nose Company operates with a standard cost accounting system and uses cost variances as a means of detecting
costs that may require more control. A standard cost sheet for a component that is manufactured exclusively in one plant
is as follows:
Absorption Variable
DM √ √
DL √ √
VOH √ √
FOH √ X
VOX X X
FOX X X
√ - Product Cost
X – Period Cost
AC NI XX VC NI XX
BEG FOH XX BEG FOH (XX)
END FOH (XX) END FOH XX
VC NI XX AC NI XX
Sherrill Corporation produces a single product. The following is a cost structure applied to its first year of operations.
During the first year, Sherrill Corporation manufactured 5,000 units and sold 3,800. There was no beginning or ending
work-in-process inventory.
a. How much income before income taxes would be reported if Stanley uses absorption costing?
b. How much income before income taxes would be reported if variable costing was used?
c. Show why the two costing methods give different income amounts.
PROBLEM 4 – BUDGETING
April: P200,000
May: 420,000
June: 350,000
How much should the company expect to collect on its receivables in June?
Production Budget (Units) DM Budget (Units)
Beginning FG xx Production xx
Production xx x DM per FG produced xx
GAS xx DM used xx
DM Budget (Pesos)
Purchases (in units) xx
x Cost per DM xx
Purchases (pesos) xx
Southworth Company
Southworth Company manufactures Product A from three raw materials (X, Y, and Z). The following table
indicates the number of pounds of each material that is required to manufacture the product:
The company has a policy of maintaining an inventory of finished goods on the product equal to 25 percent of
the next month's budgeted sales. Listed below is the sales budget for the first quarter of 2021:
Month Product A
Jan. 10,000
Feb. 9,000
Mar. 11,000
a. Refer to Southworth Company. Assuming that the company meets its required inventory policy, prepare
a production budget for the first 2 months of 2021.
b. Refer to Southworth Company. Unit costs of materials X, Y, and Z are respectively P4, P3, and P5. The
Southworth Company has a policy of maintaining its raw material inventories at 50 percent of the next
month's production needs. Assuming that this policy is satisfied, prepare a material purchases budget
for all three materials in both pounds and pesos for January.
DL Budget OH Budget
Production xx Activity base xx
x Std time allowed/unit xx x VOH rate per activity xx
Std time allowed xx Total VOH Cost xx
x Cost per DL time xx + Fixed OH xx
DL Cost xx Total OH xx
McMahon Company would like to institute an activity-based costing system to price products. The company's
Purchasing Department incurs costs of P550,000 per year and has six employees. Purchasing has determined
the three major activities that occur during the year.
Allocation # of Total
Activity Measure People Cost
Issuing purchase orders # of purchase orders 1 P150,000
Reviewing receiving reports # of receiving reports 2 P175,000
Making phone calls # of phone calls 3 P225,000
During the year, 50,000 phone calls were made in the department; 15,000 purchase orders were issued; and
10,000 shipments were received. Product A required 200 phone calls, 150 receiving reports, and 50 purchase
orders. Product B required 350 phone calls, 400 receiving reports, and 100 purchase orders.
a. Determine the amount of purchasing department cost that should be assigned to each of these
products.
b. Determine purchasing department cost per unit if 1,500 units of Product A and 3,000 units of Product
B were manufactured during the year.
“It is not a question of how much money you have, but how wise you are to save it” – Shaquille O’Neal,
DBA