UTAS

MID-SEMESTER EXAMINATION

ACC 306: MANAGEMENT ACCOUNTING

TIME: 45 minutes

Instructions: Answer all questions

1. Cost-Volume-Profit Analysis

Menlo Company manufactures and sells a single product. The company’s sales and expenses for
last quarter follow:

Total Per Unit

$ $

Sales 450,000 30

Less variable expenses 180,000 12

Contribution margin 270,000 18

Less fixed expenses 216,000

Profit 54,000

Required:

(a) What is the quarterly break-even point in units sold and in sales dollars?
(3 marks)
 (b) Explain how to determine the total contribution margin at the break-even point without
resorting to computations. (2 marks)
(c) How many units would have to be sold each quarter to earn a target profit of $90,000?
(3 marks)
(d) Compute the company’s margin of safety in dollar terms. (2 marks)

2. Cost classification

For a manufacturer of tables classify each of the following costs as Direct Materials (DM),
Direct Labour (DL), Manufacturing Overhead (MO) or Period Cost (PC).

(a) Wood used in manufacture of a table leg

(b) Labour used to assemble a table
(c) Supervisory salaries
(d) Depreciation of machinery
(e) Property taxes on office headquarters
(f) Repairs on the company president’s vehicle
(g) Utilities cost in the factory
(h) Nails used in the assembly of a table
(i) Insurance on the factory
(j) Labour costs for product quality inspection (10 marks)

End of Question Paper