Cost and Management Accounting II

Group Assignment
Due date: 5/4/2016 E.C
1. AZ Company produces a single product. For the first quarter of the year, the following data
were collected:
Units produced 10,000 units
Direct material quantity standard 4 units of DM per unit
Direct material quantity used in production 39,000 units
Direct material quantity purchased 50,000 units
Direct material standard cost br 2.00 each
Actual DM cost br 2.10 each
Instruction: compute:
A. Material price variance B. Material quantity variance
2. Given the following information for the month April, calculate MPV, MUV, LRV& LEV.
Standards
Standard inputs Standard price Standard cost
expected per unit expected per unit expected per unit
of out put of inputs of out put
DM 5 Pounds Br 2 Br 10
DL ½ hour Br 16 Br 8
And during April the company produced 7,000 units of product. However 9,000 units
were scheduled for production. The following activity was recorded relative to the
product line during this period.
- DM : 36,800 pounds of material were purchased and used at an actual unit price of br 1.9
- DL: 3,750 hours of labor were used at an actual hourly rate of br 16.4.
Assume there was no inventory of inventory on hand to start the period.
3. Summarized manufacturing cost data from the records of AZEY company are given below
- DM: purchased 130,000 units at an actual cost of br 546,000. SC OF 130,000 units, br
520,000. Used 98,000 units of DM in production. Only 95,000 units should have been used.
- DL: standard labor rate is br2 per hr. the company operated at 40,000 direct labor hour. But
produced quantity of product that should have been produced in 35,000 direct labor hours.
All but 2,000 of direct labor hours were paid for at the standard rate and the 2,000 direct
labor hours were paid for at the rate of br 3.35 per hr.
Required: MPV, MUV, MCV, LRV, LEV& LCV

4. ABC Co. uses a common direct material that has a joint product cost of Br. 16,000 and
yields 6,000 pounds of product X selling for Br. 3 per pound and 4,000 pounds of product Y
selling for Br. 3.50 per pound. Product X can be processed further into XP at an additional
cost of Br. 8,000, and product Y can be processed further into YP at an additional cost of Br.
 6,000. The new products, XP and YP, can then be sold for Br. 4 and Br. 6 per pound,
respectively.Which product (s) should be sold at split off and which should be sold after
processed further? Why? Assume no loss of input in further processing.
5. X Company has two divisions (division A and division B). Selected data for the divisions
are given as follows:
Division A Division B
Number of unit sold 6,000 unit 3,000 unit
Unit selling price 100 90
Unit variable cost 80 70
Traceable fixed cost 60,000 40,000
The following additional information is also provided regarding the company:
Common fixed cost (60% is allocated for division A)…..……30,000
Net operating asset…………………………………………...250,000
Minimum required rate of return……………………………….15%
Required:
A. Prepare segmented income statement
B. Compute margin, turnover and ROI for the company
C. Compute residual income for the company.

Individual Assignment
Due date: 5/4/2016 E.C

6. HM Company has the capacity to produce 15,000 units per month. Current regular
production and sales are 10,000 units per month at a selling price of Br. 15 each. Based on
the current production level, the following costs are to be incurred per unit:
Direct materials Br. 5.00
Direct labor 3.00
Variable factory overhead (FOH) 0.75
Fixed FOH 1.50
Variable selling expense 0.25
Fixed administrative expense 1.00
HM Company has received special order from a customer that wants to purchase 4,000 units
at Br. 10 each. There would be no selling expense in connection with this special order.
Instructions:
Should HM Company accepts or rejects the special order? Why or Why not? Assume
that the special order should not disturb regular business.
7. XYZ Store has three major departments: groceries, general merchandise, and drugs.
Management is considering dropping groceries, which have consistently shown a net loss.
The following table reports the present annual net income (in thousands).
DEPARTMENTS
Groceries General Drugs Total
merchandise
Sales Br. 1,000 Br. 800 Br. 100 1,900
Variable CGS& Expenses 800 560 60 1,420
Contribution margin Br. 200 Br. 240 Br. 40 Br. 480
Fixed expenses
Avoidable Br. 150 Br. 100 Br. 15 Br. 265
Unavoidable 60 100 20 180
Trial fixed expenses Br. 210 Br. 200 Br. 35 Br. 445
Operating income (loss) Br. (10) Br. 40 Br. 5 Br. 35

Instructions:
Which alternative would you recommend if the only alternatives to be considered are dropping
or continuing the grocery department? Assume that the total assets would be unaffected by the
decision and the space made available by dropping groceries would remain idle.
8. Great Company manufactures 60, 000 units of part XL-40 each year for use on its
production line. The following are the costs of making part XL-40:
Total Costs Cost per
60, 000 units unit
Direct material Br. 480, 000 Br.8
Direct labor 360, 000 6
Variable factory overhead 180, 000 3
Fixed FOH 360, 000 6
Total manufacturing costs Br. 1, 380, 000 Br.23
Another manufacturer has offered to sell the same part to Great for Br 21 each.Assume
further, the fixed overhead consists of depreciation, property taxes, insurance, and supervisory
salaries. The entire fixed overhead would continue if the Great Company bought the component
except that the cost of Br. 120, 000 pertaining to some supervisory and custodial personnel could
be avoided.
Instructions:
Should the parts be made or bought? Assume that the capacity now used to make parts
internally will become idle if the pats are purchased?

9. Assume that a division of Tana Company makes an electric component for its speakers.
The management is trying to decide whether the division of the company should
manufacture this component part or purchase it from another manufacturer.
The following are production costs for 100,000 units of the component for the forth-coming year.
Direct material Br.500, 000
Direct labor 200,000
Factory overhead
 Indirect labor Br. 32,000
Supplies 90,000
Allocated occupancy costs 50,000 172,000
Total cost Br.872, 000
A small local company has offered to supply the components at a price of Br.7.80 each. If
the division discontinued the production of its components it would save two thirds of the
supplies cost and Br.22, 000 of indirect labor cost. All other overhead costs would continue
regardless of the decision made.
Instruction: Should the parts be made or bought? Assume that the capacity now used to make the
parts will become idle if they are purchased from outside.
10. Abay Chemical Company produces three chemical products, x, y and z, as a result of a
particular joint process. The joint process cost is Br. 105,000. This includes raw material
costs and the cost of processing to the point where these joint products go their separate
ways. These products were processed further and sold as follows:
PRODUCTS SALES ADDITIONAL PROCESSING
COSTS
X Br. 260,000 Br. 220,000
Y 330,000 300,000
Z 175,000 100,000
The company has had an opportunity to sell at split-off directly to other processors. If that
alternative had been selected, sales would have been: X, Br. 56,000, Y, Br. 28,000 and Z, Br.
54,000.
The company expects to operate at the same level of production and sales in the forth-coming
year.
Consider all the available information, and assume that all costs incurred after split-off are
variable.
Instruction: Which products should be processed further and which should be sold at split-off?