Rift Valley University

Finfine Campus
Post graduate program (MBA)
Financial and Management Accounting
Group Assignment

By
1. Misgana Hailu
2. Obsa Alemayehu
3. Roman Ebisa
4. Diriba Tesfa
5. Aliya Abadir
6. Gebreslasie Gebrearegawi

August, 2023
Addis Ababa
 Solution to Group Assignment
1. Management Accounting Versus Financial Accounting.
 Publically reported - Financial accounting (FA)
 Forward looking - Management accounting (MA)
 Usually confidential - Management accounting (MA)
 Complies with accounting standards - Financial accounting (FA)
 Reports past performance - Financial accounting (FA)
 Uses physical measures as well as monetary ones for reports - Management accounting
(MA)
 Focus on business decision making - Management accounting (MA)
 Driven by user need - Both financial accounting (FA) and management accounting (MA)
are driven by user need, but the focus of management accounting is more on internal
decision-making while financial accounting is more focused on external reporting to
investors, regulators, and other stakeholders.
2. The Balanced Scorecard: Stakeholder Values
 High wages - Employees (L)
 Safe products - Customers (C), Regulators (F)
 Low-priced products - Customers (C)
 Improved return on investment - Investors (F)
 Job security - Employees (L)
 Cost-effective production process - Internal business processes (P)

3. XYZ Co……………….

To calculate ROA for 2009 and 2010, we need to divide the net income for each year by the total
assets at the end of that year and express the result as a percentage:

ROA 2009 = (Net Income 2009 / Total Assets at end of 2009) x 100%

ROA 2009 = ($48,000 / $480,000) x 100% = 10%

ROA 2010 = (Net Income 2010 / Total Assets at end of 2010) x 100%

ROA 2010 = ($50,000 / $560,000) x 100% = 8.93%

The ROA decreased from 2009 to 2010, indicating that the profitability performance of the
company decreased during this period. This may be due to a decrease in net income or an
increase in total assets. However, we need to examine other factors such as changes in sales,
expenses, and other financial ratios to get a better understanding of the company's financial
performance.

4. The accountant for ABC Company………………..

 In estimating the life of a building, assumes that the business will last indefinitely - Going
concern
 Records a sale when the customer is billed - Revenue recognition
 Postpones the recognition of a one-year insurance policy as an expense by initially
recording the expenditure as an asset - Deferral
 Recognizes the usefulness of financial statements prepared on a monthly basis even
though they are based on estimates - Periodicity
 Recognizes, by making an adjusting entry, wages expense that has been incurred but not
yet recorded - Accrual
 Prepares an income statement that shows the revenues earned and the expenses incurred
during the accounting period - Matching rule

5. On December 1st Mr X

a. Journal Entries:
Dec. 1 Cash 50,000

Mr X, Capital 50,000

(To record capital contribution by Mr X)

Dec. 1 Equipment 10,800

Cash 10,800

(To record the purchase of equipment)

Dec. 1 Prepaid Insurance 4,500

Cash 4,500

(To record the purchase of insurance)

Dec. 9 Land 18,000

Cash 18,000

(To record the purchase of land)

Dec. 10 Office Supplies 3,000

Accounts Payable 3,000

(To record the purchase of office supplies on account)

Dec. 19 Cash 28,000

Notes Payable 28,000

(To record the borrowing of $28,000 from the bank)

Dec. 22 Advertising Expense 800

Cash 800

(To record the payment for advertising)

Dec. 26 Accounts Payable 1,000

Cash 1,000

(To record the payment on account)

Dec. 31 Utilities Expense 280

Utilities Payable 280

(To record the utility expense incurred in December but to be paid in January)

Dec. 31 Cash 20,200

Accounts Receivable 2,700

Service Revenue 20,200

(To record the revenue earned during December)

Dec. 31 Salaries Expense 3,600

Rent Expense 700

Cash 4,300

(To record the payment of employee salaries and building rent)

Dec. 31 Unearned Revenue 1,440

Service Revenue 1,440

(To record the receipt of cash for services to be performed in January)

Dec. 31 Mr X, Withdrawals 3,000

Cash 3,000

(To record the withdrawal of cash by Mr X)

b. Unadjusted Trial Balance:

Account Debit Credit
Cash 61,500
Accounts Receivable 2,700
Office Supplies 3,000
Prepaid Insurance 4,500
Equipment 10,800
Accumulated Depreciation 0
Land 18,000
Accounts Payable 4,000
Utilities Payable 280
Interest Payable 75
Unearned Revenue 1,440
Notes Payable 28,000
Mr X, Capital 50,000
Mr X, Withdrawals 3,000
Service Revenue 20,200
Salaries Expense 3,600
Rent Expense 700
Utilities Expense 280
 Advertising Expense 800
Supplies Expense 600
Insurance Expense 375
Interest Expense 75
Depreciation Expense-Equip 180
------------------------------ ----------- -----------
Total 95,975 53,155

c. Adjusting Entries:
i. Supplies Expense 600
Office Supplies 600
(To record supplies used during the month)

ii. Depreciation Expense-Equipment 180

Accumulated Depreciation-Equipment 180
(To record monthly depreciation)

iii. Insurance Expense 375

Prepaid Insurance 375
(To record the expiration of one-month insurance)

iv. Interest Expense 75

Interest Payable 75
(To record accrued interest)

d. Adjusted Trial Balance:

Account Debit Credit
Cash 61,500
Accounts Receivable 2,700
Office Supplies 2,400
Prepaid Insurance 4,125
Equipment 10,800
Accumulated Depreciation 180 180
Land 18,000
 Accounts Payable 4,000
Utilities Payable 280
Interest Payable 75 75
Unearned Revenue 1,440
Notes Payable 28,000
Mr X, Capital 50,000
Mr X, Withdrawals 3,000
Service Revenue 20,200
Salaries Expense 3,600
Rent Expense 700
Utilities Expense 280
Advertising Expense 800
Supplies Expense 600
Insurance Expense 375
Interest Expense 75
Depreciation Expense- 180
Equip
------------------------------ ----------- -----------
Total 94,235 53,735

e. Financial Statements:
Income Statement:
Amount
Service Revenue 20,200
Expenses:
Salaries Expense 3,600
Rent Expense 700
Utilities Expense 280
Advertising Expense 800
Supplies Expense 600
Insurance Expense 375
 Interest Expense 75
Depreciation Expense- 180
Equip
Net Income 13,690

Statement of Owner's Equity:

Amount
Mr X, Capital, Dec. 1 50,000
Add: Net Income 13,690
Less: Withdrawals 3,000
Mr X, Capital, Dec. 31 60,690

Balance Sheet:
Assets Amount Liabilities and Equity Amount
Current Assets: Current Liabilities:
Cash 61,500 Accounts Payable 4,000
Accounts Receivable 2,700 Utilities Payable 280
Office Supplies 2,400 Interest Payable 75
Prepaid Insurance 4,125 Unearned Revenue 1,440
Long-term Assets: Long-term Liabilities:
Equipment 10,800 Notes Payable 28,000
Accumulated Depreciation 180
Land 18,000
Total Assets 99,705 Total Liabilities and Equity 33,795
Owner's Equity:
Mr X, Capital 60,690
Total Liabilities and Equity 99,705

f. Closing Entries:
Service Revenue 20,200
Income Summary 20,200
(To close revenue)

Salaries Expense 3,600

Rent Expense 700
Utilities Expense 280
Advertising Expense 800
Supplies Expense 600
Insurance Expense 375
Interest Expense 75
Depreciation Expense-Equip 180
Income Summary 4,610
(To close expenses)

Income Summary 8,590

Mr X, Capital 8,590
(To close income summary to Mr X, Capital)

g. Post-closing Trial Balance:

Account Debit Credit

Cash 61,500

Accounts Receivable 2,700

Office Supplies 0

Prepaid Insurance 0

Equipment 10,800

Accumulated 180
Depreciation

Land 18,000

Accounts Payable 4,000

 Utilities Payable 280

Interest Payable 0

Unearned Revenue 0

Notes Payable 28,000

Mr X, Capital 60,690

6. The three functions of accounting are scorekeeping, attention-directing, and

problem-solving.
 Scorekeeping: Accounting serves as a scorekeeper by providing financial information
about a business's performance. This information is used to track and report the financial
results of the company, such as revenues, expenses, profits, and losses, over a specific
period. The scorekeeping function of accounting provides stakeholders with a snapshot of
the financial health of the company, which helps them make informed decisions about
investing, lending, or partnering with the company.
 Attention-directing: Accounting serves as an attention-directing function by directing the
attention of managers to areas of the business that require attention. Accounting
information helps managers identify areas of the business that are performing well and
those that need improvement. This information helps managers to make informed
decisions about resource allocation, pricing, and cost management.
 Problem-solving: Accounting serves as a problem-solving function by providing
information to help managers solve problems and make decisions. Accounting
information is used to analyze the financial impact of different decisions and to identify
solutions to problems. For example, if a company is facing cash flow problems, the
accounting information can be used to identify areas where expenses can be reduced or
revenue can be increased to improve cash flow.

In summary, accounting fulfills the scorekeeping function by providing financial information,

the attention-directing function by directing managers' attention to areas of the business that
require attention, and the problem-solving function by providing information to help managers
solve problems and make decisions.

7. The accounting system used for financial statement preparation

The accounting system used for financial statement preparation is primarily designed to meet the
needs of external stakeholders, such as investors, creditors, regulators, and tax authorities. These
stakeholders are primarily interested in the financial performance and position of the company,
and the accounting system is specifically designed to provide them with the necessary financial
information.

However, the information provided by the financial accounting system may not always be
sufficient for managers to make informed decisions. This is because managers often require more
detailed and timely information about the company's operations and performance than what is
presented in the financial statements. The financial statements are usually prepared after the end
of the accounting period, and the information they provide is historical and backward-looking.

In contrast, managers need real-time information about the company's performance to make
informed decisions. They need to be able to monitor the company's operations and financial
performance continuously, identify problems and opportunities as they arise, and take
appropriate action.

Furthermore, the financial accounting system is designed to report on past performance, and it
may not provide information on the potential impact of future events or decisions. Managers
need to be able to project the financial impact of various decisions and scenarios to make
informed decisions.

In summary, while the accounting system used for financial statement preparation is essential for
external reporting and compliance purposes, it may not always provide managers with the
detailed and real-time information they need for decision-making purposes. Managers need to
supplement the information provided by the financial accounting system with other sources of
information and analytical tools to make informed decisions.

The accounting system used for financial statement preparation is primarily designed to provide
information for external stakeholders, such as investors, creditors, and regulatory bodies. As
such, the system often does not provide the detailed information or analysis that managers need
to make informed decisions about the day-to-day operations of the business.

There are several reasons why the accounting system used for financial statement preparation
may not provide the information that managers need for decision-making purposes, including:

 Lack of Timeliness: Financial statements are typically prepared quarterly or annually, and
the information contained in them may not be timely enough to help managers make
quick decisions.
 Aggregation of Information: Financial statements are prepared by aggregating financial
information over a period, such as a month or a year. This aggregation may not provide
managers with the detailed information they need to make informed decisions about
specific business activities or operations
 Focus on Historical Information: Financial statements primarily provide information
about the past performance of the business, rather than future performance or potential
opportunities. This focus on historical information may not be helpful for managers who
need to make decisions about future activities or investments.
 Limited Non-Financial Information: Financial statements typically do not provide
information about non-financial factors that may affect the business's performance, such
as customer satisfaction, employee engagement, or market trends.

To address these limitations, managers may need to rely on other sources of information, such as
internal management reports, market research, or customer feedback. They may also need to
work with the accounting department to develop customized reports or analysis that provide the
information they need to make informed decisions.

8. Managerial accounting techniques have been developed to meet the information needs of
managers in the new business environment. Some of these techniques include:
 Value Chain Analysis: This technique is used to analyze a company's value chain, which
is the series of activities that a company performs to deliver a product or service to
customers. Value chain analysis helps managers identify areas where the company can
create value and reduce costs, such as by improving the efficiency of production
processes or by outsourcing non-core activities.
  Strategic Positioning Analysis: This technique is used to analyze a company's position in
the market and to identify opportunities for growth and differentiation. Strategic
positioning analysis helps managers identify the company's strengths and weaknesses
relative to its competitors and to develop strategies to improve its competitive position.
 Activity-Based Management (ABM): ABM is a technique used to manage a company's
activities to improve its performance. ABM involves identifying and analyzing activities,
such as production, marketing, or customer service, and then developing strategies to
improve their efficiency and effectiveness. ABM helps managers identify areas where the
company can reduce costs, improve quality, or increase customer satisfaction.
 Activity-Based Costing (ABC): ABC is a technique used to allocate costs to activities
and then to products or services based on the resources they consume. ABC helps
managers identify the true cost of producing a product or service and to make informed
decisions about pricing, product mix, and process improvement.
 Balanced Scorecard: This technique is used to measure a company's performance across
multiple dimensions, such as financial, customer, internal processes, and learning and
growth. The balanced scorecard helps managers identify areas where the company is
performing well and areas where improvement is needed, and to develop strategies to
improve performance.

Overall, these managerial accounting techniques provide managers with the information they
need to make informed decisions in the new business environment. By using these techniques,
managers can identify opportunities for growth and improvement, reduce costs, improve quality,
and increase customer satisfaction.

9. To prepare a common-size analysis of the asset section of the firm's balance sheet for
2011 and 2012, we need to calculate the percentage of each asset category to total assets.
Here are the calculations:

2011:

Cash: 2,500 / 320,900 = 0.78 or 78%

Accounts receivable, net: 35,000 / 320,900 = 10.90%

Inventory: 85,000 / 320,900 = 26.47%

Other current assets: 3,400 / 320,900 = 1.06%

Total current assets: 125,900 / 320,900 = 39.21%

Property, plant & equipment, net: 180,000 / 320,900 = 56.09%

Other assets: 15,000 / 320,900 = 4.68%

Total assets: $320,900

2012:

Cash: 3,900 / 426,010 = 0.92 or 92%

Accounts receivable, net: 40,000 / 426,010 = 9.39%

Inventory: 122,000 / 426,010 = 28.63%

Other current assets: 4,110 / 426,010 = 0.96%

Total current assets: 170,010 / 426,010 = 39.91%

Property, plant & equipment, net: 230,000 / 426,010 = 53.96%

Other assets: 26,000 / 426,010 = 6.12%

Total assets: $426,010

So the common-size analysis percentages for the asset section of the balance sheet are:

2011:

Cash: 78.0%

Accounts receivable, net: 10.9%

Inventory: 26.5%

Other current assets: 1.1%

Total current assets: 39.2%

Property, plant & equipment, net: 56.1%

Other assets: 4.7%

Total assets: 100.0%

2012:

Cash: 92.0%

Accounts receivable, net: 9.4%

Inventory: 28.6%

Other current assets: 1.0%

Total current assets: 39.9%

Property, plant & equipment, net: 54.0%

Other assets: 6.1%

Total assets: 100.0%

These common-size analysis percentages show the composition of the company's assets and how
they have changed over time. For example, the percentage of cash has increased significantly
from 78% in 2011 to 92% in 2012, while the percentage of property, plant & equipment has
decreased from 56.1% in 2011 to 54.0% in 2012.

10. ABC Corporation

1. Schedule of Cost of Goods Manufactured
Direct Materials:
Raw material inventory, January 1 $90,000
Add: Purchases of raw materials $750,000
Total raw materials available $840,000
Less: Raw material inventory, Dec. 31 $60,000
Raw materials used in production $780,000
Direct Labor $150,000
Factory Overhead:
Utilities, factory $36,000
Depreciation, factory $162,000
Insurance, factory $40,000
Supplies, factory $15,000
Indirect labor $300,000
Maintenance, factory $67,000
Total Factory Overhead $620,000
Total Manufacturing Costs $1,550,000
Add: Work in process inventory, Jan. 1 $180,000
Total Cost of Work in Process $1,730,000
Less: Work in process inventory, Dec. 31$100,000
Cost of Goods Manufactured $1,630,000

2. Cost of Goods Sold

Cost of goods manufactured $1,630,000
Add: Finished goods inventory, Jan. 1 $260,000
Total cost of goods available for sale $1,890,000
Less: Finished goods inventory, Dec. 31 $210,000
Cost of goods sold $1,680,000

3. Income Statement
Sales $2,500,000
Cost of goods sold $1,680,000
Gross Profit $820,000
Selling Expenses $140,000
Administrative Expenses $270,000
Total Operating Expenses $410,000
Operating Income $410,000

Note: The income statement does not include income tax expense or any other non-operating
items.

11. The four functions of management are planning, organizing, leading, and controlling. The
type of cost management information that is appropriate for each function of management
is as follows:
 Planning: Planning involves setting goals and objectives and developing strategies to
achieve them. Cost management information that is appropriate for planning includes
budgeting, forecasting, and cost-volume-profit (CVP) analysis. Budgeting involves
setting financial targets and allocating resources to achieve those targets. Forecasting
 involves predicting future costs and revenues. CVP analysis involves analyzing the
relationship between costs, sales volume, and profitability.
 Organizing: Organizing involves arranging resources to achieve the goals and objectives
set during the planning process. Cost management information that is appropriate for
organizing includes activity-based costing (ABC), which involves identifying and
allocating costs to specific activities, and cost allocation, which involves assigning costs
to products or services based on their use of resources.
 Leading: Leading involves motivating employees and directing their efforts toward
achieving the goals and objectives set during the planning process. Cost management
information that is appropriate for leading includes performance measurement and
variance analysis. Performance measurement involves tracking actual costs and
comparing them to budgeted costs or other benchmarks. Variance analysis involves
analyzing the reasons for differences between actual costs and budgeted costs or other
benchmarks.
 Controlling: Controlling involves monitoring performance and taking corrective action as
needed to ensure that goals and objectives are achieved. Cost management information
that is appropriate for controlling includes cost-benefit analysis, which involves
comparing the costs and benefits of different courses of action, and cost control, which
involves implementing measures to reduce costs and improve efficiency.

Overall, cost management information is essential for each function of management to ensure
that the company is achieving its goals and objectives in a cost-effective manner.

12. Types of techniques managers use to succeed in their businesses

a) Balanced Scorecard/Strategy Map: The balanced scorecard is a performance management
tool that helps organizations translate their strategy into specific measurable objectives
and targets. The strategy map is a visual representation of the organization's strategic
objectives, linking them to specific measures, targets, and initiatives. The balanced
scorecard and strategy map provide a framework for aligning the organization's activities
with its strategic objectives.
b) Value Chain: The value chain is a framework for analyzing and improving the activities
involved in producing and delivering a product or service. The value chain includes all
 the activities from raw materials to the final customer, and it identifies opportunities for
cost reduction and value creation at each stage of the process.
c) Activity-Based Costing: Activity-based costing (ABC) is a method of assigning costs to
products or services based on the activities required to produce them. ABC provides a
more accurate picture of the true cost of a product or service, enabling managers to make
better decisions about pricing, product mix, and process improvement.
d) Business Intelligence: Business intelligence (BI) refers to the tools, technologies, and
processes used to collect, analyze, and present data to support business decision-making.
BI helps managers to identify trends, patterns, and opportunities for improvement in their
business operations.
e) Target Costing: Target costing is a method of cost management that involves setting a
target cost for a product or service and then designing the product or service to meet that
cost target. Target costing helps companies to design products that are cost-effective and
meet customer needs.
f) Life-Cycle Costing: Life-cycle costing (LCC) is a method of cost management that
considers the total cost of owning and operating a product or service over its entire life
cycle. LCC takes into account all costs, including acquisition, operation, maintenance,
and disposal costs, and helps managers to make better decisions about product design,
pricing, and customer service.
g) Benchmarking: Benchmarking is a method of comparing an organization's performance
to that of its competitors or other organizations in the same industry. Benchmarking helps
managers to identify best practices and opportunities for improvement in their business
operations.
h) Business Process Improvement: Business process improvement (BPI) is a method of
analyzing and improving business processes to increase efficiency, reduce costs, and
improve quality. BPI involves mapping out each step of a process, identifying bottlenecks
and inefficiencies, and implementing changes to improve performance.
i) Total Quality Management: Total quality management (TQM) is a method of managing
quality that involves all employees in the organization and focuses on continuous
improvement. TQM includes a set of principles and practices aimed at improving
customer satisfaction, reducing defects and waste, and improving overall performance.
 j) Lean Accounting: Lean accounting is a method of accounting that supports lean
manufacturing and other lean business practices. Lean accounting focuses on providing
timely and accurate financial information that supports decision-making and continuous
improvement.
k) Theory of Constraints: The theory of constraints (TOC) is a method of identifying and
managing the constraints that limit the performance of a business process. TOC involves
identifying the bottleneck in a process and then implementing changes to improve the
flow of work and increase throughput.
l) Enterprise Sustainability: Enterprise sustainability is a method of integrating
environmental and social considerations into business decision-making. Enterprise
sustainability involves identifying and managing the environmental and social impacts of
business operations, and it can help companies to reduce costs, improve efficiency, and
enhance their reputation.
m) Enterprise Risk Management: Enterprise risk management (ERM) is a method of
identifying, assessing, and managing risks that affect the performance of an organization.
ERM involves a systematic approach to identifying and assessing risks, developing
strategies to manage risks, and monitoring performance to ensure that risks are
effectively managed.
13. An emphasis on accounting and contribution of non-financial performance
management

An emphasis on accounting can limit an understanding of the broader importance of

management control because accounting primarily focuses on financial performance and does
not provide a complete picture of the organization's overall performance. Accounting measures
such as revenue, expenses, and profit can provide valuable information for decision-making, but
they do not capture the full range of factors that contribute to organizational success, such as
customer satisfaction, employee engagement, innovation, and social and environmental
responsibility. Therefore, an over-reliance on accounting can lead to a narrow focus on short-
term financial results at the expense of long-term sustainability and growth.

Non-financial performance management can contribute to our understanding of management

control within organizations by providing a more comprehensive view of organizational
performance. Non-financial measures such as customer satisfaction, employee engagement,
product quality, innovation, and environmental sustainability can help managers to assess the
overall health and effectiveness of the organization. Non-financial performance management
also helps to align the organization's goals and objectives with its broader mission and values,
providing a more holistic approach to management control.

Using a balanced approach that includes both financial and non-financial performance measures
can provide a more complete understanding of management control within organizations. By
incorporating non-financial performance management, managers can gain insight into the drivers
of organizational success and make informed decisions that support long-term sustainability and
growth.

14. XYZ company

The breakeven point in units:

Breakeven point in units = Fixed costs / Contribution margin per unit

Breakeven point in units = $64,000 / $8 per unit

Breakeven point in units = 8,000 units

The breakeven point in dollars:

Breakeven point in dollars = Breakeven point in units x Sales price per unit

Breakeven point in dollars = 8,000 units x $20 per unit

Breakeven point in dollars = $160,000

The contribution margin ratio:

Contribution margin ratio = Contribution margin / Sales

Contribution margin ratio = $80,000 / $200,000

Contribution margin ratio = 0.4 or 40%

Therefore, the breakeven point for the company is 8,000 units or $160,000 in sales revenue. The
contribution margin ratio is 40%, which means that for every dollar in sales, 40 cents are
available to cover fixed costs and contribute to profit.
 15. PQS Corporation manufactures and sells
a) Sales Budget and Schedule of Expected Cash Collections
Quarter Unit Sales Sales Revenue Cash Collection
Year 2 40,000 $320,000 $240,000
Q1
Year 2 60,000 $480,000 $420,000
Q2
Year 2 100,000 $800,000 $750,000
Q3
Year 2 50,000 $400,000 $475,000
Q4
Year 3 70,000 $560,000 $575,000
Q1
Year 3 80,000 $640,000 $700,000
Q2
Total 400,000 $3,200,000 $3,160,000

Note: Cash collection for each quarter is calculated as 75% of sales revenue for the current
quarter plus 25% of sales revenue for the previous quarter. The beginning accounts receivable
balance of $65,000 is collected in Year 2 Q1.

b) Production Budget
Quarter Unit Sales Add: Ending Total Units Less: Beginning Production
FG Inv. Needed FG Inv.
Year2 Q1 40,000 18,000 58,000 12,000 46,000
Year 2 Q2 60,000 30,000 90,000 18,000 72,000
Year 2 Q3 100,000 30,000 130,000 30,000 100,000
 Year 2 Q4 50,000 21,000 71,000 30,000 41,000
Year 3 Q1 70,000 24,000 94,000 21,000 73,000
Year 3 Q2 80,000 30,000 110,000 24,000 86,000
Total 400,000 553,000 418,000

Note: The production for each quarter is calculated as the total units needed minus the beginning
finished goods inventory plus the desired ending finished goods inventory.

c) Direct Materials Budget and Schedule of Expected Cash Payments for Purchases of
Material
Quarter P RMN Add: EMI TRN Less: BMI RMP CPRP
Year 2 Q1 46,000 230,000 23,000 253,000 23,000 230,000 $138,000
Year 2 Q2 72,000 360,000 36,000 396,000 23,000 373,000 $223,800
Year 2 Q3 100,000 500,000 50,000 550,000 36,000 514,000 $308,400
Year 2 Q4 41,000 205,000 21,000 226,000 50,000 176,000 $105,600
Year 3 Q1 73,000 365,000 37,000 402,000 21,000 381,000 $228,600
Year 3 Q2 86,000 430,000 43,000 473,000 37,000 436,000 $261,600
Total 418,000 1,160,000 2,110,000 $1,265,400
Key: P – Production, RMN - Raw Materials Needed, EMI - Ending RM Inv, TRN - Total RM
Needed, BMI - Beginning RM Inv., RMP - Raw Materials Purchases, and CPRP - Cash
Payments for RM Purchases

Note: The raw materials purchases for each quarter are calculated as the total raw materials
needed minus the beginning raw materials inventory plus the desired ending raw materials
inventory. The cash payments for raw materials purchases for each quarter is calculated as 60%
of raw materials purchases for the current quarter plus 40% of raw materials purchases for the
previous quarter. The beginning accounts payable balance of $81,500 is paid in Year 2 Q1.