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Instructions: (READ and FOLLOW) STUDENT DETAILS must be included in the answer sheet. COPY and FILL the student details table (above). The answer must be in English. ALL questions must be answered, NO optional questions. Re-write the questions in the answer sheet. Do NOT put the instructions in the answer sheet. The format of answers: (it must differ than the questions) Assignments should be submitted in MS Word format DO NOT over decorate the document. Font must be Times New Roman. Font size must be 14 points. Do NOT choose MANY font colors. The answer must be different COLORE (blue, or green). Do NOT underline, italic, highlight or bold the answers (unless it is necessary) You should submit the assignment via the Blackboard. Any other ways of submission will NOT be accepted like email. The assignment will not be accepted after Submission date. If you submit after deadline, you will get ZERO. Write the answers do NOT put it as a photo. This assignment must be answered INDIVIDUALLY. Write the answers in your own words DO NOT copy and paste them. If you engaged in plagiarism, you will get ZERO marks in the assignment or course. Questions: Prepare the journal entries for the following: (4 Points) When raw materials are received, Give an example When raw materials are sent to the factory floor, Give an example When a job is completed, what happen to the cost, Give an example Overhead expenses (salary) paid by cheque $ 5000 Utilities (Indirect expenses) paid in cash $ 10000. Salaries totaling $5,000 are accrued; 35% of these costs are direct labor, 40% are indirect labor and 25% are overhead expense. Prepare the journal entry. Overhead costs are allocated to work in process using an allocation rate of 150% of direct labor costs and 300% of overhead expenses. Prepare the journal entry. (Give different examples- examples should not be same) Riyadh Electricity Company manufactures chandeliers. Following is information for next year’s operations, based on an estimated volume of 20,000 units: (4 Points) Expected revenues $1,000,000 Unit costs: Direct materials $6.25 Direct labor 15.75 Variable overhead 5.50 Fixed manufacturing overhead 2.50 Total $30.00 Other fixed costs: Administration, marketing, etc. $225,000 Income tax rate 30% What is the breakeven point for next year? What is next year’s projected after-tax income? Suppose the managers set a target after-tax income of $100,000. Estimate the number of units that must be sold. Ahmed has budgeted next year’s sales at 8,000 units. (2Points) Compute Ahmed’s degree of operating leverage. If P = 1,000, V = 400, F = 850,000.

Question 1

 

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Instructions: (READ and FOLLOW) STUDENT DETAILS must be included in the answer sheet. COPY and FILL the student details table (above). The answer must be in English. ALL questions must be answered, NO optional questions. Re-write the questions in the answer sheet. Do NOT put the instructions in the answer sheet. The format of answers: (it must differ than the questions) Assignments should be submitted in MS Word format DO NOT over decorate the document. Font must be Times New Roman. Font size must be 14 points. Do NOT choose MANY font colors. The answer must be different COLORE (blue, or green). Do NOT underline, italic, highlight or bold the answers (unless it is necessary) You should submit the assignment via the Blackboard. Any other ways of submission will NOT be accepted like email. The assignment will not be accepted after Submission date. If you submit after deadline, you will get ZERO. Write the answers do NOT put it as a photo. This assignment must be answered INDIVIDUALLY. Write the answers in your own words DO NOT copy and paste them. If you engaged in plagiarism, you will get ZERO marks in the assignment or course. Questions: Prepare the journal entries for the following: (4 Points) When raw materials are received, Give an example When raw materials are sent to the factory floor, Give an example When a job is completed, what happen to the cost, Give an example Overhead expenses (salary) paid by cheque $ 5000 Utilities (Indirect expenses) paid in cash $ 10000. Salaries totaling $5,000 are accrued; 35% of these costs are direct labor, 40% are indirect labor and 25% are overhead expense. Prepare the journal entry. Overhead costs are allocated to work in process using an allocation rate of 150% of direct labor costs and 300% of overhead expenses. Prepare the journal entry. (Give different examples- examples should not be same) Riyadh Electricity Company manufactures chandeliers. Following is information for next year’s operations, based on an estimated volume of 20,000 units: (4 Points) Expected revenues $1,000,000 Unit costs: Direct materials $6.25 Direct labor 15.75 Variable overhead 5.50 Fixed manufacturing overhead 2.50 Total $30.00 Other fixed costs: Administration, marketing, etc. $225,000 Income tax rate 30% What is the breakeven point for next year? What is next year’s projected after-tax income? Suppose the managers set a target after-tax income of $100,000. Estimate the number of units that must be sold. Ahmed has budgeted next year’s sales at 8,000 units. (2Points) Compute Ahmed’s degree of operating leverage. If P = 1,000, V = 400, F = 850,000.
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  • When raw materials are received

 

ABC company limited produced mattresses for commercial use. They receive materials worthy $2000. This transaction is recorded as follows:

 

Debit Credit
Raw materials inventory 2000
Accounts payable 2000

 

  1. When raw materials are sent to the factory floor

XYZ releases materials worthy $1500 to the manufacturing department. This transaction is recorded as;

Debit Credit
Work in progress 1500
Raw materials inventory 1500

 

  1. Joy Interiors have completed printing wall decorations. The cost is $1000 The transaction is recorded as;
Debit Credit
Finished goods 1000
Work in progress 1000

 

  1. Overhead expenses(salaries) paid by cheque $5,000
Debit Credit
Salaries 5000
Bank 5000

 

  1. Utilities (indirect expenses) paid by cash $1,000
Debit Credit
Utilities(indirect expenses) 1000
Cash 1000

 

  1. Salaries totaling $5,000 are accrued
Debit Credit
Direct labor 1750
Accrued expenses 1750

 

Debit Credit
Indirect labor 2000
Accrued expenses 2000

 

Debit Credit
Overhead expenses 1250
Accrued expenses 1250

 

  1. Allocating overhead costs
Debit Credit
Direct labor 150%  
Work in progress 150%

 

Debit Credit
Overhead expenses 300%
Work in progress 300%

 

Question 2

a)

Break-even point is the point where total costs=total revenue.

Total costs=Variable costs+Fixed costs

Revenue=Price per unit*N

In our question,

N=20000 units

Total cost=variable costs +Fixed costs

=225000+(30*20000)

=225000+60000

=825000

Selling price per unit=1000000/20000

=50

Break even point=225000/(50-30)

=11250 units

b)

After-tax income=1000000*70%

=$ 700,000

c)

Number of units=100000/20

=5000 units

Question 3

DOL=Q(P-V)QP-V-F

DOL=8000(1000-400)80001000-400-850000

DOL=48000004800000-850000

=4800000/ 3950000

= 1.21519

This means that every 1% change in the Ahmed’s sales will change his operating income by 1.21519%

 

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