Question 3 (30 Marks)

A- The XYZ Corporation has two divisionsA and B. The divisions have the following revenues and expenses:

	A			B
Sales	$	500,000		$	550,000
Variable costs		200,000			275,000
Traceable fixed costs		150,000			180,000
Allocated common corporate costs		135,000			170,000
Net income (loss)	$	15,000		$	(75,000	)

The management of ABC is considering the elimination of Division B. If the Division B were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision.

Required:

1- Should the Company drop division B? Explain. Support you answer with the necessary calculations.

2- Would your decision be changed if you know that all traceable fixed costs to division B could

be avoided and 40% of total common corporate costs assigned to division B would be unaffected by this decision. (10 Marks)

B-XYZ Company manufactures and sell wooden product. It wants to prepare cash budget for the second quarter of the year. The companys sales budget for the second quarter given below:

	April	May	June	Total
Budgeted Credit sales	$470,000	$670,000	$230,000	$1,370,000

- Credit sales are collected as follows:

25% in the same month of sale

65% in the month following sale

10% in the second month following sale

- February sales totaled $400,000, and March sales totaled $430,000.

Required:

1 Prepare the cash collection schedule for the second quarter.

2. What is the accounts receivable balance on June 30th? (10 marks)

C

The following information has been taken from AAA company that manufacturing Gas ovens for the year 2019:

Sales revenues 36,000 opening inventory of materials 10,000 closing inventory of materials 8,000 opening inventory of finished goods 6,000 closing inventory of finished goods 4,000 cost of goods produced 26,000

Required:

1- Calculate cost of goods sold and gross profit for the year ended December 31, 2019.

2- In your opinion, and based on the given information, what would be changed if AAA was a merchandising company? Why? (5 Marks)

D- The two main sets of accounting standards followed by businesses are GAAP and IFRS. Briefly explain how the balance sheet is formatted under each set. (You can search the internet and/or university e-library to answer this question). (5 Marks)