Question No. 1-1

The HASF Company has an annual plant capacity of 50,000 units. Predicted data on sales and costs are given below.

Sales (50 per unit) 1,000,000

Manufacturing cost

Variable (material labor and overhead) 40 per unit

Fixed overhead 30,000

Selling and administrative expenses

Variable (sales commission RS 0.5 per unit) 2 per unit

Fixed 7,000

A special order has been received from outside for 5,000 units at a selling price of 45 per unit this order will no effect on regular sales. The usual sales commission on this order will be reduced by one half.

Required:

a.Should the company accept / reject the order?

b.Keeping in view the above answer narrate rationale to support your answer.

Question No. 1-2

The estimated costs of producing 6,000 units of a component are:

Per Unit

Direct Material

$10

Direct Labor

8

Applied Variable Factory Overhead

9

Applied Fixed Factory Overhead

12

$1.5 per direct labor dollar

The same component can be purchased from market at a price of $29 per unit. If the component is purchased from market, 25% of the fixed factory overhead will be saved.

Required:

a.Should the component be purchased from the market?

b.Being a production manager, provide your logical opinion on choosing between purchasing the component from market or producing in-house.

Question No. 2

Contemporary Trends sells paint and paint supplies carpet and wallpaper at a single store location in suburban Baltimore Although the company has been very profitable over the year management has seen very profitable over the year management has seen a significant decline in wallpaper sales and earnings Much of this decline is attributable to the internet and to companies that advertise deeply discounted prices in magazines and offer customer free shipping and toll free telephone number recent figures follow:

Paint and supplies

Carpeting

wallpaper

Sales

190,000

230,000

70,000

Less variable cost

114,000

161,000

56,000

Fixed costs

28,000

37,500

22,000

Total cost

142,000

198,500

78,000

operating income

48,000

31,500

-8,000

Management is studying whether to drop wallpaper because of the changing market and accompanying loss if the line is dropped the following changes are expected to occur

a.The vacated space will be remodeled at a cost of 15,000 and will be devoted to an expanded line of high and carpet sales of carpet are expected to increase by 100,000 (2 marks)

b.Contemporary can cut wallpapers fixed costs by 50%

c.Sales of paint and paint supplies are expected to fall by 30%

d.Considering (a), (b) and (c), explain your decision whether to drop or retain the wallpaper,

Question No. 3

HASF PVT.LTD

BUDGETED INCOME STATEMENT

FOR 1^st QUARTER 1999

Description

JANUARY

FEBRUARY

MARCH

Sales

285,000

323,000

221,000

Purchases

129,000

168,000

95,000

Wages

35,000

37,000

30,000

Supplies

26,000

23,000

21,500

Utilities

6,500

8,700

7,200

Rent

15,000

12,800

13,600

Insurance

12,000

12,000

12,000

Advertising

24,500

28,500

18,000

Depreciation

20,000

20,000

20,000

Net Profit

17,000

13,000

3,700

Required:

a.Please make a cash budget for the months of January, February and March 1999 based on the data for:

View Receivable Trend:

30% of Sales are collected in the month of sale

30% of Sales are collected after the month of sale

40% of Sales are collected two months after the sale is made

View Payable Trend:

10% of Purchases are paid for in the month of purchase

35% of Purchases are paid after the month of purchase

55% of Purchases are paid two months after the purchase is made

Additional Information:

Rent and Insurance expense were prepaid at the end of 1998

All other expenses are paid for in the month they were incurred

November Sales = 195,000

November Purchases = 100,000

December Sales = 250,000

December Purchases = 165,000

Please see attached Budgeted Income Statement for 1st Quarter 1999

b.Being a CFO of the company, interpret the importance budget in strategic and operational planning of the company (Word limit Max 150-200)

Question No. 4

HASF Corporation manufactures products A, B, and C from a joint process. Joint costs are allocated on the basis of relative sales value at the end of the joint process. Additional information for HASF are as follows:

A B C Total

Units produced 12,000 8,000 4,000 24,000

Joint costs 144,000 60,000 36,000240,000

Sales value before additional processing 240,000 100,000 60,000400,000

Additional costs for further processing 28,000 20,000 12,000 60,000

Sales value if processed further 280,000 120,000 70,000470,000

Required:

a.Which, if any, of products A, B, and C should be processed further and then sold?

b.Keeping in view the answer of "part a", write down your critical feedback to support your answer (Word limit Max 200)

Question No. 5-1

In planning its operations for 2011 on the basis of a sales forecast of 6,000,000 ASF Inc. prepared the following estimated data Costs and Expenses

Variable Fixed

Direct Material 1,600,000

Labor 1,400,000

Factory overhead 600,000900,000

Selling expenses 240,000360,000

Administrative expenses60,000140,000

Required:

a.What would be the amount of sales at the breakeven point?

2,250,000

4,000,000

3,500,000

5,300,000

Question No. 5-2

HASF Corporation has fixed costs of 1,000,000 variable costs of 50 per units and a contribution margin ratio of 40% and no of units sold 20,000

Required:

a.Compute the following

Units sales price and unit's contribution margin for the above product

The sales volume in units required for company to earn an operating income of 100,000

The $ sales volume required for company to earn an operating income of 300,000

Question No. 5-3

For each of the three independent situations below computes the missing amounts

S/No.

Sales

Variable costs

Contribution margin per unit

Fixed costs

Operating income

Units sold

1

?

120,000

20

?

25,000

4,000

2

180,000

?

?

45,000

30,000

5,000

3

600,000

?

30

150,000

90,000

?