Question(s):(Marks10)

Q1. ABC prepares budgets for the quarter ending sept.30. Sales in units: July 20,000, August 50,000, September.30, 000, Oct. 25,000. Selling price is SR 10 per unit. , inventory in June 31, is 4,000 units. Desired inventory is 20% of the next month sales. (2.5 marks)

Required: Prepare sales and production budgets.

ANSWER:

Q2. ABC Company has equipment and it considers whether to sell it directly at a price of SR 200,000 or to make some modifications costing SR 10,000 to sell it at a price of SR 220,000. Required: using the differential analysis which alternative do you recommend about the equipment. (2.5 marks)

Answer:

Q3.ABC Inc. has average operating assets of SR200, 000 and is required to earn a return of 15% on these assets. In the current period, the division earns net income of SR50, 000. (2.5 marks)

Required: compute the residual income.

ANSWER:

Q4. At ABC Inc., manufacturing overhead is applied to units of product based on direct labor-hours. The estimated direct labor hour next year is 50,000 hours; the variable manufacturing overhead rate is SR 20 per direct labor-hour. Fixed manufacturing overhead is SR 500,000 per year (2.5 marks)

Required: compute the single predetermined manufacturing overhead rate.

Answer: