Summer Semester 2020 ACCT 202: Managerial Accounting I Assignment 2 Please answer all of the following questions. (hand written notes or excel can be used. If you wand-write, scan all the pages in a single file and submit in the moodle. Please don't use pencil. Use pen) 1. Pfizer pharmaceuticals has the following costs (in OMR). Direct Materials 900.000 Direct Labor 700,000 Supplies 190,000 Utilities. Variable 100,000 Utilities, Fixed 50,000 Indirect labor, variable 100.000 Indirect labor, Fixed 70,000 Depreciation 120.000 Property taxes Supervisory say 100,000 Administrative expenses, variable 100.000 Selling expenses were OMR330,000 (including OMR80,000 that were variable) and general administrative expenses were OMR160,000 (including 40,000 that were variable). Sales were OMR 3,000,000. Direct labor and supplies are regarded as variable costs. A. Prepare two income statements, one using the contribution approach and one using the absorption approach. B. Suppose that all variable costs fluctuate directly in proportion to sales and that fixed costs are unaffected over a very wide range of sales. What would operating income have been if sales had been OMR 2,500,000 instead of OMR 3,000,000? Which income statement did you use to help obtain your answer? Why? 2. Abbot Engineering, a building contractor, builds houses in tracts, often building as many as 30 homes simultaneously. Abbot Engineering has budgeted costs for an expected number of houses in 2020 as follows: Direct materials 550,000 Direct labor 350,000 Job construction overhead 600,000 Cost of jobs 1,500,000 Selling and administrative costs Total costs 300,000 The job construction overhead includes approximately OMR 600,000 of fixed costs, such as the salaries of supervisors and depreciation on equipment. The selling and administrative costs include OMR 175,000 of variable costs, such as sales commissions and bonuses that depend fundamentally on overall profitability. Abbot Engineering wants an operating income of OMR 700,000 for 2000. Compute the average target markup percentage for setting prices as a percentage of the following: A. Direct materials plus direct labor B. The full cost of jobs C. The variable "cost of jobs" D. The full "cost of jobs plus selling and administrative costs E. The variable "cost of jobs" plus variable selling and administrative costs 3. Consider the following details of the income statement of the XYZ Company for the year ended December 31, 2019. All are in OMR Sales 20,000,000 Less cost of goods sold 10,000,000 Gross margin or gross profit 10,000,000 Less selling and administrative expenses Operating income 5,000,000 XYZs fixed manufacturing costs were OMR 2 million and its fixed selling and administrative costs were OMR 2 million. The division had produced and sold 5 million units. Near the end of the year, ABC Company offered to buy 250,000 units on a special order. To fill the order, a special ABC Company logo would have to be added to each unit. ABC Company intended to use the product for special promotions in an eastern city during early 2019. Should XYZ company accept the offer of ABC Company? Show the detail analysis. Summer Semester 2020 ACCT 202: Managerial Accounting I Assignment 2 Please answer all of the following questions. (hand written notes or excel can be used. If you wand-write, scan all the pages in a single file and submit in the moodle. Please don't use pencil. Use pen) 1. Pfizer pharmaceuticals has the following costs (in OMR). Direct Materials 900.000 Direct Labor 700,000 Supplies 190,000 Utilities. Variable 100,000 Utilities, Fixed 50,000 Indirect labor, variable 100.000 Indirect labor, Fixed 70,000 Depreciation 120.000 Property taxes Supervisory say 100,000 Administrative expenses, variable 100.000 Selling expenses were OMR330,000 (including OMR80,000 that were variable) and general administrative expenses were OMR160,000 (including 40,000 that were variable). Sales were OMR 3,000,000. Direct labor and supplies are regarded as variable costs. A. Prepare two income statements, one using the contribution approach and one using the absorption approach. B. Suppose that all variable costs fluctuate directly in proportion to sales and that fixed costs are unaffected over a very wide range of sales. What would operating income have been if sales had been OMR 2,500,000 instead of OMR 3,000,000? Which income statement did you use to help obtain your answer? Why? 2. Abbot Engineering, a building contractor, builds houses in tracts, often building as many as 30 homes simultaneously. Abbot Engineering has budgeted costs for an expected number of houses in 2020 as follows: Direct materials 550,000 Direct labor 350,000 Job construction overhead 600,000 Cost of jobs 1,500,000 Selling and administrative costs Total costs 300,000 The job construction overhead includes approximately OMR 600,000 of fixed costs, such as the salaries of supervisors and depreciation on equipment. The selling and administrative costs include OMR 175,000 of variable costs, such as sales commissions and bonuses that depend fundamentally on overall profitability. Abbot Engineering wants an operating income of OMR 700,000 for 2000. Compute the average target markup percentage for setting prices as a percentage of the following: A. Direct materials plus direct labor B. The full cost of jobs C. The variable "cost of jobs" D. The full "cost of jobs plus selling and administrative costs E. The variable "cost of jobs" plus variable selling and administrative costs 3. Consider the following details of the income statement of the XYZ Company for the year ended December 31, 2019. All are in OMR Sales 20,000,000 Less cost of goods sold 10,000,000 Gross margin or gross profit 10,000,000 Less selling and administrative expenses Operating income 5,000,000 XYZs fixed manufacturing costs were OMR 2 million and its fixed selling and administrative costs were OMR 2 million. The division had produced and sold 5 million units. Near the end of the year, ABC Company offered to buy 250,000 units on a special order. To fill the order, a special ABC Company logo would have to be added to each unit. ABC Company intended to use the product for special promotions in an eastern city during early 2019. Should XYZ company accept the offer of ABC Company? Show the detail analysis