Question

1.      Winston Corporation produces and sells a single product. Data concerning that product appear below:

Particulars	Total (In BD)
Sales    (60,000 units)	3,000,000
Direct Materials	1,000,000
Direct Labor	200,000
Manufacturing Overhead:
Variable	300,000
Fixed	400,000
Selling & Administrative:
Variable	400,000
Fixed	100,000

Required:

A.    As a management accountant, what strategy will you adopt in ascertain the following performance indicators for the company?

1. Unit contribution margin.

2. Contribution margin ratio.

3. Break-even in sales (BD).

4. Margin of safety percentage.

5. Break-even in units

B.     Assume that the sales volume increases by 20% with no change in total fixed expenses, what strategic approach will you adopt to determine the operating income?

C.     If you want the profit percent to increase by 5 percent how much will be the sales.

D.    Now assume that your variable cost per unit has decreased by BD 6.67 and your overall fixed expense increased by 100,000, calculate the new breakeven level in units and break even in sales.

E.     As a managerial accountant, write a strategic recommendation to the management board to show how the breakeven point as found in (d) can be achieved  

2.      Given below is the master(static) budget, flexible budget and Actual results for AMAGOO WLL. The following information has been gathered:

Particulars	Master Budget	Flexible Budget	Actual Results
Units sold	12000	10000	10000
Revenue	1440000	1200000	1250000
Direct Material Cost	720000	600000	621600
Direct Labour Cost	192000	160000	198000
Manufacturing Overheads	144000	120000	130500
Total Variable Costs	1056000	880000	950100
Contribution Margin
Fixed cost	276000	276000	285000
Net Income

You are required to do the following:

A)    As the management accountant of the company prepare the Flexible budget variance.

B)    Sales volume variances. .

C)    Compute the static budget variance and give a future strategic direction to the company’s future budgetary expectations.

Answer 1