Assignment Question(s):
Q1. Differentiate between Variable and Absorption costing with a suitable numerical example and explain what would be the changes in Net Operating Income under both the costing methods.
Answer
.
Q2. ABC prepares budgets for the quarter ending June 30. Sales in units: April 20,000, May 50,000, June 30,000, July 25,000. Selling price is SR 10 per unit. , inventory in March 31, is 4,000 units. Desired inventory is 20% of the next month sales.
Required: Prepare sales and production budgets.
Q3. The Net Present Value Method uses the concept of Time Value of Money when evaluating Capital Budgeting Decisions.
Required: Explain criteria to accept or reject investment projects based on net present value method.
Q4. ABC Company has a car and it considers whether to sell it directly at a price of SR 100,000 or to make some modifications costing SR 10,000 to sell it at a price of SR 120,000.
Required: using the differential analysis which alternative do you recommend about the car.
Answer:
| Alternative 1
Sell without modifications |
Alternative 2
Sell after modifications |
Differential | |
| Revenues | |||
| Modification costs | |||
| Differential income |
Q5. Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities.
| Cash and cash equivalents, beginning-year balance | $18,000 |
| Cash and cash equivalents, year-end balance | 78,750 |
| Cash payments for merchandise inventory | 75,750 |
| Cash paid for store equipment | 15,750 |
| Cash borrowed on three-month note payable | 22,500 |
| Cash dividends paid | 12,000 |
| Cash paid for salaries | 39,000 |
| Cash payments for other operating expenses | 48,000 |
| Cash received from customers | 220,500 |
| Cash interest received | 8,250 |
