What is the contribution margin and the contribution margin percentage at the break-even point? How many units must be sold each month to earn the minimum target net income of 60,000 riyals? Calculate the break-even point ratio?

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The first question:

A store that sells t-shirts. The average selling price is 15 riyals, the average variable cost (cost price) is 9 riyals, and the total fixed costs are 100,000 riyals. A. Determine the size of the break even point in value and the size of the break-even point in units?

  1. If the owner wants a profit of 25,000 riyals, how many shirts are required to be sold to achieve this?
  2. If fixed costs rise to 110,000 riyals, the break-even point in units will be?
  3. If the selling price rises to 16 riyals, will the break-even point size decrease and why? second question: Khaled’s company manufactures and sells a single product. The company’s sales and expenses for the last month were:

Rate unit cost total (in riyals) 100% 25 500,000 the sales 40% 10 200,000

(-) Variable costs

60%

15th

300,000

contribution margin

270000

(-) Fixed costs

30000

net income

Required:

Calculate the break-even point in terms and units:

  • Using the equation method
  • Use the contribution margin method

What is the contribution margin and the contribution margin percentage at the break-even point?

How many units must be sold each month to earn the minimum target net income of 60,000 riyals?

Calculate the break-even point ratio?

Calculate the company’s safety margin in value and percentage?

What is the company’s contribution margin if the monthly sales increase by 25,000 riyals and there is no change in the fixed costs?

If the company is able to reduce the variable cost per unit by one riyal per unit, what is the new monthly break-even point?

Calculate the degree of operating leverage If sales increase by 10%, how much will net income increase?

 

What is the process of strategic management and decision making? What types of control systems do managers use? What is the role of accounting information in strategic management?

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The Role of Accounting Information in Management Decision Making

Eldenburg & Wolcott’s Cost Management, 2e Slide # 2

Chapter 1: The Role of Accounting Information in Management Decision Making

Learning objectives

Q1 – What is the process of strategic management and decision making?

Q2 – What types of control systems do managers use?

Q3 – What is the role of accounting information in strategic management?

Q4 – What information is relevant for decision making?

Q5 – How does business risk affect management decision making?

Q6 – How do biases affect management decision making?

Q7 – How can managers make higher-quality decisions?

Q8 – What is ethical decision making, and why is it important?

Explain how current investments have made Johnson and Johnson successful. Analyze Johnson & Johnson’s portfolio as a whole to include price-to-earnings ratio, dividend yield, and earnings per share compared against a major stock market index.

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Assignment Content

Competency

Appraise organizational investments to maximize returns and minimize risk.

Student Success Criteria

View the grading rubric for this deliverable by selecting the “This item is graded with a rubric” link, which is located in the Details & Information pane.

Scenario

You work at Johnson & Johnson in the Accounting & Finance Department. You recently got promoted to CFO. Upon stepping into your new role, you have decided to clean your new office and remove what is not needed. You come across a financial proposal that the previous CFO was working on to purchase or merge with Bayer Pharmaceuticals. You know this is your major competitor which makes you wonder if the old CFO may have been on to the next profitable move. You decide to look at Johnson & Johnson’s current portfolio to decide if this would be an investment that would maximize the company’s returns and minimize the company’s portfolio risk even more.

Instructions

Using Microsoft Word, create a portfolio analysis that addresses the following:

  • Explain how current investments have made Johnson and Johnson successful.
  • Analyze Johnson & Johnson’s portfolio as a whole to include price-to-earnings ratio, dividend yield, and earnings per share compared against a major stock market index.
  • Critique each industry holding as a stand alone.
  • Evaluate Johnson and Johnson’s risk level from their current Beta.

NOTE – Be sure the portfolio analysis displays proper grammar, spelling, punctuation, and sentence structure.

Differentiate between routine operating decisions and non-routine operating decisions with suitable examples. List all non-routine operating decisions and explain any two decisions with suitable examples.

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Assignment Question(s):  (Marks 15)

Q1. Differentiate between routine operating decisions and non-routine operating decisions with suitable examples. List all non-routine operating decisions and explain any two decisions with suitable examples.  (3 Marks)

Note: Your answer must include numerical examples for each method along with qualitative consideration. (Week 8, Chapter 4)

 

Q2. Suppose that you are working in a company as a cost manager that has two support departments and two operating departments. Determine the total department cost and allocation base for these departments and allocate the support department cost to the operating department based on the following methods:    (4 Marks)

The direct method

The step-down method

Note: You are required to assume values of your own and they should not be copied from any sources.      (Week 9, Chapter 8)

 

Q3.  SFC Company is in the manufacturing process of wooden products and makes several wooden items. The following is the information related to three products manufactured by SFC company: Product X, Y, and Z. The joint costs of the three products in 2015 were SAR 110,000. The total number of units for each product and the selling price per unit is given below:    (Week 10, Chapter 9)

Products    Units    Selling Price per unit

X    5,000         SAR 150

Y    3,500         SAR 125

Z    2,200         SAR 100

Using the physical volume method and sales value at the split-off method, allocate the joint costs to each product.    (4 Marks)

 

Q4. A company is planning to prepare a budget for the year 2017 and provides you with the following information regarding the preparation of the budget:    (4 Marks)

Particulars    Amount

Budgeted selling price per unit                               $650 per unit

Total fixed costs                               $155,000

Variable costs                               $175 per unit

You are required to prepare a flexible budget for 500, 600, 700, and 800 units.     (Week 10, Chapter 10)

 

Securitization is considered one of the best financing alternatives for companies compared to traditional financing methods. In light of this phrase, discuss the concept of securitization, its advantages, its types and main accounting standards on securitization.

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Accounting Question

Q1. The Mortgage industry in the kingdom is witnessing a remarkable development in light of the Kingdom’s Vision 2030. In light of this, would you perform industry analysis using SWOT analysis explaining the opportunities and threats imposed by the external environment and the strengths and weaknesses related to the internal environment of the mortgage companies. As a case study, would you choose the financial statements of one of the mortgage companies in the Kingdom to measure and comment on the performance indicators of profitability, liquidity, financial leverage and credit quality? (7.5 marks)

Support your analysis by authentic and official references from Saudi digital library.

Q2. Securitization is considered one of the best financing alternatives for companies compared to traditional financing methods. In light of this phrase, discuss the concept of securitization, its advantages, its types and main accounting standards on securitization. (7.5 marks)

 

Note:Support your analysis by authentic and official references from Saudi digital library.

 

Provide any audit steps that Gerrard should conduct to determine whether the company complies with the bond indentures or not. List any reporting requirements that the company’s financial statements or footnotes should include.

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Assignment Question(s): (Marks 15)

IMPORTANT NOTE: Answer in your own words, DO NOT COPY from slides, fellow students, or internet sources without proper citation.

Q1 When an auditor sets control risk low, sufficient evidence can be obtained for most payroll accounts through an understanding of internal controls, substantive analytical procedures, and tests of details of transactions. However, there are several accounts in the payroll cycle that may require more attention.

Required: Name these accounts and explain why additional testing is necessary. (2 Marks).

 

Q2. For each of the following tests, identify the assertion to which the test applies. (3 Marks; 0.5 each)

1) Trace a sample of payroll checks to the master employee list to verify occurrence.

2) Recalculate the mathematical accuracy of a sample of payroll checks.

3) Test a sample of bank reconciliations for the payroll bank account.

4) Estimate sales commissions by applying commission formulas to recorded sales totals.

5) Compare amounts accrued to supporting documentation, such as payroll tax returns.

6) Compare payroll costs as a percentage of sales to industry data.

 

Q3.  You are auditing AMRT company, and the end of the accounting period is December 31st. On December 23rd, the employee responsible for processing reports and recording the receipt of inventory became very ill and was out of the office for a week. Due to the company’s small staff and the holiday season, a number of the receiving reports were not processed on a timely basis. As an auditor, which assertions would you place of high importance for this entity, and how would you test for them?  (3 Marks).

 

Q4. Describe the inherent risk factors that can affect the audit of property, plant, and equipment. (2 Marks).

 

Q5. Gerrard Smith, senior-in-charge, is auditing Mndooz, Inc.’s long-term debt for the year ended December 31. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively. The debt is held by two insurance companies. Gerrard has examined the bond agreements for each issue. The agreements provide that if Mndooz fails to comply with the covenants of the contract, the debt becomes payable immediately. Gerrard identified the following covenants when reviewing the bond agreements:

“The debtor company shall endeavor to maintain a working capital ratio of 2 to 1 at all times, and in any fiscal year following a failure to maintain the said ratio, the company shall restrict compensation of officers to a total of $650,000. Officers include the chairperson of the board and the president.”

“The debtor company shall keep all property that is security for these debt agreements insured against loss by fire to the extent of 100 percent of its actual value. Policies of insurance comprising this protection shall be filed with the trustee.”

“The company is required to restrict 40 percent of retained earnings from availability for paying dividends.”

“A sinking fund shall be established with the First Bank, and semiannual payments of $500,000 shall be deposited in the fund. The bank may, at its discretion, purchase bonds from either issue.”

Required: (5 Marks)

  1. Provide any audit steps that Gerrard should conduct to determine whether the company complies with the bond indentures or not.
  2. List any reporting requirements that the company’s financial statements or footnotes should include.

 

 

Explain formula for individual’s income tax and business entities. Arrange relative tax liability by filing status from lowest to highest? Contrast concepts of Income from accounting , economic and tax perspectives.

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Tax law

Q1. Explain formula for individual’s income tax and business entities.

Q2. Arrange relative tax liability by filing status from lowest to highest?

Q3.  Contrast concepts of Income from accounting , economic and tax perspectives.( use your own words )

Q4.  Identify Items that are not Income under US income tax law. ?

 

Why is it important for companies to implement good internal control? What are the principles of internal control? Explain your answer.

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Assignment Question(s): (Marks15)

Q1. Compare the different depreciation methods. Give an example of how companies depreciate their plant assets under each method.

Q2. Why is it important for companies to implement good internal control? What are the principles of internal control? Explain your answer.

Q3. A company wants to use the allowance method to account for bad debts. You are assigned to explain to the company the different ways it can use to estimate bad debts.

 

 

Differentiate between routine operating decisions and non-routine operating decisions with suitable examples. List all non-routine operating decisions and explain any two decisions with suitable examples.

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Assignment Question(s):  (Marks 15)

Q1. Differentiate between routine operating decisions and non-routine operating decisions with suitable examples. List all non-routine operating decisions and explain any two decisions with suitable examples.    (3 Marks)

Note: Your answer must include numerical examples for each method along with qualitative consideration.  (Week 8, Chapter 4)

 

Q2. Suppose that you are working in a company as a cost manager that has two support departments and two operating departments. Determine the total department cost and allocation base for these departments and allocate the support department cost to the operating department based on the following methods:     (4 Marks)

  • The direct method
  • The step-down method

Note: You are required to assume values of your own and they should not be copied from any sources.    (Week 9, Chapter 8)

 

Q3.  SFC Company is in the manufacturing process of wooden products and makes several wooden items. The following is the information related to three products manufactured by SFC company: Product X, Y, and Z. The joint costs of the three products in 2015 were SAR 110,000. The total number of units for each product and the selling price per unit is given below:   (Week 10, Chapter 9)

Products Units Selling Price per unit
X 5,000     SAR 150
Y 3,500     SAR 125
Z 2,200     SAR 100

Using the physical volume method and sales value at the split-off method, allocate the joint costs to each product.                                                                                                                          (4 Marks)

 

Q4. A company is planning to prepare a budget for the year 2017 and provides you with the following information regarding the preparation of the budget:                                        (4 Marks)

Particulars Amount
Budgeted selling price per unit                           $650 per unit
Total fixed costs                           $155,000
Variable costs                           $175 per unit

You are required to prepare a flexible budget for 500, 600, 700, and 800 units.  (Week 10, Chapter 10)

 

 

Provide any audit steps that Gerrard should conduct to determine whether the company complies with the bond indentures or not. List any reporting requirements that the company’s financial statements or footnotes should include.

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Assignment Question:

IMPORTANT NOTE: Answer in your own words, DO NOT COPY from slides, fellow students, or internet sources without proper citation.

Q1. Gerrard Smith, senior-in-charge, is auditing Mndooz, Inc.’s long-term debt for the year ended December 31. Long-term debt is composed of two bond issues, which are due in 10 and 15 years, respectively. The debt is held by two insurance companies. Gerrard has examined the bond agreements for each issue. The agreements provide that if Mndooz fails to comply with the covenants of the contract, the debt becomes payable immediately. Gerrard identified the following covenants when reviewing the bond agreements:

“The debtor company shall endeavor to maintain a working capital ratio of 2 to 1 at all times, and in any fiscal year following a failure to maintain the said ratio, the company shall restrict compensation of officers to a total of $650,000. Officers include the chairperson of the board and the president.”

“The debtor company shall keep all property that is security for these debt agreements insured against loss by fire to the extent of 100 percent of its actual value. Policies of insurance comprising this protection shall be filed with the trustee.”

“The company is required to restrict 40 percent of retained earnings from availability for paying dividends.”

“A sinking fund shall be established with the First Bank, and semiannual payments of $500,000 shall be deposited in the fund. The bank may, at its discretion, purchase bonds from either issue.”

Required:

  1. Provide any audit steps that Gerrard should conduct to determine whether the company complies with the bond indentures or not.

Answer:

  • List any reporting requirements that the company’s financial statements or footnotes should include.