Accounting Management Accounting Worksheet


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Management Accounting (Summer Quarter 2022)
Assignment 1
Questions for Sessions 2 and 3
Due Date: Friday 1 July by 5PM: Total = 100 marks (10%)
Please take note of the following:
• There are 13 questions in this assignment
• Your answer to the 13 questions in this assignment should be typed and should not exceed
six A4 pages. Do not use a font size any smaller than 10 point and do not adjust the margins.
• Submit your assignment to Turnitin in MOODLE.
• The clarity of your writing style (i.e., grammar, punctuation, workings, clear sentences) is
important and marks will be lost if your writing style is not appropriate.
• This is an individual work. You may work in a group to discuss about the questions and
answers, but you must write the assignment independently and separately. Do not plagiarize.
The questions that follow are based on Adidas. Before answering the questions, it might be
useful to watch the following YouTube clips, which provide some background information about

Assignment 1 | Management Accounting (Summer Quarter 2022)
Adidas manufactures the Boost which is sold for $80 in two geographic regions – the East and
West regions. The following information pertains to the company’s operations in which it
produced 40,000 units and sold 35,000 units (there was no inventory at the start of the year).
Variable cost per unit
Product costs:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administration:
Fixed Costs per year:
Fixed manufacturing overhead costs
Fixed selling and administrative costs
The company sold 25,000 units in the East region and 10,000 units in the West region. It
determined that $250,000 of its fixed selling and administrative costs is traceable to the West
region. $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed
cost. The company will continue to incur the total amount of its fixed manufacturing overhead
costs as long as it continues to produce any amount of its only product.
Answer each question independently based on the original data unless instructed otherwise.
What is the unit product cost under variable costing?
What is the unit product cost under absorption costing?
What is the company’s total contribution margin under variable costing?
What is the company’s net operating income under variable costing?
What is the company’s total gross margin under absorption costing?
What is the company’s net operating income under absorption costing?
What is the amount of the difference between the variable costing and absorption costing net
operating incomes? What is the cause of this difference?
What would have been the company’s variable costing net operating income if it had
produced and sold 35,000 units?
What would have been the company’s absorption costing net operating income if it had
produced and sold 35,000 units?
Assignment 1 | Management Accounting (Summer Quarter 2022)
If the company produces 5,000 fewer units than it sells in its second year of operations, will
absorption costing net operating income be higher or lower than variable costing net
operating income in Year 2? Why?
Prepare a contribution format segmented income statement that includes a Total column and
columns for the East and West regions.
Adidas is considering elimination the West region because an internally generated report
suggests the region’s total gross margin in the first year of operations was $50,000 less than
its traceable fixed selling and administrative expenses. Adidas believes that if it drops the
West region, the East region’s sales will grow by 5% in Year 2. Using the contribution
margin approach for analyzing segment profitability and assuming all else remains constant
in Year 2, what would be the profit impact of dropping the West region in Year 2?
Assume the West region invests $30,000 in a new advertising campaign in Year 2 that
increases its unit sales by 20%. If all else remains constant, what would be the profit impact
of pursuing the advertising campaign?

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