Accounting for Managers - Financial Ratios, Break-Even Point, Overhead Costs

This document covers Financial Ratios, Break-Even Point, Overhead Costs in Accounting for Managers. It includes topics such as Return on Equity, Equity Multiplier, Accounts Receivable Turnover Ratio, Break-Even Point, Predetermined Overhead Rate, etc.

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
Name of the Student:
Name of the University:
Author’s Note:

1ACCOUNTING FOR MANAGERS
Table of Contents
Question 1........................................................................................................................................2
Question 2........................................................................................................................................3
Question 3........................................................................................................................................4
Bibliography....................................................................................................................................6

2ACCOUNTING FOR MANAGERS
Question 1
a) Financial Ratio
1. Return on Equity.
2. Equity Multiplier (Total Assets/Total Equity Ratio).
3. Accounts Receivable Turnover Ratio
4. Interest Coverage Ratio
5. Days Sales of Inventory (365/Inventory Turnover Ratio)
b) Ratio’s
 Net Income 94500
 Beginning Shareholder's Equity 434070
 Return on Equity 21.77%
 Total Assets 809550
 Total Equity 315000
 Equity Multiplier (Total Assets/Total Equity Ratio). 2.57
 Sales 850500
 Returns 26350
 Accounts Receivable at Beginning of Year 315000
 Accounts Receivable at End of Year 280350

3ACCOUNTING FOR MANAGERS
 Accounts Receivable Turnover Ratio 2.77
 Accounts Receivable Turnover Ratio in Days 132
 Earnings before Interest and Taxes 163800
 Interest Charges 6300
 Interest Coverage Ratio 26
 Cost of Goods Sold 567000
 Average Inventory (Beginning + Ending Inventory-) 236250
 Inventory Turnover Ratio 2.4
 Days Sales in Inventory 152
Question 2
a) Break-Even Point: Fixed Costs/(Price- Variable Costs)
 Where;
 Fixed Costs: $5,600
 Price: $600
 Variable Costs: $200
 Contribution: $400
 Break-Even Point: 5600/(600-200)
 Break-Even Point: 14
b) Target Profit: $10,400

4ACCOUNTING FOR MANAGERS
Fixed Cost: $5,600
Total Amount to be recovered: $16,000
Contribution: $400
Number of Children that must be enrolled: ($10,400/$400): 40
c) Total Contribution: $400
Total Fixed Costs: $9,600 ($5,600+$4,000)
Target Profit: $10,400
Total Fixed Costs + Target Profit to be covered: $20,000
Fixed Number of Children: 40
Total Fixed Amount to be Recovered: $500
Fees Per Child: Fixed Cost+ Variable Costs ($500+$200)
Fees Per Child: $700.
d) Breakeven Point: Total Fixed Expenses/(Selling Price-Variable Expenses).
Question 3
a) a) Predetermined Overhead Rate: Estimated Annual Overhead Costs/Estimated
Annual Operating Activity
Department A
Manufacturing Overhead 162500
Machine Hours 50000
Predetermined Overhead Rate 3.25

5ACCOUNTING FOR MANAGERS
Department B
Manufacturing Overhead 215000
Labor Hours 30000
Predetermined Overhead Rate 7.17
b) The total overhead cost for Job 145 will be as follows:
Computation of Overhead Costs of Job 145
Department A
26
0
Department B
28
7
Total allocated overhead for Job 145
54
7
c) The total job cost and the associated cost per unit will be as follows:
Particulars A B Total
Direct Materials 450 250 700
Direct Labor 120 180 300
Applied Overhead 260 260 520
Total cost of Job 145 1520
Units in Job 145 10
Cost per unit 152

6ACCOUNTING FOR MANAGERS
Bibliography
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.
Williams, E.E. and Dobelman, J.A., 2017. Financial statement analysis. World Scientific Book
Chapters, pp.109-169.