Management Accounting: Income Statement, Cost Computation, Activity-Based Costing

MANAGEMENT ACCOUNTING
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PART 1
Question 1
The relevant computations for the income statement are as highlighted below.
Sales Computation
Unit selling price of barbecue = $ 2
Unit selling price of balloon = $ 1
Volume sales of barbecue = 2000
Volume sale of balloon = 1000
Total sales = 2000*2 + 1000*1 = $ 5,000
Cost of goods sold computation
Unit cost of barbecue = $ 0.2
Unit cost of balloon = $ 0.05
Volume sales of barbecue = 2000
Volume sale of balloon = 1000
Direct material cost = 0.2*2000 + 0.05*1000 = $ 450
Direct labour cost = 400*4 = $ 1,600
Manufacturing overhead has been borne by the friends in the form of leasing a BBQ and a
balloon pump.
Cost of leasing a BBQ = $ 200
Cost of balloon pump = $ 50
Total manufacturing overhead = 200 + 50 = $ 250

Selling and Administrative Expenses Computation
Leasing a gazebo = $50
Permit for standing outside of the shopping centre = $ 250
Based on the above computations, the income statement is as indicated below (Drury, 2014).
PART 2
Question 2.1
The requisite table is indicated below.
From the above, it is apparent that the total cost for operating the BBQ was $ 320. Similarly,
cost for inflating balloons was $ 480.
The above computation has been obtained by considering the following table.