BFA312 Financial Accounting Management


Question One

Alps Ltd manufactures & sells snowboards. The company manufactures a single model, the Slider. In the summer of 2020, Alps Ltd.’s management accountant gathered the following data to prepare budget for 2021.

Material & labour requirements:

Direct Materials



1.25 board meters (b.m.) per snowboard


4.8 metres per snowboard

Direct manufacturing labour

5 hours per snowboard

The company’s CEO expects to sell 1000 snowboards during 2021 at an estimated retail price of $700 per board. Further, the CEO expects 2021 beginning inventory of 100 snowboards and would like to end the 2021 with 200 snowboards in stock.

Direct material inventory:


Beginning inventory 1/1/21

Closing inventory 31/12/21


500 b.m.

375 b.m.


800 metres

1600 metres

Variable manufacturing overhead is $14 per direct manufacturing labour hour. There are also $132 000 in fixed manufacturing overhead costs budgeted for 2021. The company combines both variable & fixed manufacturing overhead into a single rate based on direct manufacturing labour hours. Variable marketing costs are allocated at the rate of $250 per sales visit. The marketing plan calls for 30 sales visits during 2021. Finally, there are

$30 000 in fixed non-manufacturing costs budgeted for 2021. Other data include:


2020-unit price

2021-unit price


$112.00 per b.m.

$120.00 b m.


$6 per metre

$6.25 per metre

Direct manufacturing labour

$48 per hour

$50 per hour

The inventoriable unit cost for ending finished goods inventory on 31 December 2020 is

$580. 80. Assume Alps uses FIFO inventory method for both direct materials & finished goods. (Ignore work in process).

Budgeted balances as at December 31, 2021 are:


$10 000

Property Plant & equipment (net)

850 000

Current liabilities

17 000

Non-Current liabilities

178 000

Share Holders’ equity

844 000


  1. Prepare Sales budget for 2021
  2. Prepare production budget for 2021
  3. Prepare the direct material usage & purchase budget
  4. Prepare direct manufacturing labour budget
  5. Prepare manufacturing overhead budget
  6. What is the budgeted manufacturing overhead rate?
  7. What is the budgeted manufacturing overhead cost per unit for 2021?
  8. Calculate the unit cost of a snowboard in closing inventory on 31 December
  9. Prepare ending inventory budget for 2021.
  10. Prepare cost of goods sold budget for 2021
  11. Prepare budgeted income & expenditure statement for year ending 31 December 2021
  12. Prepare the budgeted balance sheet for Alps Ltd as at 31 December 2021

Question Two

Romper Rugs is holding two-week carpet sale at Tommy’s Club, a local warehouse store. Romper Rugs plans to sell carpets for $500 each. The company will purchase the carpets from a local distributor for $350 each, with the privilege of returning any unsold units for a full refund. Tommy’s club has offered Romper Rugs two payment options for the use of space

A fixed payment of $5 000 for the sale period Option 2: 10% of total revenue earned during the sale period.


1.Calculate the breakeven point in units for :
(i) option 1
(ii) option 2
2.At what level of revenues will Romper Rugs earn the same profit under either option? 
    • For what range of unit sales will the company prefer option 1?
    • For what range of unit sales will the company prefer option 2?
3.Calculate the degree of operating leverage at sales of 100 carpets for the two rental options.
4.Explain and interpret your answer to requirement

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