ACCOUNT AND BUDGET SUPPORT (ABS) - LEVEL IV

PREPARE 1: PREPARE FINANCIAL REPORT

The following Unadjusted Trial Balance was taken from the books of Freedom Company
On Sene 30, 2011 E.C
FREEDOM COMPANY
UNADJUSTED TRIAL BALANCE SENE 30, 2011 E.C
Account Title Debit Credit
Cash 332,300
Account receivable 372,813
Office supplies 30,000
Prepaid Rent 60,000
Prepaid insurance 12,000
Furniture and Equipment 300,000
Accumulated depreciation 30,000
Account payable 38,000
Common stock 600,000
Retained earnings 260,000
Dividend 96,187
Service revenue 308,300
Salaries expense 20,000
Advertising expense 8,000
Utilities Expense 5,000
Balance 1,236,300 1,236,300
Additional information
1. Office rent was paid for coming two years
2. The physical inventory for office supplies end of the year showed on hand amounted is 2,000
3. Furniture and Equipment has 18 years estimate life with salvage value of Birr. 30,000 and the
company using straight line method
4. Prepaid insurance was paid for coming two years
Instruction
Task 1. Preparing necessary adjusting entries for the end of the year
Task 2. Prepared adjusted Trial balance
Task 3. Prepare financial statement
A. Income statement (Assume profit tax rate was 30%)
B. Statement of Retained Earnings and Balance statement

1
PREPARE 1: PREPARE FINANCIAL REPORT
POINTER P.L.C owned by the following table representative. The Post-Closing Trial Balance
on December 31, 2018.
POINTER P.L.C Company
Post-Closing Trial Balance December 31, 2018
Account Title Debit Credit
Cash 200,000
Account receivable 90,000
Allowance for Uncollectible Account 4,500
Supplies 60,000
Prepaid Rent 62,000
Office Equipment 110,000
Accumulated depreciation 33,000
Account payable 100,000
Capital 384,500
Balance 522,000 522,000
The following transaction was occurred during year 2018
January 05, Purchase supplies on account Birr. 2,500
March 12, Provide service on account Birr. 200,000
April, 17, Collect receivable Birr. 190,000
May 7, Paid Account Payable Birr. 90,000
June 28, Account receivable of Birr. 500 determine to be uncollectible (write-off)
July 20, Provide service to customer Birr. 150,000 in cash
Dec 27, Total salary paid during the year Birr. 90,000 (gross, income tax and pension
contribution)
December 30, Paid rent of Birr. 36,000 for the next 12 months
The following additional information for adjustment on Dec. 31, 2018 obtained
1. Bad debt expense was estimated to be birr. 2,500
2. Depreciation Expense was birr 21,000 for the year
3. Supplies on hand at the end of the year was birr 19,000
4. Prepaid rent Expired during the year was birr 72,000
Required:
Task 1: Record the transaction occurred during the period
Task 2: Prepared un-adjusted Trial balance on December 31, 2018
Task 3: Record adjusting entries on December 31, 2018
Task 4: Prepared adjusted Trial balance on December 31, 2018
Task 5: Prepare an income statement for the year 2018 (Use PLC tax Proclamation to
determine business profit tax)
Task 6: Prepare Balance sheet statement for the year 2018

2
PROJECT: PREPARE FINANCIAL REPORT
The listed of account below appear the GADA PLC ledger balance shows balance at the end of
fiscal year June 30, 2018.
GADA PLC - Unadjusted Trial Balance
For The Two Months Ended December 31, 2018
Account Title Trial Balance
Debit Credit
Cash 3,425
Accounts Receivable 7,000
Supplies 1,270
Prepaid Insurance 620
Office Equipment 51,650
Accumulated Depreciation 9,700
Accounts Payable 925
Unearned Fees 1,250
T. Roderick, Capital 29, 000
T. Roderick, Drawing 5,200
Fees Earned 59,125
Wages Expense 22,415
Rent Expense 4,200
Utilities Expense 2,715
Miscellaneous Expense 1,505
Balance 100, 000 100, 000
Additional information
The following data are given as additional information for adjustments required on June 30, 2018
a. Supplies on hand at June 30, 2018, are Birr. 380.
b. Insurance premiums expired during the year are Birr. 315.
c. Depreciation of equipment during the year is Birr. 4,950.
d. Wages accrued but not paid at June 31, 2018, are Birr. 440.
e. Accrued fees earned but not recorded at June 30, 2018, are Birr. 1,000.
f. The earned fees on June 31, 2018, are Birr. 750.
Required
1. Journalize the adjusting entries
2. Prepare an income statement, a statement of owner’s equity and a balance sheet.
3. Journalize closing entries
4. Prepare Post closing Trial Balance

3
PROJECT 2: PREPARE BANK RECONCILIATION
ENTOTO TRADING receives its bank statement for the month ended on MESKEREM 30, 2012
from Awash Bank. At the same date balance at bank account is birr. 241,300 Whereas
companies’ cash book shows birr. 150,720. Its Accountant investigates the discovered the
following difference.
1. Banks charges of Br. 600 had not been entered in cash book
2. The checks drawn by Entoto Trading totally birr. 4,424 had not yet presented by bank
3. Entoto Trading had not entered a note receivable br. 5,300
4. The Bank had not credited Entoto Trading with receipt of Meskerem 30, 2012 for br. 97,700
made in to the bank on Tikimt 1.
5. Entoto Trading had entered a utility expense payment for br. 5,600 in his cash book as 6,500
6. A cheque received for br. 3,000 from debtor had been returned by the bank marked as
“NSF”.
7. A Dividend of br. 90,000 on Entoto Trading holding shares has been paid direct to its bank
account and no entry made in cash book
8. Interest amount of 91,256 had been credited by the bank but not entered in the cash book.
Instruction:
A. Prepare a Bank Reconciliation Statement for the month MESKEREM 30, 2012
B. Recoding the necessary journal entries

PROJECT 4: PREPARE BANK RECONCILIATION

FREEDOM COMPANY receives its bank statement for the month ended on Nahasie 30, 2011
from Awash Bank. At the same date balance at bank account is birr. 26,465.50 Whereas
companies’ cash book shows birr. 17,324.40 And accountant investigates the following
difference.
1. The December statement showed the following balance credited by the banks not presented
by the books: Notes plus interest of birr 150 are birr 3,650.
2. The deposit in transit is birr. 2,148.21
3. The outstanding checks totally birr. 8,003.84
4. Bank error debited the accompany account balance which will be added is 270
5. Depositor’s error which will be deducted is birr. 75.78
6. Banks charges 18.75 had not been entered in cash book
Instruction:
1. Prepare a bank reconciliation at the end of Nahasie 30, 2011

PROJECT: PREPARE BANK RECONCILIATION

4
ETANA TRADING has a current account at Awash Bank. The Banks sent bank statement every
month to ETANA TRADING. The following information particular ETANA TRADING as
MESKEREM 30, 2010 E.C
ETANA TRADING receives its bank statement for the month ended on MESKEREM 30, 2010
from Awash Bank account is Birr. 65,000 Whereas companies’ cash book shows birr. 52,840.
Its Accountant investigates the discovered the following difference.
1. A depotist Br. 7,000 was deposited during Meskerem does not appear in bank statement of
Meskerem.
2. The checks issued but not paid by a bank totaled birr. 11,000.
3. A Bank collected a Note Receivable birr. 5,660, of which Br. 60 interest income.
4. Bank service and collection charge for Meskerem amounted to Birr. 120.
5. A cheque amount of Birr. 1,972 had been recorded in cash payment journal of ETANA
Trading as Birr. 1,792. The check was issued for payment of an account payable.
6. The Bank credited ETANA Trading account for a deposit made by Hana Trading for Birr.
3,000.
7. A Birr. 560 a cheque received from customer were returned with a bank statement marked as
“NSF” (Not sufficient fund).
8. A Check of Birr. 3,400 received from sale of merchandise for a cash customer was
erroneously recorded in cash receipt journal of ETANA Trading as Birr. 3,040. However, the
ban records the correct amount of 3,400 in the account of ETANA Trading.
Instruction:
1. Prepare a Bank Reconciliation Statement for the month MESKEREM 30, 2012
2. Recoding the necessary journal entries
PROJECT: COST ACCOUNTING
During the month of January the following transaction occurs produce three product
1. Raw material purchase
Sand 500.00
Steel 790.00
Chemicals 4,500.00
2. Material issued and Direct factory labor cost used
Materials Direct Labors
Job#1 227.50 160.00
Job#2 780.00 210.00
Job#3 3,900 175.00
3. Factory overhead cost is 80% of Direct labor cost (436)
4. Sold finished products of birr. 7,800.00
5. All goods produced are sold
Instruction:
Task 1: Record necessary journal entry
Task 2: Calculate cost of each jobs
Task 3: Calculate amount of total Gross Profit

PROJECT: JOB ORDER COSTING INFORMATION

5
Star Company uses a job order cost system and perpetual inventory system for manufactures
products for its accounting records. Information on the company production for the current
accounting period as the following
1. Beginning finished goods inventory of the period birr 45,000 (Job 10)
2. Beginning work in process inventory of during the period birr. 30,000
3. Purchased raw material for cash birr. 60,000.
4. Materials requisitioned record sheet as
No. 11 48,000
No. 12 32,000
No. 13 19,200
No. 14 22,400
5. The Time ticket record sheet as
No. 11 12,000
No. 12 10,500
No. 13 37,500
No. 14 39,000
6. The company estimated factory overhead costs 70% of direct labor cost of production
7. Jobs completed and Transferred: Job 11, Job 12, and Job 13 to finished goods
8. Jobs were shipped to customer: jobs 10, jobs11 and jobs 12 birr. 420,000 on credit
Required:
1. Determine ending work in process and ending finished goods inventory during the period.
2. Record necessary journal entries
3. Calculate cost of goods manufactured
4. Calculate cost of goods sold
5. Calculate gross profit
JOB ORDER COSTING INFORMATION
Freedom manufacturer Company uses a job order cost system and perpetual inventory for
manufactures products for its accounting records. Information on the company production for the
current accounting period as the following

Sales during the period Birr. 95,000

Beginning direct material inventory 43,000
Beginning Work in process 35,000
Beginning Finished Goods 34,000
Direct labor cost 35,000
The following estimate data were available
1. The factory overhead cost average of 30% of conversion cost
2. Maintain purchase for the period account birr 24,000
3. Prime cost average 80% of cost of goods manufactured
4. Gross profit on the sales averages 25%
5. Cost of goods available for sale amount is Birr. 80,000
6. Selling and distribution costs are Birr 11,230
7. General administrative expense are Birr 9,500

6
Perform the following tasks
Task 1: Determine ending material inventory
Task 2: Determine Work in process inventory
Task 3: Determine Finished Goods inventory
Task 4: Prepare Cost of Goods Manufactured schedule
Task 6: Prepare income statement

JOB ORDER COSTING

Geda Trading Company uses a job order cost system and perpetual inventory for manufactures
products for its accounting records. Information on the company production for the current
accounting period as the following

Direct material purchase Birr 25,000

Direct material used 21,000
Direct labor cost 35,000
Factory overhead cost (80% Direct labor cost)
Beginning Finished goods Inventory 16,000
Ending Finished goods Inventory 18,000
Beginning Raw material Inventory 13,000
Sales 117,000
Perform the following tasks
Task 1: Calculate Cost of Goods Manufactured
Task 2: Calculate Cost of Goods sold
Task 3: Calculate Gross Profit

PROJECT 6: ACCOUNTING FOR INVENTORY

SWEET MANUFACTURER Company has reported beginning inventory at Nahasie 1, 2011
fiscal year 150 unit at a cost birr 150 per unit .
Purchases during the year ended Nahasie 1, 2011, were as follows:
Nahasie 10 purchased 200 unit @ 160
Nahasie 15 purchased 300 unit @ 170
Nahasie 25 purchased 400 unit @ 180
Additional Information
The company made the following sales
Nahasie 16 sales 120 unit at birr 200
Nahasie 28 sales 200 unit at birr 250
All purchase and sales are made on account
Required:
Task 1: Calculate Cost of goods sold, ending inventory at the end of month and determine
amount of gross profit uses perpetual inventory and FIFO cost method
Task 2: Calculate Cost of goods sold, ending inventory at the end of month and determine
amount of gross profit uses periodic inventory and LIFO cost method

7
PROJECT 6: ACCOUNTING FOR INVENTORY
SWEET MANUFACTURER Company has reported beginning inventory at Nahasie 1, 2011
fiscal year 15,000 unit at a cost Birr. 50 per unit = Birr. 750,000
Purchases during the year ended Nahasie 1, 2011, were as follows:
Nahasie 10 purchased 20,000 units @ 60 = Birr. 1,200,000
Nahasie 15 purchased 25,000 units @ 70 = 1,750,000
Nahasie 25 purchased 20,000 units @ 80 = 1,600,000
Total unit and cost of goods aval. For sale 80,000 unit Birr. 5,300,000
The physical count of Inventory on hand at the end would be 25,000 Unit

Required: Task 1: Calculate Ending inventory and Cost of goods sold, by using
1. PERIODIC inventory and FIFO cost method
2. PERIODIC inventory and LIFO cost method

PROJECT 7: REVENUE RECOGNITION METHOD

Assume that in the first year of operation, a dealer in household appliances had total installment
sales of Birr 300,000, and the cost of the merchandise sold amounted Birr 180,000.Assume also
that collection of the installment accounts receivable were spread over three years as follows:
1st Year Birr 140,000
nd
2 Year 100,000
rd
3 Year 60,000

Instruction:
1. Find the Gross Profit at Point of Sale Method
2. Find the Gross Profit under Installment Method
3. Find the Gross Profit under Cost-Recovery Method

8
PROJECT # 1: PREPARE OPERATIONAL BUDGET
The following data is available to prepare operational budget for Kality Steel Factory
manufactures and sells for the year 2012. Kality Steel Factory is contemplating its first year
operation and it’s preparing to construct operational budget for the coming year 2012. The data
will detail each quarter activity and the activity of the year total.
a. The fourth quarter sales for 2011 are 55,000 unit
b. Unit sales by quarter for 2012 are projected as follow
- First Quarter 65,000
- Second Quarter 70,000
- Third Quarter 75,000
- Fourth Quarter 90,000
c. The selling price of Br. 400 per unit; 85 percent sales on cash basis and 15 percent sales are
credit sales. Credit sales are collected the following quarter.
d. There is no beginning finished goods inventory. And the company is planned the following
ending finished goods inventory for each quarter:
- First Quarter 13,000
- Second Quarter 15,000
- Third Quarter 20,000
- Fourth Quarter 10,000
e. Each unit output uses five direct labor-hours. Three unit of direct material are required for
each unit produced. The laborers paid Br.10 hour. One unit of material cost is Br. 80.
f. There are 65,700 units of material as January 1, 2012. At the end of each quarter, Kality Steel
Factory plans to have 30 percent raw material needed for the next quarter sales. On
December 31, 2012 Kality Steel Factory have the same inventory level in January 1 2012.
g. Kality Steel Factory material buys on account. Half of purchases are paid in the quarter and
the remaining half paid the following quarter. Wage and salary of employees are paid at the
end of the month.
Required:
Task 1: Prepare sales Budget and schedule of expected cash collections for each quarter
Task 2: Prepare production in unit for each quarter
Task 3: Prepare Raw material purchase and cash disbursement for each quarter
Task 4: Prepare Direct labor cost budget for each quarter.

9
 PROJECT 4: PREPARE OPERATIONAL BUGET
KALITY STEEL FACTORY uses job order costing system for manufactures two products A
and B, the budget department of the factory has the following information at the beginning of the
current year.
Sales volume in unit during the current year
Product “A” Product “B”
Sales Volume 400,000 unit 200,000 units
Selling price Br. 20 Br. 25
Cost of unit production Br. 12 Br. 21
Ending cost of finished goods inventory Br. 20,000 Br. 25,000
Beginning cost of finished goods inventory Br. 15,000 Br. 10,000
Required:
Task 1: Prepare Sales Budget
Task 2: Prepare Production Budget
Task 3: Compute Gross Profit
PROJECT 5: PERFORM ACCOUNTING FOR PAYROLL
FANA Corporation Agency pays the salary of its employees according to the Ethiopian calendar
month to ERCA. The fifth coming data relating to the Month of Maskaram. 2014.
No Name of BS Allowance Hourly Duration of work
Employees Worked
1 Gemechu Br.10,250 Transportation -  
2 Bacha 6,850 12 Weekend
3 Sara W. 1,560 7 Public Holiday
4 Zebiba 4,900 15 Evening, Day 6 AM to 10 PM
1. Transportation Allowance 30% of basic salary and out of 20% are taxable
2. The workers are expects to work 40 hours in a week and 160 in month.
3. All workers of this corporation are permanent employees; SARA W. is casual employees
4. The applicable pension contribution permanent employees are 7% from employees and 11%
from employer.

PERFORM THE FOLLOWING TASKS

1. Compute Gross Earning, Gross Deduction and Net pay of each Employee Agency.
2. Prepare a payroll register (or sheet) for the corporation for the month.
3. Record the payment of salary as the month. Using Check No. 154 as a source documents.
4. Record the payroll taxes expense for the month of Maskram 31, 132, 2014.

PROJECT 7: TAX ACCOUNTING

10
Belayad Motor PLC assembly of commercial vehicle import and Distribution of various types
of motors vehicle, heavy trucks and machinery with after sale service. On December 1, 2019
Company Cash balance indicated bank account was Birr. 19,550,800. During December
Company imported 30 diesel Vehicle motors with Cylinder capacity 1300 CC from Germany
costing Vehicle FOB in EURO 80,000. The freight cost Birr. 150,000 and insurance was paid to
the imported goods.
Duty and tax applicable on imported vehicle in Ethiopia
Duty Rate: 35%
Excise Tax: 30%
VAT: 15%
Sur Tax: 10%
Withholding tax: 3%
Exchange rate during the month (constant) as follows
Buying rate Selling rate
Euro 33.00 35.50
Required: Task 1: Determine total cost of imported diesel vehicle before duty and tax payable
Task 2: Calculate the following taxes at the time of imported
Task 3: Based on the above data determine the amount of cash balance during the
month
PROJECT: INVENTORIES
The following information is given:
Jan 1. Beginning Inventory…………………………..………….200 units @9
Jan 10 Purchase………………………………………………….300 units @10
Jan 15 Purchase………………………………………………….400 units @11
Jan 29 Purchase………………………………………………….100 units @12
The physical count on December 31 shows that 300 units of the particular commodity are on
hand.
Using Periodic FIFO Method:
1. Calculate the Cost of Goods Sold
2. Calculate the Gross Profit, if selling price per unit is Birr 15.
3. Calculate the business profit tax, assume administration cost is 2,500 from this 900 birr is for
personal investment (use 30% profit tax rate).

PROJECT: PAYROLL ACCOUNTING

11
The following information is given for payroll data of Relief Agency employees who are
different job position profession. Their names and other information regarding their payroll data
for the month Hamle, 30, 2015

S.N Name of Basic Representational Fuel OT Hrs. Duration of OT

Employee Salary Allowance Allowance worked OT works Rate
1 Gemechu 5,500 750 200 litters - - -
2 Chala 3,500 350 150 litters 6 hrs. Weekend 2
3 Bontu 850 - - 10 hrs. 10pm to 6am 1.5
4 Kena 2,800 150 100 litters 6 hrs. Holiday 2.5
5 Hordofa 1,500 - 50 litters 6 hrs. Holiday 2.5
Additional Information
The management of the company expects all employees to work 40 hrs per week and all
employees have worked as they have expected. Bontu is a Casual Employee. Gemechu and
Chala monthly contribute 10% of their basic salary to credit association as monthly saving
whereas Kena contribute 5% of his basic salary. Up to 1,000 birr fuel Allowance is exempted
form tax and the selling price of one litter is Birr 20. Pension is given as 7% from employee and
11% from employer.

Instruction:
1. Calculate earnings, income tax, pension contribution and others of each employees
2. Prepare a payroll register (or sheet) for the agency for the month
3. Record the payment of salary
4. Record the payroll taxes expense for the month
5. Recorded the payroll of withhold tax and pension contribution to concerning of government

PROJECT: JOB ORDER COSTING INFORMATION

12
Star Company uses a job order cost system and perpetual inventory system for manufactures
products for its accounting records. Information on the company production for the current
accounting period as the following
9. Beginning finished goods inventory of the period birr 45,000 (Job 10)
10. Beginning work in process inventory of during the period birr. 30,000
11. Purchased raw material for cash birr. 60,000.
12. Materials requisitioned record sheet as
No. 11 48,000
No. 12 32,000
No. 13 19,200
No. 14 22,400
13. The Time ticket record sheet as
No. 11 12,000
No. 12 10,500
No. 13 37,500
No. 14 39,000
14. The company estimated factory overhead costs 70% of direct labor cost of production
15. Jobs completed and Transferred: Job 11, Job 12, and Job 13 to finished goods
16. Jobs were shipped to customer: jobs 10, jobs11 and jobs 12 birr. 420,000 on credit
Required:
6. Determine ending work in process and ending finished goods inventory during the period.
7. Record necessary journal entries
8. Calculate cost of goods manufactured
9. Calculate cost of goods sold
10. Calculate gross profit
Materials requisitioned The Time ticket
JOB
record sheet record sheet FOH
No. 11 48,000 12,000 8400
No. 12 32,000 10,500 7350
No. 13 19,200 37,500 26250
No. 14 22,400 39,000 27300
Total 121,600 99,000 69,300

Task 3.1: Determine ending work in process and ending finished goods inventory during the period.
Ending Work In Process Ending Finished Goods
30,000 201,200 45,000 163,250
121,600 201,200
99,000
69,300 82,950
118,700

Task 3.2: Record necessary journal entries

Work in Process 121,600
Materials 121,600

Work in Process 99,000

13
 Wages Payable 99,000
Work in Process 69,300
Factory Overhead (70% of 99,000) 69,300

Computation of the cost of jobs finished:

DM DL FOH Total
No. 11 48,000 12,000 8400 68,400
No. 12 32,000 10,500 7350 49,850
No. 13 19,200 37,500 26250 82,950
Total 201,200
Finished Goods inventory 201,200
Work in Process 201,200
Accounts Receivable 420,000
Sales 420,000
Cost of Goods Sold 163,250
Finished Goods 163,250
Task 3.4: Calculate cost of goods sold
Cost of jobs sold computation:
Job 10 45,000
No. 11 68,400
No. 12 49,850
Total 163,250
Task 3.3: Calculate cost of goods manufactured
Solution:-
1. Total manufacturing costs incurred
Direct materials used 121,600
Direct manufacturing labor 99,000
Manufacturing overhead costs 69,300
Total manufacturing costs 289,900
2. Cost of goods manufactured
Beginning WIP inventory 30,000
Add: Total manufacturing costs 289,900
Total manufacturing costs to account for
Less: Ending WIP inventory (118,700)
Cost of goods manufactured 201,200
3. Cost of Goods Sold
Ending FG inventory 45,000
Add: Cost of goods manufactured 201,200
Less: Ending FG inventory 82,950
Cost of Goods Sold 163,250
Calculate gross profit
Sales Revenue 420,000
Less: Cost of Goods Sold (163,250)
Gross profit 256,750

14
Assume Creative Printers is a company run by a group of students who use desktop publishing to
produce specialty books and instruction manuals. Creative Printers uses job costing.
On July 1, Creative Printers had these beginning inventories:
- Materials inventory (or Raw Materials Inventory) $20,000
- Work in process inventory (Job No. 106)
- Direct materials $4,200
- Direct labor $ 5,000
- Overhead $4,000
Total Work in process inventory $13,200
Finished goods inventory (Job No. 105) $5,500
Creative Printing had completed Job No. 105, a set of gardening books, but had not shipped them to the
customer as of June 30. 
Additional information regarding July transactions follows:
a. During July, Creative Printers purchased $ 25,000 of materials on account.
Raw Materials Inventory 25,000
Accounts Payable 25,000
(Purchased materials on account)
b. During July, Creative Printers sent direct materials from the materials storeroom to jobs as follows: $
9,000 to Job No. 106, and $ 14,000 to Job No. 107. The company also sent indirect materials of $
1,000 to jobs. The cost of the direct materials FROM raw materials inventory TO work in process
inventory. 
Work in Process Inventory 23,000
Raw Materials Inventory 23,000
(Record direct materials used ($9,000+ 14,000)
Factory Overhead 1,000
Raw Materials Inventory 1,000
(Record indirect materials used)
c. The company assigned production-related labor costs to jobs (direct labor) and to Overhead as
follows: $4,000 to Job No. 106, $ 16,000 to Job No. 107, and indirect labor of $ 2,000 to Overhead. 
For direct labor, we want to take the cost of labor FROM the payroll summary account TO work in
process inventory. 
Work in Process Inventory 20,000
   Factory Payroll 20,000
(Record direct labor used ($4,000+ 16,000)  
Factory Overhead 2,000
Factory Payroll 2,000
(Record indirect labor used)
d. The company assigns overhead to each job on the basis of the machine-hours each job uses.  
Overhead is assigned to a job at the rate of $ 2 per machine-hour used on the job.   Job 16 had 875
machine-hours so we would charge overhead of $1,750 (850 machine-hours x $2 per machine-hour). 
Job 17 had 4,050 machine-hours so overhead would be $8,100 (4,050 machine-hours x $2). 
The journal entry to apply or assign overhead to the jobs would be to move the cost FROM overhead
TO work in process inventory.
Work in Process Inventory   9,850
     Overhead   9,850
(Record overhead applied ($1,750+ 8,100)  

The complete job cost sheets for Jobs 106 and 107 would appear as below:
15
 Job: 106 107
Beginning Work in Process $13,200 0
 Added this period: 
Direct Materials 9,000 14,000
    Direct Labor  4,000 16,000
    Overhead applied  1,750 8,100
Total Job Costs $ 27,950   $ 38,100 
e. Job No. 106 was completed.   The total job cost of Job 106 is $27,950 for the total work done on the
job, including costs in beginning Work in Process Inventory on July 1 and costs added during July.
This entry records the completion of Job 106 by moving the total cost FROM work in process
inventory TO finished goods inventory.
Finished Goods Inventory 27,950
   Work In Process Inventory 27,950
Record completion of Job 16
(Beg. WIP $13,200 + DM 9,000 +   DL 4,000 + OH 1,750)
f. Job No. 105 was sold on account in July for $ 9,000. This transaction would require 2 entries:  one for
the sales and customer side and one for the company’s actual cost (remember, you do not want these
to be the same amount.  You want to charge customers MORE than it cost you to make a profit). 
Since this was sold on account, we know that means accounts receivable.  The cost of Job 105 can be
found in the beginning inventory for finished goods inventory.
Accounts Receivable 9,000
   Sales 9,000
Record sale of Job 105 for $9,000 on account
Cost of goods sold 5,500
   Finished Goods Inventory 5,500
Record total cost of Job 105 now sold
g. The company applied overhead to the jobs in entry
Machinery repairs and maintenance $1,500
Utilities, including energy costs to run machines 1,000
Depreciation of building and machines 2,500
Other overhead 1,800
Total overhead incurred in July,  other than indirect materials and $6,800
indirect labor
To prepare the journal entry,
Overhead   6,800
   Accounts Payable 4,300
   Accumulated Depreciation 2,500
Record actual overhead costs incurred
Determine the ending balances of the inventory accounts to be:
Raw Materials Inventory $21,000
(20,000 + 25,000 – 23,000 – 1,000)
Work in Process Inventory $38,100
(Total costs of Job 17)
Finished Goods Inventory $27,950
(Total cost of Job 16)

PROJECT #: PREPARE OPERATIONAL BUDGET

The following data is available to prepare operational budget for Kality Steel Factory
manufactures and sells for the year 2012. Kality Steel Factory is contemplating its first year

16
operation and it’s preparing to construct operational budget for the coming year 2012. The data
will detail each quarter activity and the activity of the year total.
h. The fourth quarter sales for 2011 are 55,000 unit
i. Unit sales by quarter for 2012 are projected as follow
- First Quarter 65,000
- Second Quarter 70,000
- Third Quarter 75,000
- Fourth Quarter 90,000
j. The selling price of Br. 400 per unit; 85 percent sales on cash basis and 15 percent sales are
credit sales. Credit sales are collected the following quarter.
k. There is no beginning finished goods inventory. And the company is planned the following
ending finished goods inventory for each quarter:
- First Quarter 13,000
- Second Quarter 15,000
- Third Quarter 20,000
- Fourth Quarter 10,000
l. Each unit output uses five direct labor-hours. Three unit of direct material are required for
each unit produced. The laborers paid Br.10 hour. One unit of material cost is Br. 80.
m. There are 65,700 units of material as January 1, 2012. At the end of each quarter, Kality Steel
Factory plans to have 30 percent raw material needed for the next quarter sales. On
December 31, 2012 Kality Steel Factory have the same inventory level in January 1 2012.
n. Kality Steel Factory material buys on account. Half of purchases are paid in the quarter and
the remaining half paid the following quarter. Wage and salary of employees are paid at the
end of the month.

Required:
Task 1: Prepare sales Budget and schedule of expected cash collections for each quarter
Task 2: Prepare production in unit for each quarter
Task 3: Prepare Raw material purchase and cash disbursement for each quarter
Task 4: Prepare Direct labor cost budget for each quarter.

1. Sales Budget

17
  1 Quarter 2 Quarter 3 Quarter 4 Quarter Total
Sales Volume 65,000 70,000 75,000 90,000 300,000
Selling Price 400 400 400 400  
Total Sales Revenue 26,000,000.00 28,000,000.00 30,000,000.00 36,000,000.00 120,000,000

Cash collection Budget

  1st Quarter 2nd Quarter 3rd Quarter 4rd Quarter  
Quarter 1 22,100,000 3,900,000     26,000,000
Quarter 2   23,800,000.00 4,200,000.00   28,000,000
Quarter 3     25,500,000.00 4,500,000.00 30,000,000
Quarter 4       30,600,000.00 30,600,000
  22,100,000.00 27,700,000.00 29,700,000.00 35,100,000.00 114,600,000

2. Production Budget
3
1 Quarter 2 Quarter 4 Quarter Total
  Quarter
Sales in unit 65,000 70,000 75,000 90,000 300,000
Add: Desired Ending FG Inventory 13,000 15,000 20,000 10,000
Less: Estimate Begn FG Inventory 0 (13,000) (15,000) (20,000)
Unit to be Produced 78,000 72,000 80,000 80,000

3. Direct material purchase budget

PROJECT: PREPARE FINANCIAL STATEMENT

The listed of account below appear the ledger of HTTC company at June 30, 2015, the end of
fiscal year. None of the year ended adjustment has been recorded.
HTTC COMPANY
18
 Unadjusted Trial Balance
Cash ……………………………………………………….9, 410
Fees receivable ……………………………………………48,310
Supplies …………………………………………………… 675
Prepaid insurance…………………………………………..3,725
Prepaid Advertise…………………………………………..1,000
Salaries payable ……………………………………………………………………….?
Unearned rent …………………………………………………………………………1,000
Capital …………………………………………………………………………………42,810
Fees earned…………………………………………………………………………… 62,250
Salaries Expense ……………………………………….. 41,700
Advertise Expense……………………………………… 10,340
Insurance Expense…………………………………………..?
Supplies Expense……………………………………………?
Rent Income ……………………………………………………………………………9,100
Additional Information
a. Unbilled and uncollected revenue for services performed Br. 7,750
b. An inventory count shows supplies Birr. 190
c. The amount of Br.2100 insurance expired
d. Payments of Birr. 1,000 for advertise newspaper 75% were used
e. Accrued but unpaid employee salaries were at June Birr. 1,140
f. Rent collected in advance will not earned 700
g. The company registered for tax as Ethiopian tax law?
Solution
a. Unbilled fees 7750
Fees Receivable……………………………..7,750
Fees Earned ……………………………….. 7,750
b. Inventory supplies 190
Supplies expense…………………………….485
Supplies ………………………………………….485
(675-190 = 485) supplies on hand =190
c. Br.2100 insurance expired
Insurance expense ……………………………2,100
Prepaid insurance………………………………2,100
d. Payments of 1000 for advertise eth. her land newspaper 75% were used
Advertise Expense …………………………………………………….750
Prepaid advertise……………………………………………………….750
e. Salaries accrued at June 1140
Salaries Expense …………………………………..1,140
Salaries payable …………………………………1,140
f. Rent collected in advance will not earned 700
Unearned rent……………………………………………..300
Rent income …………………………………….300
(1000-700 =300)
g. The company registered for tax as Ethiopian tax law?
Tax expense …………………………………………6,865.5
Tax payable ………………………………….6, 865.5
HTTC COMPANY TRIAL BALANCE
Adjusted Trial Balance
Cash ……………………………………………………… 9,410
Fees receivable ……………………………………………56,060
Supplies …………………………………………………… 190
19
Prepaid insurance…………………………………………..1,625
Prepaid Advertise…………………………………………..250
Salaries payable ………………………………………………………………………1,140
Unearned rent …………………………………………………………………………700
Capital ………………………………………………………………………………..42,810
Fees earned……………………………………………………………………………70,000
Salaries Expense ……………………………………….. 42840
Advertise Expense……………………………………… 11090
Insurance Expense……………………………………… 2100
Supplies Expense………………………………………… 485
Rent Income …………………………………………………………………………… 9400
Balance =124,050 =124,050
HTTC COMPANY
Profit and loss statement
Fees earned………………………………………………………………………………70,000
Add: Rent Income ……………………………………………………………………… 9400
Total Revenue ……………………………………………………………………………79,400
Less: operating Expense
Salaries Expense ……………………………………….. 42840
Advertise Expense……………………………………… 11090
Insurance Expense……………………………………… 2100
Supplies Expense………………………………………… 485
Total expense ………………………………………………………………………….56, 515
Income from operation …………………………………………………………22,885
Business Profit Tax (22,885*0.3)……………………………………………… 6,865.5
Net income ……………………………………………………………………..16,019.5

HTTC COMPANY
Balance sheet statement
Cash ………………………………………………………...9,410
Fees receivable …………………………………………… 56,060
Supplies …………………………………………………… 190
Prepaid insurance…………………………………………..1,625
Prepaid Advertise…………………………………………..250
Total Asset 67,535
Salaries payable ……………………………………………. 1,140
Tax payable ………………………………………………… 6,865.5
Unearned rent ………………………………………………. 700
Capital ………………………………………………………58,829.5
Total Liability and Owners Equity 67,535

PROJECT: Revenue Recognition Method

At the beginning of first Year operating, GLURIOUS Company A dealer house telephone on
installment sale for Br 300,000 that have cost of Br 180,000 of merchandise. The collections of
installment account receivables are process. The cash collection performances are as follows:

20
 Year 1 Br 140,000
Year 2 Br 100,000
Year 3 Br 60,000
Instruction:
1. What is the Gross profit for each year installment based on Point of sales method:
2. Determine the gross profit to be reported each year under Installment Method:
Solution
What is the Gross profit for each year installment based on Point of sales method?
1) Point of Sales Method “Accrual Method”
Gross Profit = Total cost * 100
Total Sales
= Br. 180,000 * 100
300,000
= Br. 0.4 *100
= 40%
Year Instalment Sales Br 300,000 100%
 Year 1 Cost of Instalment Sales 180,000 60%
  Realized Gross Profit Br 120,000 40%
Year 2 Realized Gross Profit -0-  
Year 3 Realized Gross Profit -0-  
Journal Entry:
Deferred Gross profit…………………….. 120,000
Realized Gross profit ………………….. 120,000
Determine the Gross profit to be reported each year under Installment Method
2) Installment Method
 Year Collection GP %age Realized Gross Profit
Year 1 140,000 40 % 140,000 @ 35% = 56,000
Year 2 100,000 40 % 100,000 @ 35% = 40,000
Year 3 60,000 40 % 60,000 @ 35% = 24,000
Total 300,000 120,000
Journal Entry:
a) Deferred Gross profit…………………….. 56,000
Realized Gross profit ………………….. 56,000
b) Deferred Gross profit…………………….. 40,000
Realized Gross profit ………………….. 40,000
c) Deferred Gross profit…………………….. 24,000
Realized Gross profit ………………….. 24,000

2. At the beginning of Year 3, SANCHO Company sold merchandise on installment basis for
Br 200,000 that have cost of Br 130,000. The first payment is to be collected at the end of
Year 3. The cash collection performances are as follows:
Year 1 Br 90,000
Year 2 Br 60,000
Year 3 Br 50,000
21
Instruction: Determine the Realized gross profit to be reported each year under Installment
Method, Point of sales method and Cost recovery Method
1. Accrual Method
Year 1 Instalment Sales Br 200,000 100%
  Cost of Instalment Sales 130,000 65%
  Realized Gross Profit Br 70,000 35%
Year 2 Realized Gross Profit -0-  
Year 3 Realized Gross Profit -0-  
2. Cost Recovery Method
 Year Collection Cost Realized GP
Year 1 90,000 130,000 Br0
Year 2 60,000 40,000 Br. 20,000
Year 3 50,000 0 Br. 50,000
Total 200,000 Br. 70,000

3. Installment Method
 Year Collection GP %age Realized Gross Profit
Year 1 90,000 35% 90,000 @ 35% =31,500
Year 2 60,000 35% 60,000 @ 35% =21,000
Year 3 50,000 35% 50,000 @ 35% =17,500
Total 200,000 70,000

Journal Entry:
Deferred Gross profit…………………….. 70,000
Realized Gross profit ………………….. 70,000

22
PROJECT: INVENTORIES
The following information is given:
Jan 1. Beginning Inventory…………………………..………….200 units @9
Jan 10 Purchase………………………………………………….300 units @10
Jan 15 Purchase………………………………………………….400 units @11
Jan 29 Purchase………………………………………………….100 units @12
The physical count on December 31 shows that 300 units of the particular commodity are on hand.
Using Periodic FIFO Method:
4. Calculate the Cost of Goods Sold
5. Calculate the Gross Profit, if selling price per unit is Birr 15.
6. Calculate the business profit tax, assume administration cost is 2,500 from this 900 birr is for
personal investment (use 30% profit tax rate).
1. Hope Company was formed on December, 1, 2002.
Unit Units cost Total cost
January 1 Inventory 200 Br. 9 = Br. 1,800
10 Purchase 300 10 = Br. 3,000
25 Purchase 400 11 = Br. 4,400
30 Purchase 100 12 = Br. 1,200
Total cost of merchandise available for Sales……………………… = Br. 10,400
Instruction: If at the end of the month, the fiscal count shows that 300 unit are on hand. The
company uses Periodic inventory Method under FIFO, LIFO
Periodic Inventory System- FIFO Method
Inventory on hand = 300 unit
The cost of ending inventory under FIFO method would be:
From Jan. 30, purchase 100 units @ Br. 12 = Br. 1,200
From Jan. 25, purchase 200 units @ Br. 11 = Br. 2,200
Total 1,600 units Br. 3,400
® Cost of Ending inventory = Br. 3,400
® Cost of Goods sold = CGAFS – Cost of Ending Inventory
= Br. 10,400 – Br. 3,400 = 7,000
Calculate the Gross Profit, if selling price per unit is Birr 15.
Gross profit = Sales revenue – CGS =
Calculate the business profit tax, assume administration cost is 2,500 from this 900 birr is for personal
investment (use 30% profit tax rate).
B. Periodic Inventory System- LIFO Method
Inventory On hands (Ending Inventory) at the end would be 300 Unit
The cost of ending inventory under FIFO method would be:
From Jan. 1, purchase 200 units @ Br. 9 = Br. 1,800
From Jan 10, purchase 100 units @ 10 = Br. 1,000
Total 1,600 units Br. 2,800
® Cost of Ending inventory = Br. 2,800
® Cost of Goods sold = CGAFS – Cost of Ending Inventory
= Br. 10,400 – Br. 2,800 = Br.8,600

23
Calculate the Gross Profit, if selling price per unit is Birr 15.
Gross profit = Sales revenue - CGS
=
Calculate the business profit tax, assume administration cost is 2,500 from this 900 birr is for personal
investment (use 30% profit tax rate).
C. Weighted Average Method
Average cost per unit = Cost of goods available for sale ÷ Total units available for sale
DXY Company uses periodic inventory and LIFO cost method
Periodic FIFO
Oct 1 Inventory…………15@30………..450
Oct 10 Purchase………….10@32………..320
Oct 30 Purchase………….10@33………..330
35 Birr. 1,100
Units Remained on Hand = UAFS – Units Sold = 35 unit – 20 = 15 units
Recent Costs, Oct 30………….10@ 33…………330
Next Recent Costs, Oct 10…….5 @ 32…………160
15 Birr. 490
Sales 5 @ 35.........................175
12 @ 39...................... 468
3 @ 40....................... 120
20 Birr. 763
Cost of Goods Sold
CGS = Beginning Inventory + Net Purchases – Ending Inventory
= Birr. 450 + 650 – 490
= Birr. 610
Gross Profit GP = Net Sales – CGS
= Birr. 763 – 610 = Birr. 153
DXY Company uses perpetual inventory and FIFO cost method
Perpetual LIFO
Date Purchases CGS Inventory
Qty UC TC Qty UC TC Qty UC TC
Oct 1 15 30 450
4 5 30 150 10 30 300
10 10 32 320 10 30 300
10 32 320
17 10 32 320 8 30 240
2 30 60
22 3 30 90 5 30 150
30 10 33 330 5 30 150
10 33 330
Cost of ending inventory 15 Birr. 480
Cost of Goods Sold
CGS = Birr. 150 + 320 + 60 + 90 = Birr. 620

24
 Gross Profit = Net Sales – CGS = 763 – 620 = Birr. 143
PROJECT: PAYROLL ACCOUNTING
Tec Talk IT company engaged in It activities having a five employees who are different position
profession. Their names and other information regarding their payroll data for the month April, 30,
2015
TEC IT Company Payroll Register
April 30, 2015
S.N Name of Earnings Gross Deductions Total Net Pay Sign
Employee Earnings Deductions
Basic OT Income Pension
Salary Earnings Tax Contr.
1 Boru - 2,067.50
2 Nigatu 2,379
3 Geletu 943.50
4 Yemariam 155.40
5 Nitsuh
Total
Additional Information
1. Boru and Nigatu have paid the same income tax a month
2. Boru pension contribution is 22.64% of his income tax
3. The total (employees and employer ) pension contribution of Nitsuh is equal to Yemariam
4. Geletu pension contribution is 28.74% of his income tax
5. The pension contribution is 6% from employees and 7% from employer.
Required
1. Prepare a payroll register (or sheet) for the agency for the month.
2. Record the payment of salary
3. Record the payroll taxes expense for the month
4. Recorded the payroll of withhold tax and pension contribution to concerning of government
PROJECT: PAYROLL ACCOUNTING
TEC IT Company Payroll Register
April 30, 2015
S.N Name of Earnings Gross Deductions Total Net Pay Sign
Employee Earning Deductions
Basic OT s Income Pension
Salary Earnings Tax Contr.
1 Tirusew 7,800 - 7,800 2,067.50 468 2,535.58 5,264.42
2 Nigatu 5,421 2,379 7,800 2,067.50 325.26 2,419.76 5,380.24
3 Geletaw 4,520 - 4,520 943.50 271.20 1,214.66 3,305.34
4 Yemariam 2,590 - 2,590 412.50 155.40 567.90 2,022.10
5 Nitsuh 1,036 - 1,036 107.90 62.16 170.06 865.94
Total 21,367 2,379 23,746 5,598.90 1,282.02 6,907.96 16,838.04

Journal Entries
25
 1. To record the payments of salary expense for the month:
Salary Expense ……………23,746
Income Tax Payable…………………..5,598.90
Pension Contribution Payable……….1, 282.02
Cash…………………………………….16, 865.08
2. To record the Payroll Tax (Employer’s Pension) Expense:
Payroll Tax Expense………….1,923.03
Pension Contribution Payable…………..1,923.03
(21,367 x 9% = 1,923.03)
3. To record the payment of payroll tax and withholding tax to the Inland Revenue Authority:
Income Tax Payable…………….………5,598.90
Pension Contribution Payable…….……3,205.05
Cash………………………………………….8,803.95

PROJECT: BANK RECONCILIATION

Pointer PLC has the data required to reconcile the bank statement as of April, 30,2012 have been
taken from various documents and records and are reproduced as follows
Cash at bank account depositors records:
Cash in bank account in April 1, 2012 …………….. 7,817.40
Cash receipt journal during April 30, 2012 ………… 7,829.50
DUPLICATE DEPOSIT TICKETS:
Date and amount of each deposit in April: Bank statement for the Month of April:
Date Amount
Date Amount
CK# Amount
April 1, 2012 848.63 740 287.50 CK# Amount
April 1, 2012 690.25 731 162.15
April 3, 2012 914.04 741 555.15
April 2, 2012 848.63 738 60.55
April 8, 2012 840.50 742 501.90
April 4, 2012 914.04 740 287.5
April 10, 2012 971.71 743 671.30
April 9, 2012 840.50 741 555.15
April 15, 2012 957.85 744 506.88
April 11, 2012 971.71 742 501.90
April 24,012 946.74 746 415.91
April 16, 2012 975.85 743 671.30
April 22, 2012 897.34 748 490.9
April 18, 2012 946.74 744 506.88
April 24, 2012 942.72 750 1,016.90
753 1,217.33 April 23, 2012 897.34 746 415.9
April 29, 2012 510.06
April 22, 2012 942.72 748 490.90
754 249.75
755 172.75 750 1,016.90
757 1,021.9 751 251.40
758 359.60 753 1,217.33
759 601.50 754 249.75
760 486.39 757 1,021.90
760 486.39

Bank statement for April

Balance as April 1, 2015 $ 7,947.20
Deposit and other Credit $ 10,652.77
Checks and other debits ($ 8,232. 21) 9
Balance of April 30, 2015 $ 10,367.67

26
Bank memo Accompanying April Bank statement
Date Description Amount
April 4, 2015 Bank credit for note collected
Principal 2,500.00
Interest 125.00
April 24, 2015 Debit memo for checks returned because of NSF 311.8
April 30, 2015 Bank debit Memo service charge 24.5
POINTER PLC BANK RECONCILIATION
FOR MARCH 31, 2015
Cash Balance according to bank statement . . . . . . . . . . . . . . . . . . . . . . . . $ 7,947.20
Add: Outstanding deposit of June 30, not recorded by bank . . . . . . . . 690.25
Sub-total…………………………………………………………… $ 8,637.45
Deduct outstanding checks:
No. 731 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 162.50
No. 736 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345.94
No. 738 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251.4
No. 739 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60.55 820.05
Adjusted balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,817.40
Cash balance according to company’s records . . . . . . . . . . . . . . . . . . . . . $7,832.50
Deduct service charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.10
Adjusted balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,817.40
Instruction
1. Prepare Bank reconciliation April 30,2015
2. Record necessary journal entry
POINTER PLC
BANK RECONCILIATION April 30, 2012
Balance Per Bank Statement………………………………………………………10,367.76
Add: Deposit in transit……………………………………………………………..510.06
Subtotal……………………………………………………………………………..10,877.82
Deduct: Checks Outstanding……………………………………………………….1,479.80
Adjusted Balance………………………………………………………………..….9,398.02

Balance Per Depositor’s Records……………………………………………..…….7,091.32

Add: Notes Plus Interest…………………………………………2,625
Depositor Error……………………………………………18 2,643
Subtotal……………………………………………………………………………..9,734.32
Deduct: Bank Service Charge………………………………..24.50
Account receivable …………………………………….311.80 336.30
Adjusted Balance…………………………………………………………………….9,398.02
Journal Entries
1. Cash in Bank……………………2,643
Notes receivables……………………..………2,500
Interest Income………………………………….125
Accounts Payable……………………………….18
2. Miscellaneous Expense……………..24.50
Account receivable……………………………311.80
Cash in Bank…………………………..336.30

PROJECT: COST ACCOUNTING

During the month of January the following transaction occurs produce three product
27
6. Raw material purchase
Sand 500.00
Steel 790.00
Chemicals 4,500.00
7. Material issued and Direct factory labor cost used
Materials Direct Labors
Job#1 227.50 160.00
Job#2 780.00 210.00
Job#3 3,900 175.00
8. Factory overhead cost is 80% of Direct labor cost (436)
9. Sold finished products of birr. 7,800.00
10. All goods produced are sold
Instruction:
Task 1: Record necessary journal entry
Task 2: Calculate cost of each jobs
Task 3: Calculate amount of total Gross Profit
Solution
1. Raw material purchase
Sand 500.00
Steel 790.00
Chemicals 4,500.00
Total …………………………………………… Birr. 5,790
Raw materials …………………………………………. 5,790
Cash /Account payable ……………………………5,790
(To record purchase of materials)
2. Material issued and Direct factory labor cost used
Materials Direct Labors
Job#1 227.50 160.00
Job#2 780.00 210.00
Job#3 3,900 175.00
Total ………………………… Birr. 4,907.5 Birr. 545
Work-in-process ………………………… 5,452.5
Wage payable ……………………. 545
Material …………………………… 4,907.5
(To record material sent to production)
3. Factory overhead cost is 80% of Direct labor cost (436)
Mfg. OH control ………………………………. 436
Account payable …………………………….. 436
4. All jobs are completed or finished
Finished goods …………………….. 5,888.5
Work-in-process ……………………… 5,888.5
(To record goods manufactured)
5. Sold finished products of birr. 7,800.00
Cash …………………………………7,800
Sales ……………………………… 7,800
(To record goods sold cash)
6. All goods produced are sold
Cost of goods sold ……………………………….. 5,888.5
Finished goods ………………………………….. 5,888.5
(To record cost of goods sold)
Task 2: Calculate cost of each jobs
Direct Factory
28
 Job Materials Direct Labor Overhead Total
Job #1 227.50 160.00 128 515.5
Job#2 780.00 210.00 168 1,158
Job#3 3,900 175.00 140 4,215
Total cost = 5,888.5
Task 3: Calculate amount of total Gross Profit
Income statement
Sales Revenue 7,800
Less: Cost of goods sold 5,888.5
Gross profit 1,911.50
PROJECT: COST VOLUME PROFIT (CVP)
Star Alliance Company would like to perform (Music and Dance show) on New Year party for Addis
Ababa. Fixed costs for the performance total 50,000 Birr. Each Ticket for the party will sell for 150 birr
and an outside agency (agent) is responsible for processing ticket orders and charges the company a fee
of 30 Birr per ticket. Star Alliance Company expects to sell 800 tickets.
Required:
1. How many tickets must Star sell at break-even?
2. How many tickets must the star sell to earn a profit of 70,000 Birr?
3. How much must Star have in sales dollars to break even?
4. How much must Star have in sales dollars to earn a profit of 70,000 Birr?
5. What is the star margin of safety in units and in sales dollars?
Solutions
Break Even Point (in units) = Fixed cost + Profit
Contribution margin unit
= 50,000 + 0 / 150 – 30 = 50,000/ 120
= 416.66 = 417 Tickets
SAC must sell 417 tickets to Break Even or recover its all fixed and variable costs.
1. Sales Volumes (in units) = Fixed cost + Profit
Contribution margin unit
= 50,000 + 70,000/ 150 – 30
= 120,000 / 120
= 1000 Tickets

Star Alliance Company must sell 1000 tickets to earn profit of 70,000 birr.

1. Break Even Point ( in Birr) = Fixed cost + Profit

Contribution margin ratio
= (50,000 + 0) / 80 %
= Birr 62, 500
Contribution margin ratio = Contribution per ticket / Sales per ticket x 100
= 120/150 x 100
= 80% or 0.8

Star Alliance Company should make sales of 62,500 birr to break even.
29
 Profit = Sale – Total Cost (FC + VC)
= Sales – (Total Fixed Cost + Total Variable Cost)
= 62,500 – (50,000 + 30 x 416.66)
= 62,500 – (50,000 + 12,500)
= Birr. 0

2. Sales Required ( in Birr) = Fixed Cost + Profit

Contribution margin ratio
For desired Profit = (50,000 + 70,000) / 80%
= 120,000 / 0.8
= 150,000 Birr
Confirmation,
Profit = Sales – (TFC + TVC)
= 150,000 – (50,000 + 30 x1,000)
= 150,000 – 80,000
= 70,000 Birr
3. Margin of safety = Expected or Actual Sales – Break Even Sales
= 800 ticket – 417 Tickets
= 387 Tickets
The sales of SAC can drop by 387 units before it start making loss.

30