BE211/4-Introduction To Managerial Accounting

Hi-Tech Computers (HTC) is one of the leading computer service providers in Gulf Countries.  It is operating with a head office at Bahrain and with branches throughout Gulf Countries.  Hi-Tech Computers started its operations as a service company that specialized in providing computer related services like networking, software installation, maintenance of computer systems etc.  Later it became a merchandising company.  Now, the company is buying microchips, memory, keyboard, mouse and computer accessories and selling them to their customers in their retail stores.  As it has become a merchandising company, it has got many stakeholders now like customers, creditors, bankers, owners, employees, government, general public etc.  The company has been keen on initializing management accounting systems within the company to help top management and managers to move ahead in achieving its long-term goals.

(a) Service and Merchandising Operations of Hi-Tech Computers

Hi-Tech Computers furnishes cost details about its service and merchandising operations for the financial year 2018.  The details are as below:

Information Merchandising Operations Service Operations
Beginning Inventory (Finished goods) 100,000
Closing Inventory (Finished Goods) 60,000
Purchase of inventories 200,000
Staff Salaries 100,000 60,000
Administration Expenses 48,000 68,000
Selling & Distribution Expenses 40,000 72,000
Sales Revenue 480,000
Service Revenue 180,000

 

(b) Manufacturing Operations of Hi-Tech Computers

Later in 2018, the company had moved from merchandising to manufacturing operations as well.  It has two main products (A and B).   The cost and sales details of products A and B been estimated as below:

Information Product A Product B
Sales (2000 units @ 25 per unit) 50,000 50,000
Less: Variable Costs
(2000 units x $ 5 per unit) (10,000)
(2000 units x $ 15 per unit) (30,000)
Contribution Margin 40,000 20,000
Fixed Costs (24,000)