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1. Topic: Case study on Aussie pies.
Instructor: Mr. Ashraful Arefin
Course Code: ACN202
Course Title: Management Accounting
Section: 3
Semester: Summer 2019
Date Of Submission: 28 July 2019
AUSSIE PIES
Ahanaf Akhyer Hossain 1710323
Jahirul Islam 1730236
Maisha Zaman Sheikh 1710001
Arfeen Zaman 1610605

2. Mr. Ashraful Arefin
Lecturer
Independent University, Bangladesh
Bashundhara R/A, Dhaka.
28 July, 2019
Subject: Submission on (case study of Aussie Pies)
Dear Sir,
We are pleased to submit the report that you asked for & gave us the
authorization to work on the case study of Aussie Pies. This report is a
part of our course. We tried our best to work on it carefully and sincerely
to make the report informative.
The study we conducted enhanced our knowledge to make an executive
report. This report has given us an exceptional experience that might
have immense uses in the future endeavors and we sincerely hope that it
would be able to fulfill our expectations.
We have put our sincere effort to give this report a presentable shape and
make it as informative and precise as possible. We want to thank you for
providing us this unique opportunity.
Thank you.

3. Acknowledgement
Our respected faculty, Mr. Ashraful Arefin deserves our greatest
gratitude for guiding us throughout the report with numerous
consultations. He happily welcomed all our obstacles and confusions
regarding this report and acted as a silent backbone of this report.
We are extremely thankful to our honourable faculty who took the
interest on our report and supported us till the end.
We would also like to expand our deepest gratitude to all those who
have directly and indirectly guided us in writing this assignment.
Many people, especially our team members themselves, have made
valuable comments and suggestions on this report which gave us an
inspiration to improve our assignment by a large margin. We thank
all the people for their help directly and indirectly to complete our
assignment.

4. Executive Summary
Back in 2005, Anna Amphlett and Andrew Ferris observed that Australians
love meat pies and from an Australian Football match and came up with the
idea of launching the new meat pie business in Seattle, Washington. They
registered the trade name, ‘Aussie Pie’ and decided to introduce the concept of
the Australian meat pie to American consumers.
At part 1, we figured out that the initial fixed cost is $30,000; variable cost per
unit is $1.25; monthly loss is $18,000 based on 6000 sales of units; BEP in
dollars are $48,749 and units are 15,000 pies.
Assuming, after year 1, the establishment changes location and rental changes
by $1000, fixed salary increases by $2000, sales commission gets added by
$.50/pie and supplies increase to $200. Considering all these changes and
other costs keeping the same, the new monthly fixed manufacturing overhead
cost (FMOH) is $25,400; total fixed selling and administrative cost is $16,400;
total variable per unit cost of production is $1.35; total per unit selling and
administrative cost is $0.52, BEP in units are 30,290 pies, margin of safety in
units are -5290 pies (due to loss), margin of safety in percentage in 21.16%;
net loss for selling 25,000 pies is $7,300 (Variable costing approach) and
$6353 (Absorption costing approach).
Here we tried to figure all desired costs based on different situations. Aussie
pie is facing loss according to our calculation.

5. Table of Contents
1) Aussie Pie’s Fixed Costs:......................................................................1
2) Aussie Pie’s Variable Costs:.................................................................1
3) Aussie Pie’s ProfitLoss when they generate 6000 pies per month: ...1
4) Break-even point (Units):....................................................................1
5) a) Monthly fixed manufacturing overhead cost for the production of
meat pies: ...............................................................................................2
b) Monthly fixed selling and administrative cost: ...................................2
c) Variable per unit cost of production: ..................................................2
d) Per unit selling and administrative cost:.............................................2
e) New Break-even point (unit)...............................................................2
f) Margin of safety...................................................................................3
g) Variable Costing Approach:..............................................................3
Variable Costing Approach:.................................................................3
Absorption Costing Approach:............................................................3
h) Reconciliation of net operating income (Loss) under Variable costing
and Absorption costing for the month of February: ...............................5
I ) If produced units exceeds units sold, which method (variable or
absorption costing) would you expect to show the higher operating
income? Why? ........................................................................................5
Reference ...............................................................................................5

6. Page | 1
1) Aussie Pie’s Fixed Costs:
Rent of store at Pike Market Place $11,900
Renting cooking equipment’s $8,000
Renting fixtures $5,000
Two full-time chefs (2 x1800) $3,600
One full-time sales assistant $1,200
Utility cost for lighting the store $300
Total Fixed Cost $30,000
2) Aussie Pie’s Variable Costs:
Ingredients $1.20
Utilities for making pies $0.03
Packaging of meat pies at point of sale $0.02
Total variable cost per unit $1.25
3) Aussie Pie’s ProfitLoss when they generate 6000 pies per month:
Per Unit Total Percentage
Price (Ratio)
Sales $3.25 $19,500 100%
Less: Variable Cost $1.25 ($7,500) 38.46%
Contribution Margin $2.00 $12,000 61.54%
Less: Fixed Cost ($30,000)
Net operating income (Loss) ($18,000)
4) Break-even point (Units):
Break-even point (Units) = Total Fixed Cost / Contribution Margin per unit
= $30,000 / 2
= 15,000 pies
Break-even point (dollar) = Total Fixed Cost / Contribution Margin Ratio
= $30,000 / 0.6154
= $48,749

7. Page | 2
5) a) Monthly fixed manufacturing overhead cost for the production
of meat pies:
Rent of production house $11,900
Rent of cooking equipment’s $8,000
Rent of fixtures $5,000
Supplies for cleaning production house $200
Utilities for lighting production house $300
Total Fixed Manufacturing Overhead $25,400
b) Monthly fixed selling and administrative cost:
Rent of new selling store at Alki Beach, Seattle $1,000
Table and bench set ($1200 x 10) $12,000
Owners salary (2 x $1000) $2,000
Salary of Sales Assistant $1,200
Deprecation of Table and bench set per month $200
[12000/(5 x 12)]
Total Fixed Selling and Administrative cost $16,400
c) Variable per unit cost of production:
Ingredients $1.20
Utilities for making pies $0.03
Two chefs ($3600/30,000) $0.12
Total variable per unit cost of production $1.35
d) Per unit selling and administrative cost:
Commission of sales personnel $0.50
Packaging of meat pies at point of sale $0.02
Total per unit selling and administrative cost $0.52
e) New Break-even point (unit)
New Break-even point (unit) = Total Fixed Cost / Contribution Margin per unit
= ($16,400+$25400) / [$3.25 - ($1.35+$0.52)]

8. Page | 3
= $41,800 / $1.38
= 30,290 pies
f) Margin of safety
Margin of safety = Actual Unit – Break-even point (unit)
= 25000 – 30290
= (5290) pies
Margin of safety percentage = [(5290) / 25000] x 100
= 21.16%
Interpretation: So, a negative margin of safety of 5290 pies indicates a net loss of 21.16%
as the actual unit (25000 pies) has fallen below break-even unit (30290 pies)
g) Variable Costing Approach:
Variable Costing Approach:
Product cost in January = Direct Material + Direct Labor + Variable Manufacturing
Overheard
= $1.20 + ($3600 / 30,000) + $0.03
= $1.35
Product cost in February = Direct Material + Direct Labor +Variable Manufacturing
Overhead
= 1.20 + ($3600 / 30,000) + $0.03
= $1.35
Absorption Costing Approach:
Product cost in January = Direct Material + Direct Labor + Variable Manufacturing
Overheard
+ Fixed Manufacturing Overhead
= $1.20 + ($3600 / 30,000) + $0.03 + ($25400 / 24500)

9. Page | 4
= $1.20 + $0.12 + $0.03 + 1.036734694
= $2.39
Product cost in February = Direct Material + Direct Labor + Variable Manufacturing
Overheard
+ Fixed Manufacturing Overhead
= $1.20 + ($3600 / 30,000) + $0.03 + ($25400 / 26000)
= $1.20 + $0.12 + $0.03 + $0.9769230769
= $2.33
Variable Costing approach:
Income statement: February
Sales ($3.25 x 25000) $81,250
Less: Variable Expenses:
Variable Cost of goods sold ($1.35 x 25000) ($33,750)
Variable Selling and Administrative
expenses
($0.52 x 25000) ($13,000)
Contribution Margin $34,500
Less: Fixed Expenses:
Fixed Manufacturing Overhead ($25,400)
Fixed Selling and Administrative Expenses ($16,400)
Net operating income (Loss) ($7,300)
Absorption Costing approach:
Income statement: February
Sales ($3.25 x 25000) $81,250
Less: Cost of goods sold (500 x $2.386734694) ($58,203)
+ (24500 x $2.326923077)
Gross Profit $23,047
Less: Selling and Administrative expense:
Variable Selling and Administrative expense ($13,000)
Fixed Selling and Administrative expense ($16,400)
Net operating income (Loss) ($6,353)

10. Page | 5
h) Reconciliation of net operating income (Loss) under Variable
costing and Absorption costing for the month of February:
Reconciliation of net operating income (Loss) under Variable costing and Absorption costing
for the month of February:
Variable Costing Net operating income (loss) ($7,300)
Add FMOH deferred in
inventory under absorption
(1500 x $0.9769230769) $1465.38
costing
Deduct FMOH released from
inventory under
(500 x $ 1.036734694) ($518.37)
absorption costing
Absorption Costing Net operating income (loss) ($6,353)
I ) If produced units exceeds units sold, which method (variable or
absorption costing) would you expect to show the higher operating
income? Why?
When units produced exceeds units sold, Absorption Costing approach would show higher
operating income because fixed manufacturing overhead cost is deferred in inventory under
absorption costing as inventories increase.
Reference
 Managerial Accounting” by Garrison, Noreen and Brewer, 15th
Edition, McGraw-Hill Irwin