FATİH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT

MAN 306 MANAGERIAL ACCOUNTING

FINAL EXAM

Instructor: Assist. Prof. Ali COSKUN June 6, 2006

(PLEASE CHOOSE FIVE OF THE FOLLOWING QUESTIONS AND ANSWER)

QUESTION 1.

Alexi Company prepared the following absorption-costing income statement for the year ended April 30, 2006.

Sales, (15,000 units) $300,000

Cost of goods sold 160,500

Gross margin $139,500

Selling and administrative expenses 66,000

Operating income $ 73,500

Additional information follows:

Selling and administrative expenses include $2.20 of variable cost per unit sold. There was no beginning inventory, and 17,000 units were produced. Variable manufacturing costs were $9 per unit. Actual fixed costs were equal to budgeted fixed costs.

Required:

Prepare a variable costing income statement for the same period.

QUESTION 2.

The Holiday Card Company, a producer of specialty cards, has asked you to complete several calculations based upon the following information:

Income tax rate 35%

Selling price per unit $10.00

Direct material cost per unit 1.80

Direct labor cost per unit 1.50

Variable manufacturing cost per unit 0.70

Variable non-manufacturing cost per unit 2.90

Manufacturing fixed costs $ 34,500

Non-manufacturing fixed costs $ 26,000

Required:

a. Compute the break-even point in units.

b. Compute the sales dollars necessary to earn an after-tax net income of $10,000.

c. Compute the total units sold to earn an after-tax net income of $20,000.

QUESTION 3.

Smithland Coaster Company is evaluating its ticket prices. It is open during the summer months for 15 weeks. The following information pertains to last year's tourist season. Costs are expected to remain the same for this year.

Average tourists per day on Friday through Tuesday 2,000

Average tourists per day on Wednesday and Thursday 500

Variable operating costs per day when open $3,280

Fixed overhead costs per year $144,000

Marketing costs per year $50,000

Customer service costs per year $6,100

Required:

a. What is the minimum long-run price for tour tickets?

b. Studies have shown that Wednesdays and Thursdays have the fewest tourists. The director wants to increase the attendance on these days to an average of 1,000 tourists. One suggestion the director has received is to lower ticket prices. A special promotion for the discount days will cost $4,200. What minimum ticket price should be charged for the off-peak days?

QUESTION 4.

Flash Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 50,000 units of this part are as follows:

Direct manufacturing costs $84,000

Variable factory overhead 80,000

Fixed factory overhead 50,000

Of the fixed factory overhead costs, $20,000 is avoidable.

Required:

a. Assuming there is no alternative use for the facilities, should Flash take advantage of an offer from a supplier who is willing to sell Flash 50,000 units of the same part for $3.75 per unit?

b. Would your answer to “part a” change if the facilities could be rented for $15,000 a year?

QUESTION 5.

Noel Enterprises has budgeted sales in units for the next five months as follows:

January ..... 6,800 units

February .... 5,400 units

March ....... 7,200 units

April .......... 4,600 units

May ........... 3,800 units

Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

a. How much is the beginning inventory in units for April?

b. How much is the total number of units to be produced in February?

c. How much is the desired ending inventory for March?

QUESTION 6.

Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for $5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average production run of 5,000 units. It normally has four production runs a year, with $400,000 setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds.

A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4,000. Management believes it must lower the price in order to compete. Marketing believes that the new price will increase sales by 25 percent a year. The plant manager thinks that production can increase by 25 percent with the same level of fixed costs. The company currently sells all the Deluxe beds it can produce.

Required:

a. What is the annual operating income from Deluxe at the current price of $5,000?

b. What is the annual operating income from Deluxe if the price is reduced to 4,000 and sales in units increase by 25 percent?

c. What is the target cost per unit for the new price if target profit is 20 percent of sales?

QUESTION 7. The two cases below are independent

A. The Porter Company has a standard cost system. In July the company purchased and used 22,500 kg of direct material at an actual cost of $53,000; the materials quantity variance was $1,875 Unfavorable; and the standard quantity of materials allowed for July production was 21,750 kg.

How much was the materials price variance for July?

B. Borden Enterprises uses standard costing. For the month of April, the company reported the following data:

• Standard direct labor rate: $10 per hour

• Standard hours allowed for actual production: 8,000

• Actual direct labor rate: $9.50 per hour

• Labor efficiency variance: $4,800 F

How much was the labor rate variance for April?