FATİH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT

MAN 306 MANAGERIAL ACCOUNTING

MIDTERM EXAM II

Instructor: ALI COSKUN

Duration: 75 Minutes May 17, 2004

QUESTION 1.

Ceylan Corporation has three departments. Data for the most recent year is presented below:

Florya Silivri Avcılar

Sales $370,000 $180,000 $100,000

Variable expenses 108,000 82,000 34,000

Fixed expenses:

Unavoidable 96,000 30,000 27,000

Avoidable 116,000 106,000 55,000

Required:

a. Compute the operating income of the company.

b. Compute the contribution margin and operating income of each department.

c. Should any department(s) be eliminated? Which one(s) and why?

QUESTION 2.

Baysal Auto Company manufactures a part for use in its production of automobiles. When 10,000 items are produced, the costs per unit are:

Direct materials $12

Direct manufacturing labor 50

Variable manufacturing overhead 24

Fixed manufacturing overhead 42

Total $128

Another company has offered to sell to Baysal Auto Company 10,000 units of the part for $118. The plant facilities could be used to manufacture another part at a savings of $130,000 if Baysal accepts the offer. In addition, $15 per unit of fixed manufacturing overhead on the original part would be eliminated.

Required:

a. What is the relevant per unit cost for the original part?

b. Which alternative is best for Baysal Company? Make or buy?

QUESTION 3.

Asil Company produces wood statues. The following information has been provided by management:

Actual sales 80,000 statues

Budgeted production 100,000 statues

Direct materials costs $5.00 per statue

Fixed manufacturing overhead $2.00 per statue

Variable manufacturing overhead $1.50 per statue

Variable administrative costs $2.50 per statue

Selling price $20.00 per statue

Required:

What is the total throughput contribution?

QUESTION 4.

Karsan Company sells its products for $66 each. Unit manufacturing costs are: direct materials, $12.00; direct manufacturing labor, $18.00; and variable manufacturing overhead, $9.00. Total fixed manufacturing overhead costs are $180,000 and marketing expenses are $6.00 per unit plus $60,000 per year. The current production level is 25,000 units, although only 20,000 units are anticipated to be sold.

Required:

a. Prepare an income statement using variable costing.

QUESTION 5.

Furkan Company, a producer of oak lumber for door companies, has an offer to supply a special load of lumber for an exporter.

It will take three months to fill the order of 1,000,000 board feet. During the three months, half of its production capacity will be utilized for the special order.

The total fixed costs for the three months will be $3,000,000. Variable costs per board feet will be $1.25

The marketing manager believes that half of the capacity taken up by the special order can be utilized with regular business which will generate income of $120,000.

Required:

Determine the minimum price that needs to be charged for the special order.

QUESTION 6.

Sesli Avionics currently sells radios for $1,800. It has costs of $1,400.

A competitor is bringing a new radio to market that will sell for $1,600.

Management believes it must lower the price to $1,600 to compete in the market for radios.

Marketing believes that the new price will cause sales to increase by 10 percent, even with a new competitor in the market.

Sesli's sales are currently 1,000 radios per year.

Required:

a. What is the target cost if target profit is 25 percent of sales?

b. What is the target selling price if costs cannot be reduced and target profit is changed to 20 percent of sales?

c. What is the change in operating income if marketing is correct and only the sales price is changed?

d. What is the target cost if the company wants to maintain its same income level, and marketing is correct?