FATİH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT

MAN 306 MANAGERIAL ACCOUNTING

MIDTERM EXAM

Instructor: ALI COSKUN

Duration: 100 Minutes                                                                                      April 30, 2003

QUESTIONS

QUESTION 1. (25 points) Asel Technology Company is an aircraft producing company. The Company produces and sells one type of product: Regular parts. Management ready to prepare a master budget for the year 2004. The executives forecast the following figures:

 

                                    Beginning                Target                                    

Direct material :           inventory          ending inventory                Costs

   Material no.5               500 kg.                   1000 kg.                   $ 10 per kg.    

   Material no.6             1000 kg.                    700 kg.                    $ 15 per kg.     .

 

Direct labor cost is $ 30 per hour

Variable manufacturing overhead is allocated at the rate of $10 per direct labor hour.   

Fixed manufacturing overhead is forecast to be $11,400,000 for 2004.

Target ending (31 December 2004) inventory of regular parts: 3,000 units.               

Beginning (1 January 2004) inventory of regular parts:           8,000 units                

Budgeted units to be sold: 100,000 units at $150 per unit.

The inventoriable cost per regular part in 2003 is $400.

Inventory is costed using using First in First out method (FIFO).

 

Content of each finished good of regular part:  

Direct material no.5       5 kg. at $10 per kg.                

Direct material no.6      10 kg. at $15 per kg.                

Direct labor                    3 hours             

 

Required:

1.       Prepare the production budget.

2.       Prepare the direct materials usage budget.

3.       Prepare the ending inventory budget.

 

 

QUESTION 2. (25 points) Prior Company design and manufactures parts for special machinery. The static budget for the year ended December 31, 2002 and the actual results incurred in 2002 are given below:

 

                                           Actual Results                           Static Budget

------------------------------------------------------------------------------------------------

Units Sold                                     80,000                                      85,000

                                          ------------------                           -----------------

Revenues                               $ 1,665,000                               $ 1,700,000

Variable costs:

  Direct materials          495,000                         510,000

  Direct labor                189,000                         170,000

  Variable MOH             144,000                         119,000

Total variable cost                        828,000                                     799,000

Contribution margin                     837,000                                     901,000

   Fixed costs                               830,000                                     850,000

Operating Income                        $ 7,000                                    $ 51,000

 

Required:

1.       Prepare a flexible budget for 2002.

2.       Find the flexible budget variances for revenue, variable costs and fixed costs.

3.       Find the total sales volume variance.

4.       Find the total static budget variance.

QUESTION 3. (25 points) Light Company prepared the following statement of standard costs at the beginning of the year:

Standard Cost per unit:

            Direct material input    10 kg. at $25 per kg.

            Direct labor input         5 hours at $30 per labor hour

            Variable overhead         $ 20 per direct labor hour

            Fixed overhead              $ 37,000 per month.

It was budgeted that 1,000 units would be produced and sold each month.

During July, the following results were reported:

            Direct material used     $ 230,000 (10,000 kg. at $23 per kg.)

            Direct labor cost           $ 133,920 (4,320 hours at $31 per hour)

            Variable overhead         $ 88,000

            Fixed overhead              $ 36,500

The actual units produced and sold during July was 900.

There were no beginning inventory of direct materials and finished goods.

 

Required:

1.       Determine the direct materials price and efficiency variances.

2.       Determine the direct labor rate and efficiency variances.

3.       Determine the variable manufacturing overhead spending and efficiency variances.

 

 

QUESTION 4. (20 points) Sweaty Travel intends to sell his customers a special round-trip airline ticket package. He is able to purchase the package from the airline carrier for $450 each. The airline intends to reimburse Sweaty Travel for any unsold ticket packages. The round-trip tickets will be sold for $600 each. Fixed administrative and selling expenses are $3,000 per month. Assume that currently number of packages to be sold is expected to be 40 per month.

 

Required:

1.       How many ticket packages will he need to sell in order to break even?

2.       How many units would have to be sold to yield a target income of $6,000?

3.       If Sweaty Travel spends $2,000 to advertise, the number of packages sold is expected to increase to 55. Should Sweaty advertise or not?

4.       If Sweaty Travel does not advertise but reduces selling price to $550, the number of packages sold is expected to be 50. Should Sweaty decrease the price or not?

 

 

QUESTION 5. (15 points) Cost volume profit (CVP) Graph for Maximum Company is given below. There are three alternative cost structure options for the company. Selling price of the product will be same under all of the options.

 

			Required:   1.       If the company anticipates selling 50 units which option should be chosen? 2.       If the company anticipates selling 150 units which option should be chosen? 3.       If the company anticipates selling 250 units which option should be chosen?