8/3/2019 ADMS 2510 Final Exam W 2005

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Q1Name:______________________________

Q2Student Number: _____________________

Q3Section:_____________________________

Q4Total

YORK UNIVERSITYAtkinson Faculty of Liberal & Professional Studies

ADMS2510 3.0 Final ExaminationWinter 2005: 13th April 2005: 7-10 pm

Instructions:

A: This is a closed book examination and no collaboration is allowed.

B: There are four compulsory questions worth 25 marks each.C: Put your name and student number at the top of this page.D: Answer each question on the examination paper.E: You may write with a pencil or a pen.F: Place photo identification on your desk during the examination to facilitate

verification.G: Marks will be posted to the course website as soon as they are available.H: You are allowed to use a simple calculator.I: You are allowed to use a dictionary.J: Show all workings.

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Question 1: (25 marks: allow about 45 minutes):

You have been hired by the President of Electric Motors & Computing Corp.(EM&CC) to provide advice on 3 issues. EM&CC has a number of divisions,each with their own manager.

The following information is taken from the 2003 accounting records of EastCoast Marketing, a division of EM&CC.

Sales $12,000,000Variable costs 4,000,000Contribution margin $ 8,000,000Direct fixed costs 5,000,000Segment income $ 3,000,000

=========

At the beginning and end of 2003, East Coast Marketing had total assets of

$6,000,000 and $4,000,000 respectively.

Required: Issue 1: (8 marks)

1a) Compute the asset turnover ratio (3 marks)

1b) Calculate the profit margin ratio (based on segment income) (2 marks)

1c) Calculate the return on investment (3 marks).

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Issue 2: (11 marks):

The Cambridge Division of EM & CC manufactures circuit breakers. Thecompany evaluates managers on the basis of both financial and non-financialresults. The following data relate to the throughput of the Cambridge plant:

Units started into production: 350,000;Good units completed: 300,000;Total production hours: 20,000;Value-added production hours: 17,500.

Required:

2a) Calculate the manufacturing cycle efficiency (2 marks):

2b) Calculate the process productivity (3 marks);

2c) Calculate the process quality yield (3 marks):

2d) Calculate the throughput per hour (3 marks):

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Required: Issue 3: (6 marks)

The President wants to know how the compensation plan that is used to provideannual pay increases to managers should relate to the overall goals andobjectives of EM & CC.

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Question 2 (25 marks: allow about 45 minutes)

The Gasket Division is an autonomous division of Precision Parts Inc. It isproducing 120,000 gaskets per month, which represents full capacity utilization.All its production is sold to outside buyers. The Rebuilt Engine Division of

Precision Parts Inc is negotiating to buy 20,000 gaskets from the GasketsDivision. These are in various sizes and shapes, but one commonly used gasket(type XL5) is being used to set the transfer price. The outside purchase price ofXL5 is $7.50. The Gasket Divisions cost estimates for XL5 are as follows:

Direct materials: $2.00Direct labour: 1.00Fixed manufacturing overhead: 0.60Variable selling costs: 1.80Fixed selling costs: 0.80Fixed administrative costs: 0.30

The variable selling costs are mostly commission paid to sales representatives.This would not be incurred on an internal sale.

Required:

a) What would be a fair transfer price for the Gasket Division to supplyproduct XL5 to the Rebuilt Engine Division (explain why it is fair)? (5marks)

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b) What would be a fair transfer price for the Rebuilt Engine Division to buyproduct XL5 from the Gasket Division (explain why it is fair)? (5 marks)

c) Should the management of Precision Parts Inc. take any action in respectof the transfer price or the sourcing of these gaskets, and if so, what and why? (5marks)

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d) If the Gasket Division had excess capacity, in what ways would youranswers to (a) (b) and (c) above change? (5 marks)

e) Define an avoidable cost, and give one example (5 marks)?

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Question 3: (25 marks: allow about 45 minutes)

Kline Co. makes a product that has a variable production cost of $15 and aselling price of $65. Variable selling costs per unit are $7.50. Fixedmanufacturing costs total $250,000 and fixed selling costs total $175,000. The

companys tax rate is 40%.

The product requires 10 kg of steel. Steel costs $1.50 per kg. The productionplan for the next three months is:May: 12,000 units;June: 15,000 units;July: 20,000 units.

They always plan to have enough raw materials inventory on hand at the start ofeach month to manufacture all of that months output.

Required:

a. Kline Co. wants to earn $212,500 before taxes. How many units must itsell? (5 marks)

b. Kline Co. wants to earn $255,000 after taxes. How many units must it sell?(5 marks)

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c) What is the cost of raw material budgeted to be purchased in the month ofJune? (5 marks)

d) If normal production is 12,500 kg per month, what is the standardmanufacturing cost per unit produced? ( 5 marks)

e) If, in the month of May actual production was 10,000 units, and 100,000kg of steel costing $180,000 was used, what was the material pricevariance? (5 marks)

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Question 4: (25 marks: allow about 45 minutes)

Chips For You manufactures microchips for computers. They use the weightedaverage method of process costing. All their manufacturing activities are treatedas a single process for accounting purposes.

The following data refers to the first two months of 2005:

January February

Direct material used: $420,000 $420,000Direct labour incurred: 380,000 380,000Total manufacturing costs: $800,000 $800,000

There was no WIP inventory at the beginning of January. In January 10,000chips were started into production and 10,000 good chips were produced and

sold. There was no closing inventory at the end of January.

There was no opening WIP inventory at the beginning of February. In February10,000 chips were started into production, but only 9,000 were completed. Theremaining 1,000 chips were complete in respect of materials, but only 50%complete in respect of conversion costs.

Required:

a) Prepare a production report for January 2005 (10 marks)

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b) Prepare a production report for February 2005 (15 marks)