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Exam - Fall 2007 (Solutions) - MGT223 Final Exam Fall 2007...

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MGT223 Final Exam Fall 2007 Solutions Part A – 30 marks, 2 marks each 1. C 2. A 3. A 4. B 5. B 6. C 7. D 8. C 9. A 10. D 11. D 12. B 13. D 14. D 15. B ** Explanation for M.C. #15 EUP DM CC Total S/C 1,600,000 1,600,000 1,600,000 EWIP 400,000 (.40, .60) 160,000 240,000 Total EUP 1,760,000 1,840,000 Dollars $ 880,000 $ 148,000 $ 368,000 $ 552,000 Cost / EUP $ 0.50 $ 0,30 $0.80 Units sold = 1,600,000 – 600,000 = 1,000,000 Cost per unit = $ 0.80 Cost of goods sold = 1,000,000 x $0.80 = $800,000
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Part B Problem 1 ( 10 marks) Case A Case B Case C Case D Unit sales 700 300 6,000 29,000 Sales revenue $42,000 $1,500 $162,000 $58,000 Variable cost per unit $45 $1 $15 $1 Contribution Margin $10,500 $1,200 $72,000 $29,000 Fixed costs $7,500 $1,100 $60,000 $30,000 Operating income $3,000 $100 $12,000 -$1,000 Unit contribution margin $15 $4 $12 $1 Break-even point (units) 500 275 5,000 30,000 Margin of Safety 200 25 1,000 -1,000 Case A: Price = $42,000/700 = $60; Unit C. M. = $60 - $45 = $15; (.5 mark) Total C. M. = ($15) x (700) = $10,500; (.5 mark) Op. Inc. = $10,500 - $7,500 = $3,000; (.5 mark) B. E. point = $7,500/$15 = 500; (.5 mark) Margin Safety = 700 - 500 = 200; (.5 mark) Case B: Revenue = $1,200 + (300) x ($1) = $1,500; (.5 mark) Fixed Costs = $1,200 - $100 = $1,100; (.5 mark) Unit C. M. = $1,200/300 = $4; (.5 mark) B. E. point = $1,100 / $4 = 275; (.5 mark) Margin Safety = 300 - 275 = 25; (.5 mark) Case C: Unit Sales = 5,000 + 1,000 = 6,000; (.5 mark) Price = ($60,000/5,000) + ($15) = $27; Revenue = ($27) x (6,000) = $162,000; (.5 mark) C. M. = $162,000 - (6,000) x ($15) = $72,000; (.5 mark) Op. Inc. = $72,000 - $60,000 = 12,000; (.5 mark) Unit C. M. = $27 - $15 = $12; (.5 mark) Case D: Unit Sales = 30,000 - 1,000 = 29,000; (.5 mark) Fixed Costs = (30,000) x ($1) = $30,000; (.5 mark) Price = $58,000/29,000 = $2; V. C. per unit = $2 - $1 = $1; (.5 mark) C. M. = ($1) x (29,000) = $29,000; (.5 mark) Op. Inc. = $29,000 - $30,000 = -$1,000; (.5 mark)
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Part B – Problem 2 (7 marks) a) The analysis of the alternatives follows below: * 40% x $20 The company should make the part rather than buy it from the outside supplier because it costs $4 less under that alternative.
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