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Exam - Fall 2007 (Solutions)

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)
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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