3510 sample Mid-term 1 Solutions

3510 sample Mid-term 1 Solutions - Name. Student #....

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Name……………………………………. . Student #. ................................................... Section: A: Tuesday 7-10 B: Friday: 2:30 – 5:30 C: Tuesday 4-7 YORK UNIVERSITY Atkinson School of Administrative Studies ADMS3510 3.0 Mid Term Exam 1, Fall 2009 Sunday October 25 th – 10:00 am – 12 noon (2 hours) Instructions This is a closed book examination and no collaboration is allowed. There are 4 equally weighted questions: attempt them all. Put your name and student number at the top of the page. Answer each question on the examination paper, and on the back of a page if necessary. You may write with a pencil or pen. Two hours are allowed to complete the exam. If you leave early, please respect your fellow students by leaving quietly. Place photo identification on your desk during the examination to facilitate verification. Good luck. 1
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Question 1: The Maybeline Co manufactures 5 different products: details as follows: Product: A B C D E Demand: 200 1,000 1,000 500 2,000 Selling Price: $2,350 $1,300 $1,000 $870 $425 Raw materials: $1,000 $ 500 $ 300 $400 $200 Direct labour: 700 500 200 200 100 Variable overhead: 250 100 250 150 50 Fixed overhead: 250 100 250 150 50 Total cost: $2,200 $1,200 $1,000 $900 $400 Product profitability: $ 150 $ 100 $ nil $ (30) $ 25 Machine hours: 5 2 5 3 1 Labour hours: 35 20 4 10 5 The total machine hours available amount to 6,000 per month. Required: a) If selling prices cannot be changed and the number of machine hours cannot be increased, calculate an optimal production plan for the next month. (20 marks) b) Ignoring the restrictions in (a) above, list three ways that the company could respond to this situation in order to increase profitability. (5 marks). 2
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Solution: (a) Product: A B C D E Demand: 200 1,000 1,000 500 2,000 Selling Price: $2,350 $1,300 $1,000 $870 $425 Raw materials: $1,000 $ 500 $ 300 $400 $200 Direct labour: 700 500 200 200 100 Variable overhead: 250 100 250 150 50 Total variable cost: $1,950 $1,100 $ 750 $750 $350 Contribution margin:$ 400 $ 200 $ 250 $120 $ 75 (10 marks) Machine hours: 5 2 5 3 1 CM/Mc hour: $ 80 $ 100 $ 50 $ 40 $ 75 Rank order: 2 1 4 5 3 (5 marks) Maybeline should prioritize production, starting with product B, then A, E, C and finally D: Product: Demand Machine Machine Cumulative: hours/unit: hours used: B 1,000 2 2,000 2,000 A 200 5 1,000 3,000 E 2,000 1 2,000 5,000 C 200 5 1,000 6,000 There will be unsatisfied demand for 800 units of C and 500 units of D (20 marks) 3
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(b) Possible actions that could increase profitability: (any three of the following: 2 marks for each of the first two and 1 for the third: total 5 marks) 1: increase prices to the point where demand and capacity are in balance;
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3510 sample Mid-term 1 Solutions - Name. Student #....

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