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ADMS 2510 Common Final Exam Winter 2005: 13 th April 2005 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 East Sales \$ 12,000,000 Variable costs 4,000,000 Contribution margin \$ 8,000,000 Direct fixed costs 5,000,000 Segment 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.

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Required : Issue 1 : ( 8 marks ) 1a). Compute the asset turnover ratio ( 3 marks ) Asset turnover = sales / assets = \$ 12,000,000 / \$ 6,000,000 = 2 times Or, using average assets: \$ 12,000,000 / \$ 5,000,000 = 2.4 times 1b). Calculate the profit margin ratio ( based on segment income ) ( 2 marks ) Profit margin = income / sales = \$ 3,000,000 / \$ 12,000,000 = 25 % 1c). Calculate the return on investment ( 3 marks ). ROI = income / assets = \$ 3,000,000 / \$ 6,000,000 = 50 % Or, using average assets = \$ 3,000,000 / \$ 5,000,000 = 60 %
Issue 2 : ( 11 marks ) The Cambridge Division of EM & CC manufactures circuit breakers. The company evaluates managers on the basis of both financial and non-financial results. 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 ) Manufacturing cycle efficiency = value added time / total time : 17,500 / 20,000 = 87.5 % 2b). Calculate the process productivity; ( 3 marks ) Process productivity = total units processed / value-added time : 350,000 / 17,500 hours = 20 units per hour 2c). Calculate the process quality yield; ( 3 marks ) Process quality yield = good units / total units processed : 300,000 / 350,000 = 85.7 % 2d). Calculate the throughput per hour; ( 3 marks ) Throughput = good units / total time : 300,000 / 20,000 = 15 units per hour ( Check: Throughput = MCE * PP * PQY = 87.5 % * 20 * 85.7 % = 15 )

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Required : Issue 3 : ( 6 marks ) The President wants to know how the compensation plan that is used to provide annual pay increases to managers should relate to the overall goals and objectives of BPI. 1. A good compensation plan tries to tie together the elements
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