ADMS3510F.FL04

ADMS3510F.FL04 - 1 YORK UNIVERSITY Atkinson Faculty of...

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Unformatted text preview: 1 YORK UNIVERSITY Atkinson Faculty of Liberal & Professional Studies ADMS 3510 3.0 Final Examination December 20 th 2004 7:00 to 10:00 pm Note: Answers are provided at end of paper. Question 1: (25 marks - allow 45 minutes) The Sinclair Co sells 300,000 of subunit #23 to the automotive and truck industry, Sinclair has a capacity of 110,000 machine-hours and can produce 3 subunits per machine-hour. Subunit #23’s contribution margin is $8. Sinclair sells only 300,000 subunits because 30,000 subunits (10% of good subunits) need to be reworked. It takes one machine-hour to rework 3 subunits so that 10,000 hours of capacity are lost in the rework process. Sinclair’s rework costs are $210,000. Rework consists of: Direct materials and direct rework labour (variable costs): $3 per unit Fixed costs of equipment, rent and overhead allocation: $4 per unit Sinclair’s process designers have come up with a modification that would maintain the speed of the process and would ensure 100% quality and no rework. The new process would cost $315,000 per year. The following additional information is available: 1) The demand for Sinclair’s subunit #23 is 370,000 per year. 2) The Jackson Corporation has asked Sinclair to supply 22,000 #XL5 subunits if Sinclair implements the new design. The contribution margin per #XL5 subunit is $10. Sinclair can make two #XL5 subunits per machine-hour with 100% quality and no rework. Required: a) Suppose Sinclair’s designers implemented the new design. Should Sinclair accept Jackson’s order for 22,000 #XL5 subunits? Explain why or why not. b) Should Sinclair implement the new design? c) What non-financial and qualitative factors should Sinclair consider in deciding whether to implement the new design? 2 Question 2: (25 marks - allow 45 minutes) McHearty Co. makes two flavours of soup: vegetable and chicken. These are sold to restaurants in boxes of 24 cans each. The budget for October was as follows: Vegetable Chicken Selling price, per box: $10 $12 Variable cost per box: 4 8 Fixed cost per box: 2 2 Sales volume: 20,000 boxes 30,000 boxes Actual results for October were as follows: Vegetable Chicken Selling price, per box: $11 $12 Variable cost per box: 4.50 9 Fixed cost per box: 2.50 2.50 Sales volume: 24,000 boxes 36,000 boxes The original budget was set on the basis of the total market for soup being 5 million boxes and McHearty Co getting a 1% market share. Actual total market sales were as forecast, 5 million boxes. Required: Calculate the following variances (for each product and in total where appropriate): a) flexible budget variance; b) sales volume variance; c) sales quantity variance; d) sales mix variance; e) market size variance; f) market share variance. 3 Question 3: Case SBS Books: (50 marks - allow 90 minutes) SBS is one of North America’s largest book retailers. It was formed in the 1970s by the amalgamation of two established booksellers that had in total, 90 stores in regional malls. Subsequently SBS expanded into a wider variety of retail outlets. Subsequently SBS expanded into a wider variety of retail outlets....
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This note was uploaded on 10/02/2010 for the course ADMS 3510 taught by Professor .... during the Spring '10 term at York Tech.

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ADMS3510F.FL04 - 1 YORK UNIVERSITY Atkinson Faculty of...

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