Exam189.10 - Prof. Salem A Helles Advanced Managerial...

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Unformatted text preview: Prof. Salem A Helles Advanced Managerial Accounting Accounting Department Faculty of Commerce Final Exam Date: Sat., 4 Sept. 2010 Master of Business Administration Master of Accounting and Finance : : ANSWER EIGHT QUESTIONS ONLY: (7.5 Mark for each Question ( Question One: Gaza Company is studying a project that would have an eight- years life and require a $2,400,000 investment in equipment. At the end of eight years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows : Sales ............................... ......... $ 3 , 0 0 0, 0 0 0 Less variable expenses 1,800,000 Contribution margin 1 , 2 0 0, 0 0 0 Less fixed expenses : Advertising, salaries, and other fixed out-of-pocket costs ............. $700,000 Depreciation ............................... 300,000 Total fixed expenses .................... 1 , 0 0 0, 0 0 0 Net operating income .................. $2 0 0 , 0 0 0 The company's discount rate is 12% Required : 1- Compute the project's net present value. Is the project acceptable . 2- Find the project's internal rate of return to the nearest whole percent . 3- Compute the project's payback period . 4- Compute the project's accounting rate of return . Question Two: LG Products markets two computer games: A and B. A contribution format income statement for a recent month for the two games appears below: A B Total Sales $30,000 $70,000 $100,000 Less variable expenses 20,000 50,000 70,000 Contribution margin $10,000 $20,000 30,000 Less fixed expenses 24,000 Net operating income $6,000 Required: 1. Compute the overall contribution margin (CM) ratio for the company. 2. Compute the overall break-even point for the company in sales dollars. 3. Compute the break- even point for each computer games in sales dollars. Question Three: Sea Corporation makes a single product-a fire-resistant commercial filing cabinet-that it sells to office furniture distributors. The company has a simple ABC system that it uses for internal decision making. The company has two overhead departments whose costs are listed below : Manufacturing overhead $500,000 Selling and administrative overhead 300,000 Total overhead costs $800,000 The company's ABC system has the following activity cost pools and activity measures : Activity Costs Pool Activity Measure Assembling units ........... Number of units Processing orders .......... Number of orders Supporting customers ....... Number of customers Other . . . . . . . . . . . . . . . . . . . Not applicable Costs assigned to the "Other" activity cost pool have no activity measure; they consist of the costs of unused capacity and organization-sustaining costs-neither of which are assigned to orders, customers, or the product ....
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Exam189.10 - Prof. Salem A Helles Advanced Managerial...

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