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# Exam161.10 - Prof Salem A Helles Accounting Department...

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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 ............................... ......... \$3,000,000 Less variable expenses … ……… 1,800,000 Contribution margin 1,200,000 Less fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs ............. \$700,000 Depreciation ............................... 300,000 Total fixed expenses .................... 1,000,000 Net operating income .................. \$200,000 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 : Gaza Farms produces strawberries and raspberries. Annual fixed costs are \$ 15,600. The cost driver for variable costs is pints of fruit produced. The variable cost is \$0.75 per pint of strawberries and \$ .95 per pint of raspberries. Strawberries sell for \$ 1.10 per pint, raspberries for \$ 1.45 per pint. Two pints of strawberries are produced for every pint of raspberries. Required: 1- Compute the number of pints of strawberries and the number of pints of raspberries produced and sold at the break-even point. 2- Suppose only strawberries are produced and sold. Compute the break- even point in pints. 3- Suppose only raspberries are produced and sold. Compute the break- even point in pints. Page 1 of 7     نمحرلا هللا مسب   ميحرلا Prof. Salem A Helles Advanced Managerial Accounting Accounting Department Faculty of Commerce Final Exam Date:30 Jan. 2010   Master of Business Administration Master of Accounting and Finance : يعماجلا مقرلا : بلاطلا مسا

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Question Three : 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 Four : FG Company makes two products, P1 and P2. Data regarding the two products follow : Direct Labor- Hours per Unit Annual Production P1 0.80 10,000 units P2 0.40 40,000 units Additional information about the company follows : a. P1 require \$32 in direct materials per unit, and P2 require \$18 . b. The direct labor wage rate is \$15 per hour . c. P1 are more complex to manufacture than P2 and they require special equipment .
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Exam161.10 - Prof Salem A Helles Accounting Department...

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