ADMS2510F.FL04 - ADMS 2510 Common Final Exam Fall 2004:...

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1 ADMS 2510 Common Final Exam Fall 2004: 14 th Dec 2004 Note: Answers are provided at the end of the paper. Question 1 (25 marks: allow about 45 minutes): You have been hired by George Snoopy, President of Snoopy Ceramics, to provide advice in three areas. First: Snoopy Ceramics experienced the following gas bills and kiln hours for January through June of the current year: Month Kiln hours Gas bill Jan. 220 $ 5,200 Feb. 110 3,000 March 300 8,500 Apr. 100 3,500 May. 176 5,500 June 100 3,500 Required: (a) Using the high-low method, determine the fixed gas cost and the variable gas cost per kiln hour (5 marks) (b) Assuming that the company plans to use 220 kiln hours in September, predict the gas bill for that month. (5 marks) Secondly: in its first year of operations, Snoopy Ceramics produced 1,000,000 units and sold 850,000 units. Cost component information for the first year was as follows. Production costs : Direct material $ 20 per unit Direct labour $ 10 per unit Variable manufacturing overhead $ 15 per unit Fixed factory overhead $ 2,000,000 Selling and administrative expense: Variable $ 5 per unit Fixed $ 800,000
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2 The firm maintains no Work in Process Inventory, and the average unit selling price was $53. The firm uses variable costing. Required: Provide George with the following information: (c) Prepare the income statement for the year (10 marks) Thirdly: given the cost data George now has, he is considering outsourcing a component of the production operation. d) Required: Briefly and in “point form” explain why George might decide not to outsource the component even though to do so would reduce costs (5 marks)
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Question 2 (25 marks: allow about 45 minutes): Parkhurst Manufacturing Inc. a clothing manufacturer has a sales forecast for the second quarter of 2005 for one major product line: Month Units April 12,000 May 14,500 June 16,000 Finished Goods Inventory at the end of each month is expected to equal 20% of estimated sales for the next month. Assume both July and August sales are 12,000 units. At March 31 st (the end of the first quarter 2005), there were 2,000 finished units on hand. Four units of cotton and six units of wool are needed to produce a finished unit. Materials equal to one-half of the next month's production requirements are expected in materials inventory at the end of each month. This requirement has consistently been met. Required:
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ADMS2510F.FL04 - ADMS 2510 Common Final Exam Fall 2004:...

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