294 MIDTERM PRACTICE 1 (with solutions)

294 MIDTERM PRACTICE 1 (with solutions) - Sauder School of...

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Sauder School of Business Mid-term Examination Commerce 294 Name: ....................................................... Signature: . ....................................................... Student number: ...................................... Time: 120 minutes Total Marks: 109 This examination booklet contains thirteen pages (including this page). Check to ensure this paper is complete. No programmable calculators are permitted. Please show all your calculations in an orderly format for part marks. Time management is crucial. Be sure to answer each question. No questions will be permitted during this examination. If you need to make an assumption, state it and continue. Read the questions carefully before making any assumptions. At the end of the examination hand your exam paper directly to an invigilator. 1

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Question 1 (15 marks, suggested time 15 minutes) Cost Behavior Kobe Company’s total overhead costs are presented below: Week Assembly Hours Total Overhead Costs First 25,000 \$87,000 Second 27,500 89,900 Third 20,000 75,100 Fourth 23,500 79,050 Fifth 18,000 70,850 Sixth 35,000 110,800 A breakdown of the third week’s overhead cost is as follows: Cost Description Amount Utilities \$26,000 Factory Rent 14,000 Equipment Depreciation 6,000 Janitorial Services 29,100 Kobe rents its factories on a monthly basis. The utilities are directly related to assembly time (production). The straight-line method is employed to depreciate the equipment based on the estimated useful life. Janitorial services consist of one person on staff, plus supplies required for cleaning the equipment. Required: a. Estimate the janitorial service cost for week four. (6 marks) 2
b. i) What janitorial service cost would you expect to be incurred at an operating level of 22,500 assembly hours? (4 marks) ii) What will be the total overhead cost expected at 22,500 assembly hours? (3 marks) c. In week 7, there could be a strike which would significantly reduce the activity level to 8,000 assembly hours. Can you use all the available information to estimate the total overhead cost in the case that a strike occurred? Explain. (2 marks) 3

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Question #2 (44 marks, suggested time 44 minutes) CVP Farmer Dell (Dell) has a very large pig and poultry farm in Langley. The following is a summary of some of the data for an average year of farming: Pigs Chickens Number of animals sold per year # 2,000 # 18,000 Average sales price per animal \$150 \$ 8 Total feed cost per year \$ 50,000 \$ 19,800 Purchase price per baby animal \$12 \$ 0 . 50 “De-worming” shot per animal, per year \$ 8 0 Butcher costs \$ 40,000 \$13,500 Rental of feeding machines per year \$ 3,000 \$ 2,400 Dell is presently almost at capacity. There is capacity for 200 more pigs or 1,200 more chickens. A pig uses six times more space than a chicken. Based on the acreage, Dell has hired three workers who are each paid a salary
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294 MIDTERM PRACTICE 1 (with solutions) - Sauder School of...

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