Recent Question/Assignment

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Assessment Weight: 50 total marks
• All questions must be answered by using the answer boxes provided in this paper.
• Completed answers must be submitted to Blackboard by the published due date and time.
Submission instructions are at the end of this paper.
This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit

Assessment Design – Adapted Harvard Referencing
Holmes has been implementing as a pilot program using a revised/adapted Harvard approach to referencing. The following guidelines apply:
• Reference sources in assignments are limited to sources which provide full text access to the source’s content for lecturers and markers.
• The Reference list should be located on a separate page at the end of the essay and titled: References.
• It should include the details of all the in-text citations, arranged alphabetically A-Z by author surname. In addition, it MUST include a hyperlink to the full text of the cited reference source.
For example;
P Hawking, B McCarthy, A Stein (2004), Second Wave ERP Education, Journal of Information Systems Education, Fall,
• All assignments will require additional in-text reference details, which will consist of the surname of the author/authors or name of the authoring body, year of publication, page number of content, paragraph where the content can be found.
For example;
“The company decided to implement a enterprise wide data warehouse business intelligence strategies (Hawking et al, 2004, p3(4)).”

Non-Adherence to Referencing Guidelines
Where students do not follow the above guidelines:
1. Students who submit assignments which do not comply with the referencing guidelines will receive a 10% penalty.
2. Students who submit assignments in which the citations are “fake” will be reported for academic misconduct.
Question 1 (7 marks)
Part A
Asco Company has a relevant range of production between 15,000 and 30,000 units. The following cost data represents average variable costs per unit for 25,000 units of production.
a) If 25,000 units are produced, what is the variable cost per unit? (1 mark)
b) If 16,000 units are produced, what is the variable cost per unit? (0.5 mark)
c) Comment briefly on your answers to (a) and (b). (1 mark)
d) If 18,000 units are produced, what are the total variable costs? (1 mark)
Part B
GEM Ltd leases a photocopy machine with terms that include a fixed fee each month plus a charge for each photocopy made. GEM made 5,000 copies and paid a total of $600 in January. In April, they paid $400 for 3,000 copies.
a) What is the variable cost per copy if GEM uses the high-low method to analyze costs? (1.5 marks)
b) How much would GEM Ltd pay if it made 7,500 copies? (Hint: Need to solve for Fixed cost) (2 marks)
ANSWER: ** Answer box will enlarge as you type
Question 2 (11 marks)
Henry’s Kitchens makes two types of sandwich makers: Basic and Deluxe. The company expects to manufacture 70,000 units of Basic, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30,000 units of Deluxe, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Basic will use 140,000 machine hours and Deluxe will require 60,000 machine hours. Historically, the company has used the traditional overhead allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown:
Machine setups $ 90 000
Machine processing 4 000 000
Material requisitions 100 000
Total overhead $ 4 190 000
The cost driver for each cost pool and its expected activity is shown:
Basic Deluxe Total
Machine setups 100 200 300
Machine hours 140 000 60 000 200 000
Parts requisitions 80 120 200
a) What is the per-unit cost for each product under the traditional overhead allocation method? (3 marks)
b) What is the per-unit cost for each product under ABC costing? (4 marks)
c) Briefly comment on the overhead applied per unit under the two overhead allocation methods. i.e. How much was overhead under or overapplied for each product? Further, would you recommend a change to ABC costing for Henry’s Kitchens? Why or why not? (4 marks)
Question 3 (7 marks)
Relevant data from Picta Company’s operating budgets are presented below. The company’s financial year ends on 30 June.

Quarter 1 Quarter 2
Sales $248,470 $251,539
Direct material purchases 120,295 128,832
Direct labor 76,553 74,289
Manufacturing overhead 26,000 24,400
Selling and administration expenses 33,500 33,500
Depreciation included in selling and administration expenses

Collection from customers 230,524 220,116
Cash payments for purchases 114,345 118,346
Additional data:
Equipment was sold in July for $8,000 and $4,500 in November. Dividends of $5,500 were paid in August. The beginning cash balance was $80,395 and a required minimum cash balance per quarter is $60,000.
The company has a 15% open line of credit for $70 000 with their bank.
a) Use this information to prepare a cash budget for the first two quarters of the year. (5 marks)
bi) Briefly comment on Picta Company’s expected cashflow position in the first two quarters of the year. (2 marks)
Question 4 (7 marks)
The income statement for Forklift Electrical Ltd for two years are shown below:
a) Determine the operating income (loss) (dollars) for each year. (1 mark)
b) The company made a strategic decision to invest in additional assets in the current year. These
amounts are provided. Using the amounts of the total assets as the investment base, calculate the return on investment. (1 mark)
c) Was the decision to invest additional assets in the company successful? Explain. (1 mark)
d) Assuming an 8% cost of capital, calculate the residual income for each year. (2 marks)
e) Would the management of Forklift Electrical Ltd have been more likely to accept the investment opportunity if the residual income had been used as a performance measure instead of ROI? Explain your answer. (2 marks)
Question 5 (11 marks)
Micol & Co. Ltd sells a single product, baby hamper, with a selling price of $150 and variable costs per baby hamper of $100. The company’s monthly fixed expenses are $200,000.
a) What is the company’s break-even point in units? (2 marks)
b) What is the company’s margin of safety in dollars, assume sales is expected to be $800,000? (2 marks)
c) How many baby hampers will Micol & Co. Ltd need to sell (in sales dollars) in order to realize a target profit of $500,000? (2 marks)
d) Construct a contribution margin income statement for the first month (in July) that reflects $2,400,000 in sales revenue for Micol & Co. Ltd. (3 marks)
e) Provide two suggestions to Micol & Co. Ltd on how it can increase profit in subsequent months? (2 marks)
Question 6 (7 marks)
Technology Inc. Ltd sells desktop computer printers for $65 per unit. Unit product costs are:

A special order to purchase 10,000 desktop computer printers has recently been received from another company, and Technology Inc. has the idle capacity to fill the order. The company will incur an additional $1.50 per printer for additional labor costs due to a slight modification the buyer wants to be made to the original product. One-third of the manufacturing overhead costs are fixed and will be incurred no matter how many units are produced. $2,100 of existing fixed administrative costs will be allocated to the order as “part of the cost of doing business”.
a) Which of the data above should be ignored in making the special-order decision? For what reason? (2 marks)
b) Should Technology Inc. Ltd accept the order if the buyer offers $38 per unit for 10,000 desktop computer printers? (3 marks)
c) What factors must any company consider before accepting a special-order contract? (2 marks)
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