Managerial Accounting, writing homework help
This is a mangerial accounting
KSB 6
31
Name__________________________________
Comprehensive Examination
(
10
0 points
–
28% of Course Grade
)
Fall 2016
AUID#_________________________________
This examination is a “take
at
home” examination. You must complete the examination on
an individual basis. You may use your text, your notes, and the materials in the course
Learning Management System in completing the examination requirements. No other
sources may be used.
Your i
nstructor has the right to process examination papers through SafeAssign which is a
software program used by American University to detect potential plagiarism in
assignments submitted for credit.
By completing and submitting this exam
ination
, you have at
tested that you have completed
this exam
ination
in accordance with the above instructions and have abided by the
American University Academic Integrity Code.
The completed examination is due not later than 11:59 pm on
Sunday, December 11th
.
Your complete
d examination must include a cover page with your name and AUID# and
all supporting documents in word and/or excel and must be submitted via the Learning
Management System not later than the due date
specified above
.
You may include all documents in one fi
le, properly formatted for printing. This is
particularly important for Excel spreadsheets that
utilize
several tabs and pages
. Please
ensure proper formatting so your examination will print out without spanning across
multiple pages
.
That is, each respo
nse to a problem will print out on sequential pages
without trailing information on a subsequent page.
All work must be fully shown
(including formulas used and completed)
to receive partial to
full credit. Unsupported answers will receive zero credit.
Problem 1
20 points
Eagle
Stores is a retailer of office supplies. The monthly retail demand for a product is provided
below from January 2015 to October 2016.
DEMAND DATA
Year
Month
2015
2016
January
616
758
February
832
974
March
898
940
April
964
1106
May
880
1072
June
1016
988
July
912
1004
August
828
870
September
894
1036
October
850
1018
November
1010
December
969
a.
Use the naïve method to forecast the demand for November and December 2016.
b.
Use
the moving average method with 5
periods to forecast the demand for
November
and December 2016.
c.
Use the exponential smoothing method with smoothing constant 0.8 to forecast the
demand for November and December 2016. Initialize the forecasting method using the
actual demand in January
2
015.
d.
Fit a trend line to
the demand data from January 2015 to December 2015.
What is the
trend line equation?
e.
What is the forecasted demand for
November and December 2016 if you use this trend
line equation
?
f.
How reliable is this forecast from a statistic
al perspective?
g.
Compute the MAD of the trend line method used in part (d). Use the forecasts from
January 2016 to October 2016 to compute the MAD of the method.
h.
What is the interpretation of MAD?
i.
Explain clearly why it is important to compute and track
forecast accuracy.
Problem 2
15 points
Lone Mountain Extraction mines ore in Colorado. The following selected costs were incurred
in December, the low point of activity, when 2,800 tons of ore were extracted:
Straight
-
line depreciation
$60,000
Labor
$630,000
Mining Royalties
$280,000
Trucking & Hauling
$560,000
The highest level activity of 5,400 tons of ore extracted occurred in June, resulting in labor
costs of $1,215,000, mining royalties of $449,000 and trucking & hauling outlays of $720,000.
The trucking & hauling outlays exhibit the following behavior:
Less than 2,800 tons
$480,000
From 2,800
–
3,799 tons
$560,000
From 3,800
–
4,799 tons
$640,000
From 4,800
–
5,799 tons
$720,000
Lone Mountain Extraction uses the high
-
low method to
analyze cost behavior.
Required:
a.
Classify the four costs listed above in terms of their behavior: that is, whether each is
variable, step
-
variable, committed fixed, discretionary fixed, step
-
fixed, or semi
-
variable.
Show calculations to support your answ
ers for labor and mining royalties.
b.
Calculate the total cost for next April when 3,400 tons are expected to be extracted. Show
all calculations used to determine this cost.
c.
Comment on the cost
-
effectiveness of hauling 2,800 tons with respect to Lone
Mountain's
trucking & hauling costs.
d.
How can the company's operational effectiveness be improved?
Problem 3
15 points
Eagle Machines purchases a subcomponent critical for its most popular product from another
manufacturer. The annual demand for the sub
component is 4000 units. The holding cost is
assessed at 20% of the price of the subcomponent. The manufacturer of the
subcomponent
charges
Eagle $30 for each unit if Eagle orders less than 200 units and $28 for each unit if Eagle
orders 200 units or more.
Eagle’s cost to place an order is $18.
a.
What
is the
optimal
order quantity
for this subcomponent
if the EOQ model is used
?
b.
What is the total
of
annual relevant costs of Eagle Machines (considering the cost of inventory
holding and cost of ordering)?
c.
If the EOQ model is used, what is the optimal number of orders to be placed in a year?
d.
If the manufacturer’s lead time is 1 week and Eagle operates 50 weeks a year, what is the
reorder point for the product?
e.
What is
your
interpretation of the reorder p
oint you calculated in part (d)?
Problem 4
20 points
ABC Corporation makes three different products. Data concerning these products appear
below:
Product A
Product B
Product C
Sales Volume
200,000
400,000
800,000
Selling Price per unit
$3.30
$3.00
$1.70
Variable costs per
unit
$2.50
$1.40
$0.50
Total fixed expenses are $800,000 per year.
The company has no beginning or ending work in process or finished goods inventories.
Required: Show all of your calculations in detail.
a.
What is the
corporation’s current operating income?
b.
What is the corporation’s over
-
all break
-
even point in dollar sales?
c.
Of the total fixed expenses of $800,000, $40,000 could be avoided if Product A is
dropped, $160,000 if Product B is dropped, and $120,000 if Prod
uct C is dropped. The
remaining fixed expenses of $480,000 consist of common fixed expenses such as
administrative salaries and rent on the production facility that could be avoided only by
going out of business entirely.
i
What is the break
-
even point
in unit sales for each product line?
Ii
Should any of these product lines be dropped? Explain why or why not.
iii.
If the corporation sells exactly the break
-
even quantity of each product, what will
be the overall profit of the company? Explain thi
s result.
d.
What actions do you recommend to the president of ABC to increase its profitability?
Problem 5
15 points
The diagram below represents a process where three components are made stations A1, A2, and
A3 (one component is
made at each station). These components are then assembled at Station
B and moved through the rest of the process, where some additional work is completed at
stations C and D. One and only one person is allowed to work at each station. The times given
bel
ow for each station represent the amount of work that needs to be done at that station by
that person, with no processing time variation. No inventory is allowed to build in the system.
a)
What is the hourly throughput (output) of the process?
b)
Which s
tation is the bottleneck?
c)
What does it mean for a station to be the bottleneck of a process?
d)
What is the flow time of a unit consisting of the three components?
e)
What is the cycle time of the process?
f)
What is the utilization rate of each worker?
g)
Can a service company benefit from process analysis? Explain clearly why or why not.
Station A1
3 minutes
Station A2
2
minutes
Station B
5 minutes
Station A3
3 minutes
Station C
4 minutes
Station D
1 minute
Problem 6
15 points
You have been asked as a consultant to assist Lifetime Adventures Company in recovering from a recent
hacking incident. The company produces a
survival kit
.
Unfortunately, due to the computer hacking
incident, only the following
data from the
standard cost card relating to production of a single survival
kit are given below:
Standard Quantity
Standard Price
Standard cost per kit
Direct mater
ial
$6 per yard
Direct labor
Variable production
overhead
$3 per direct labor
hour
Total
Through interviews with company personnel, you learned production overhead is applied to production
on the basis of direct labor
-
hours. During a recent month, 1,000 survival kits were produced and sold.
The only
other
information recovered from the company
’s database relating to the recent month’s
production and the related variance analysis is given below
.
Variance Analysis
Materials
Used
Direct
Labor
Variable Production
Overhead
Standard Cost for 1,000 kits
$16,800
$10,500
$4,200
Actual costs incurred
$15,000
$3,600
a.
Materials Price Variance
Materials Quantity Variance
$1,200 U
b.
Labor Rate Variance
c. La
bor Efficiency Variance
d.
Variable Overhead Rate Variance
e.
Variable Overhead Efficiency
Variance
Further interviews
with company personnel revealed the following for the recent month’s production
Actual Direct Labor Hours Worked: 1,500
:
Standard variable overhead rate per direct labor hour $3.00
:
Difference between the standard and actual cost per kit during the recent
month: $.15
Favorable.
The
company had no beginning or ending inventories of materials.
Required:
Determine the variances shown in bold
in
the table above.
Show all your work and
calculations
Optional
Bonus
Problem
15 points
The
following
is the
activity list
for a project
:
Activity
Predecessor
Normal
duration
(weeks)
Crash
duration
(weeks)
Normal
cost
Crash
cost
A
--
3
2
$12,000
$24,000
B
A
5
4
$20,000
$22,000
C
A
4
3
$16,000
$20,000
D
B
6
4
$24,000
$28,000
E
B
5
4
$20,000
$24,000
F
C
7
6
$28,000
$38,000
G
D
3
2
$14,000
$20,000
H
E,F
4
3
$18,000
$30,000
a.
Draw an activity on node
(AON)
diagram to represent the project.
b.
Apply
the critical path method and determine
the following using the normal durations of
the activities:
i.
The project
duration,
ii.
The earliest start and finish time of each activity,
iii.
The latest start and finish time of each activity,
iv.
The slack of each activity,
v.
The critical path(s).
c.
Which activity or activities should be crashed
and in which sequence
to reduce the project
duration by
2
week
s
?
d.
What is the resulting total project cost?
e.
What is (are) the critical path(s) of the project after crashing?
Answers
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