Dundar Mifflin makes electronic products for the RCMP. The following data is for the first six months:

Direct Labor Hours

Manufacturing Overhead

January

45,000

$295,000

February

59,600

$305,575

March

57,000

$323,000

April

58,000

$320,000

May

27,700

$158,400

June

29,000

$152,500

Required:

1.Use the high-low method to estimate the cost formula(3 marks)

2.Estimate the total overhead cost at an activity level of 43,000 machine hours, using the separate estimates you obtained for its components.(2 marks)

Question 2

Time: 20 minutes

Total: 10 marks

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:

Jan

Feb

Mar

Sales

50,000

52,000

57,000

Production

54,000

49,000

50,000

Cash-related production costs are budgeted at $12 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. $125,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $225,000, which will be paid in February.

All units are sold on account for $17 each. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale. On January 1 accounts receivable totaled $655,000 ($140,000 from November's sales and the remaining from December).

Required:

1.Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company.(5 marks)

2.Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

(5 marks)

Question 3

Time: 20 minutes

Total: 12 marks

Orville Company's standard and actual costs per unit are provided below for the most recent period. During this time period 635 units were actually produced.

Standard

Actual

Materials:

Standard: 2.4 metres at $2.40 per m.

$5.76

Actual: 2.1 metres at $2.60 per m.

$5.46

Direct labour:

Standard: 1.4 hrs. at $8.20 per hr.

11.48

Actual: 1.7 hrs. at $8.50 per hr.

14.45

Variable overhead:

Standard: 1.4 hrs. at $4.50 per hr.

6.30

Actual: 1.7 hrs. at $4.20 per hr.

7.14

Total unit cost

$23.54

$27,05

For simplicity, assume there was no inventory of materials at the beginning or end of the period.

Required:

Given the information above, compute the following variances. Also indicate if the variances are favorable or unfavorable.

1.Materials price variance(2 marks)

2.Materials quantity variance(2 marks)

3.Direct labour rate variance(2 marks)

4.Direct labour efficiency variance(2 marks)

5.Variable overhead efficiency variance(2 marks)

6.Variable overhead spending variance(2 marks)

Question 4

Time: 10 minutes

Total: 6 marks

Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require the same initial investment. Compute the present value of the cash inflows for each investment using a 7% discount rate. (PLEASE ROUND EACH DISCOUNTED CASH FLOW TO THE NEAREST CENT)

Year

Investment X

Investment Y

1

$2,500

4,000

2

3,000

3,500

3

3,500

3,000

4

4,000

2,500

Total

$13,000

$13,000

1.(Total: 6 marks; 3 marks for X and Y each)

Question 5

Time: 20 minutes

Total: 10 marks

Canada's Wonderland Inc. operates amusement parks similar to those such as Six Flags, Universal Studios, Disneyland etc. Canada Wonderland's mission is to provide high quality family entertainment that exceed guests' expectations and will create lifelong memories. To achieve this goal, Wonderland strives to provide safe, clean, friendly family environments at reasonable prices. In addition to the amusement parks, the company operates a community outreach program. Through volunteerism, it offers educational and recreational programs (e.g. after school programs for children and teenagers, employment related training for adults) and special events at its facilities.

Wonderland's president, Jerry Maguire, has asked you to lead a team of employees in developing a balanced scorecard for its parks.

Required:

For each balanced scorecard perspective identify two measures of performance that relate to Wonderland's key success factors. Include targets and an explanation of why the metric is important. What strategy is Canada's Wonderland following?

Question 6

Time: 20 minutes

Total: 12 marks

Mary's Auto Shop Inc. allows its divisions to operate as autonomous units. Their results for the current year were as follows:

Sport

Terrain

City

Revenues

$1,700,000

$800,000

$6,000,000

Current assets

230,000

40,000

410,000

Capital assets

870,000

660,000

1,590,000

Current liabilities

100,000

100,000

500,000

Net operating income

238,000

48,000

608,000

After-tax income

188,300

36,300

484,300

Weighted average cost of capital

10%

10%

10%

Required:

For each division compute(to two decimal)the:

1.Return on sales in %

2.Return on investment (to two decimal) based on total assets employed in %

3.Economic value added

4.Residual income based on net operating income

Question 7

Time: 10 minutes

Total: 6 marks

Bob's Electronics Inc. manufactures high-tech screens for computers. In June, the two production departments had budgeted allocation bases of 8,400 machine hours in Department 1 and 5,860 direct manufacturing labour hours in Department 2. The budgeted manufacturing overheads for the month were $32,000 and $27,500, respectively. For Job 101, the actual costs incurred in the two departments were as follows:

Department 1

Department 2

Direct materials purchased on account

$66,000

$106,500

Direct materials used

12,500

9,100

Direct manufacturing labour

32,500

32,200

Indirect manufacturing labour

6,600

5,400

Indirect materials used

4,500

2,850

Lease on equipment

9,750

2,250

Utilities

600

750

Job 101 incurred 1,100 machine hours in Department 1 and 400 manufacturing labour hours in Department 2. The company uses a budgeted departmental overhead rate for applying overhead to production.

1.What is the budgeted indirect cost allocation rate for Department 1?(2 marks)

2.What is the budgeted indirect cost allocation rate for Department 2?(2 marks)

3.What is the total cost assigned to Job 101 based on normal costing?(2 marks)

Question 8

Time: 27 minutes

Total: 19 marks

Juanita earns $65,000 annually as a marketing specialist in Mexico City, Mexico. She has applied for admission to the M.B.A program at Dalhousie University. If accepted, she will resign and move to Halifax, Nova Scotia. Juanita has assembled the following data to make the decision:

Juanita's annual salary

$65,000

Annual tuition and fees

13,200

Annual book and supply expense

3,300

Monthly living expenses in Mexico City

920

Monthly living expenses in Halifax

1,700

Monthly auto expenses in Mexico city

362

Monthly auto expenses in Halifax

362

Cost of two business suits purchased just prior to resigning

630

Moving expenses

5,800

Required:

a) Calculate the following in the context of Juanita's decision:

(i) Total sunk costs (if any)(2 marks)

(ii) Total differential or incremental costs (if any)(6 marks)

(iii) Total opportunity costs (if any)( 2 marks)

b) What is your best estimate of the total cost to Juanita of earning an M.B.A. degree if it will take her 12 months to complete the program?(5 marks)

c). Suppose you are Juanita.What specific additionalinformation would you need in order to make a rational decision to pursue and successfully complete the MBA program at Dalhousie? Explain.(4 marks)

Question 9

Time: 28 minutes

Total: 20 marks

For the Win (FTW) Corporation uses a standard costing system in the creation of awards and trophies. The Manufacturing overhead costs are applied to products based on machine time.

Required:

1.Unfortunately, due to accounting glitches in FTW's software, several numbers and labels have been omitted from the analysis of fixed overhead below. Supply the missing numbers and labels to help FTW out:(10 marks)

Actual Fixed Overhead Cost

Flexible Budget Overhead Cost

Fixed Overhead Cost Applied to Work in Process

(a)

(b)

302,400 MH x $1.2 = (c)

Budget variance, $3,320 U

(d)

Total variance, $400 F

(e)

2.Next, assume that 6 minutes of machine time is standard per unit of production. How many units were produced in the situation above?(5 marks)

3.Once again, assume that 6 minutes of machine time is standard per unit of production. How many units of production were assumed when the predetermined application rate for fixed overhead was established?(5 marks)