Question 8

Time: 27 minutes

Total: 19 marks

Juanita earns $63,000 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

$63,000

Annual tuition and fees

13,400

Annual book and supply expense

3,500

Monthly living expenses in Mexico City

940

Monthly living expenses in Halifax

1,700

Monthly auto expenses in Mexico city

364

Monthly auto expenses in Halifax

364

Cost of two business suits purchased just prior to resigning

650

Moving expenses

5,950

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 additional information 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)

302,700 MH x $1.2 = (c)

Budget variance, $3,020 U

(d)

Total variance, $820 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)