Section "A"
1) Lyka is the brand manager for the Nintendo Wii. She sells her product to Walmart for $199 and Walmart sells it at a retail price of $269 to consumers. Sales were going well; in 2008, Lyka sold 3 million units of the Wii. But now, sales were beginning to slow down. To get sales moving again, Lyka wanted to launch a $20 million advertising campaign targeted to senior citizens which would feature the new Wii Fit game. Lyka knew that her product was very profitable, with variable costs of $100, so it seemed like she could afford to spend money advertising the product. She submitted her advertising plan to her boss Tess. Tess liked the idea, but asked Lyka few questions:
a) How many incremental units of product she would have to sell to breakeven on the advertising investment, and whether this quantity was feasible, given current sales levels.
b) What is the breakeven point?
c) Can Lyka feasibly sell this quantity if she runs her advertising campaign? Why or why not?
2) Analyze the below questions based on equivalent units concept:
a) Suppose you have a work-study job in the office of your college's president, and she asks you to compute the cost of instruction per full-time equivalent student at your college. The college's vice president for finance provides the following information.
Costs:
Total cost of instruction $9,000,000
Student population:
Full-time students 900
Part-time students 1,000
Part-time students take 60% of the classes of a full-time student during the year.
b) The Mixing Department's output during the period consists of 20,000 units completed and transferred out, and 5,000 units in ending work in process 60% complete as to materials and conversions costs. Beginning inventory is 1,000 units, 40% complete as to materials and conversion costs. Calculate the equivalent units of production.
3)
a) Discuss briefly the different forms of business organizations prevalent in the UAE.
b) Illustrate the basic difference between Management & Financial Accounting.
4) Northwestern Company sells several products. Information of average revenue and costs are as follows:
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Selling price per unit
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$20.00
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Variable costs per unit:
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|
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Direct materials
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$4.00
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Direct manufacturing labor
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$1.60
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Manufacturing overhead
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$0.40
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Selling costs
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$2.00
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Annual fixed costs
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$96,000
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a) Calculate the contribution margin per unit.
b) Calculate the number of units Northwestern's must sell each year to break even.
c) Calculate the number of units Northwestern's must sell to yield a profit of $144,000.
d) Calculate Margin of safety in units and percentage terms
Section "B"
Answer the below questions.
1) Khaled Industries, a defense contractor, is developing a cash budget for October, November, and December.
Khaled's sales in August and September were $100,000 and $200,000 respectively. Forecasted Sales for October, November, and December are as below: October - $400,000 November - $300,000 December - $200,000
30% of the firm's sales have been for cash, 50% have been collected after 1 month, and the remaining 20% after 2 months. Bad-debt expenses (uncollectible accounts) have been negligible. In December, Khaled will receive a $30,000 dividend from stock in a subsidiary.
Khaled has also gathered the relevant information for the development of a cash disbursement schedule. Purchases will represent 70% of sales - 40% will be paid immediately in cash, 60% is paid the month following the purchase. The firm will also expend cash on rent, wages and salaries every month of $52,000.
Prepare a Cash Budget for October, November and December.
2) A company has two divisions, Division A and Division B. Division A manufactures products for both outside market as well as for Division B. The manager of Division B has expressed that transfer price of Division A is too high.
Division A has been selling 40000 units to outsiders and 10000 units to Division B, all at $20 per unit. The variable cost is $12 per unit and fixed costs at $200,000. Division B is asking for a transfer price of $18 per unit. If Division A does not sell to Division B, fixed costs of $ 30000 and assets of $175000 can be avoided. The firms existing assets are worth $ 800,000. Division A is judging based on ROI.
c) Should Division A transfer its products at $18 to Division B?
d) What is the lowest price that Division A should accept?
3) Analyze the inventory valuation of Has been & Tracy based on the information below:
a) Hasbeen Company completed its inventory count. It arrived at a total inventory value of $200,000. You have been given the information listed below. Discuss how this information affects the reported cost of inventory.
i. Hasbeen included in the inventory goods held on consignment for Falls Co., costing
$15,000.
ii. The company did not include in the count purchased goods of $10,000, which were in transit (terms: FOB shipping point).
iii. The company did not include in the count inventory that had been sold with a cost of $12,000, which was in transit (terms: FOB shipping point).
b) Tracy Company sells three different types of home heating stoves (gas, wood, and pellet). The cost and net realizable value of its inventory of stoves are as follows.
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Cost($)
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Net Realizable Value ($)
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Gas
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84,000
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79,000
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Wood
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250,000
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280,000
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Pellet
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112,000
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101,000
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Determine the value of the company's inventory under the lower-of-cost-or-net realizable value approach.