MANAGERIAL ACCOUNTING TRIAL FINAL EXAM V2

DURATION 120 MINUTES

-------------Task 1
Ramlee Productions performs shows at Istana Budaya, Kuala Lumpur. The
average show sells 1,100 tickets at $55 per ticket. There are 110 shows a year.
The average show has a cast of 65 members, each earning an average of $310
per show. The cast is paid after each show. The other variable cost is program
printing at a cost of $7 per guest. Annual fixed costs total $522,400.
Requirements:
a) Compute revenue and variable costs for each show.
b) Use the income statement equation approach to compute the number of
shows Ramlee Productions must perform each year to break even.
c) Use the contribution margin approach to compute the number of shows
needed each year to earn a profit of $4,113,900. Is this profit goal realistic? Give
your reasoning.
d) Prepare Ramlee Productions contribution margin income statement for 110
shows for 2013. Report only two categories of costs: variable and fixed.
Task 2
Yip Auto Parts, a family owned auto parts shop, began in January with $10,300
cash. Management forecasts that collections from credit customers will be
$11,400 in January and $14,800 in February. The business is scheduled to receive
$5,000 cash from an accounts receivable in January. Projected cash payments
include inventory purchases ($13,000 in January and $13,600 in February) and
operating expenses of $2,700 for each month.
Yip Auto Parts bank requires a minimum balance of $10,000 in the shops
business current account. At the end of any month when the account balance
falls below $10,000 the bank automatically extends credit to the store in
multiples of $1,000. Yip Auto Parts borrows as little as possible and pays back
loans in quarterly installments of $2,000, plus interest at 4% on the entire unpaid
principal. The first payment occurs three months after the loan.
Required:
a) Prepare Yip Auto Parts cash budget for the months of January and February.
b) How much cash will Yip Auto Parts borrow in February if collections from
customers that month total $13,800 instead of $14,800? Show the workings.
Task 3
Shady Lighting manufactures lamp shades. En Riduwan, the manager of the
company, uses standard costs to judge performance. Recently, a clerk mistakenly
shredded some of the records and En Riduwan has only partial data for October.
He knows that the total direct labour variance for the month was $1,385 (U), the
standard labour rate was $10 per hour, and the actual labour rate was $10.50 per
hour. The standard direct labour hours for the actual October output were 4,450.
Required:
a) Find the actual number of direct labour hours worked during October.
b) Compute the direct labour rate and efficiency variances. Do these variances
suggest that the manager may have made a trade-off?
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Task 4
a) Although Return on Investment (ROI) is widely used in evaluating performance,
it is subject to criticisms. Discuss.
b) The magnetic imaging division of Beach Hospital Berhad has reported the
following results for the operations ending on 31 December 2013.
$ (000)
Net sales
25,000
Earnings before interest and taxes
3,000
Average operating assets
10,000
Required:
i. Compute magnetic imaging divisions margin, turnover and ROI.
ii. The board of directors of Beach Hospital Berhad has set a minimum required
rate of return on average operating assets of 25%. What is the magnetic imaging
divisions residual income for the year?
Task 5
A-One Bags Company makes rolling suitcases. Its sales budget for the first
quarter 2014 is as follows:
January
February
March
April
Unit sales
15,000
20,000
40,000
60,000
A-One Bags policy is that ending inventory of finished suitcases should equal 30
percent of the next month's sales. The beginning inventory as at 1 January 2014
is 5,300 suitcases. Each suitcase required 1.5 metres of ballistic nylon. The
ending inventory policy for nylon is that 20 percent of the following month's
production needs must be on hand. On 1 January 2014, A-One Bags had 10,450
metres of nylon in inventory.
Required:
a. What is the desired ending inventory of suitcases for February?
b. What is the budgeted production of suitcases for February?
c. What is the desired ending inventory of nylon for January?
d. What are the budgeted metres of nylon to be purchased in January?
e. Assuming each suitcase required two metres of ballistic nylon, what is the
desired ending inventory of nylon for January?
THIS IS THE END OF THE EXAM PAPER

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