10-Sep-15

Solution
Trial final exam 2015 V2

Task 1
a) Revenue per show = 1,100 55 = 60,500
Variable cost per show
Programs (1,100 7)
7,700
Cast (65 310)
20,150
Total variable costs per show 27,850

10-Sep-15

Task 1
b) Break-even shows
= 522,400/(60,500 27,850) = 16
c) Number of shows to earn a target profit of 4,113,900
= (522,400 + 4,113,900)/(60,500 27,850) = 142
This profit goal is unrealistic since Ramlee Productions
currently performs 110 shows a year.

Task 1
d)
Ramlee Productions - Contribution Margin Income
Statement - Year Ended 2013

Sales revenue (110 $60,500)

Variable costs (110 $27,850)
Contribution margin
Fixed costs
Operating income

6,655,000
3,063,500
3,591,500
522,400
3,069,100

10-Sep-15

Task 2
a)

Yip Auto Parts - Cash budget - January and February

January
Beginning balance
10,300
Cash collections
16,400
From customer
11,400
From note receivable
5,000
Cash available
26,700
Cash payments
15,700
Purchases of inventory
13,000
Operating expenses
2,700
Cash excess (deficiency)
11,000
Financing (borrowing)
Ending cash balance
11,000

February
11,000
14,800
14,800
25,800
16,300
13,600
2,700
9,500
1,000
10,500

Task 2
b)

Yip Auto Parts - Cash budget - January and February

January
Beginning balance
10,300
Cash collections
16,400
From customer
11,400
From note receivable
5,000
Cash available
26,700
Cash payments
15,700
Purchases of inventory
13,000
Operating expenses
2,700
Cash excess (deficiency)
11,000
Financing (borrowing)
Ending cash balance
11,000

February
11,000
13,800
13,800
24,800
16,300
13,600
2,700
8,500
2,000
10,500

10-Sep-15

Task 3
a) Standard labor cost = 10 4,450 = 44,500
Actual labor cost = 44,500 + 1,385 = 45,885
Let AH = actual number of direct labor hours worked
Then, actual labor cost = AH AR = AH 10.5
Then AH = 45,885/10.5 = 4,370 (hours)

Task 3
b) Direct labor rate variance
= AH (AR SR) = 4,370 (10.5 10)
= 2,185 (U)
Direct labor efficiency variance
= SR (AH SH) = 10 (4,370 4,450)
= 800 (F)
[or 1,385 (U) 2,185 (U) = 800 (F)]

10-Sep-15

Task 3
b) The unfavorable direct labor rate variance combined
with the favorable direct labor efficiency variance
suggests that the manager may have used higher-paid,
more skilled workers who performed more efficiently.
However, the net effect is unfavorable ($2,185U +
$800F = $1,385U), so this does not appear to have
been a good decision.

Task 4
a) The limitations of ROI
In the absence of the balanced scorecard,
management may not know how to increase ROI
Managers often inherit many committed costs over
which they have no control
Managers evaluated on ROI may reject profitable
investment opportunities.

10-Sep-15

Task 4
b) i. Margin = 3,000/25,000 = 12%
Turnover = 25,000/10,000 = 2.5
ROI = 12% 2.5 = 30%
i. Residual income = 3,000 10,000 25% = 500

Task 5
Production budget
Sales in units
Ending inventory
Total needs
Beginning inventory
Required production

Jan
15,000
6,000
21,000
5,300
15,700

Feb
20,000
12,000
32,000
6,000
26,000

Mar
40,000
18,000
58,000
12,000
46,000

a) The desired ending inventory of suitcases for February is 12,000 units

b) The budgeted production of suitcases for February is 26,000 units

10-Sep-15

Task 5
c) Desired ending inventory of nylon for January
= 26,000 x 1.5 x 20% = 7,800 metres
d)
January
February
Production x 1.5 metres nylon
15,700 x 1.5 26,000 x 1.5
= Nylon needed for production 23,550
39,000
Add: Desired ending inventory
7,800
Nylon needed
31,350
Less: Beginning inventory
(10,450)
Purchases of nylon for January 20,900 (metres)

Task 5
e) Desired ending inventory of nylon
= 26,000 x 2 x 20% = 10,400 metres