Islamic University – Gaza
Faculty of Commerce
Dept. of Accounting
Master in Accounting & Finance / / Advanced Managerial Accounting
Date: 29/03/2014
Prof. Salem Abdalla Helles
Master of BusinessAdmin.
Med- term Exam
Student Name: ……………………………………………..…………Student No.………………………….

ANSWER THE FOLLOWING QUETIONS:

Question One: (10 Marks)

  • Bob’s Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:

Men’sBoy's

Selling Price$28.80Selling Price$24.00

Variable Cost$20.40Variable Cost$16.80

Fixed costs are $38,400.

Required:

  1. What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men's shirts?
  2. What is the operating income, assuming the sales mix is 2:1 in favor of men's shirts, and sales total 9,000 shirts?
  3. Compute the company's degree of operating leverage and margin of safety as a percentage?
  4. How many units for each type of shirt would be sold if the company desired an after- tax net income of $24,000, facing a tax rate of 20%?

Question Two : (10 Marks) Each Multiple – choice question has four suggested answers, letter (A), (B), (C), or (D). You should read each question and then decide which choice is best.

  • Helping Hands is a nonprofit organization that supplies electric fans during the summer for individuals in need. Fixed costs are $200,000. The fans cost $20.00 each. The organization has a budgeted appropriation of $480,000. How many people can receive a fan during the summer?

A)12,000 people

B)14,000 people

C)24,000 people

D)34,000 people

  • Under costing of a product is most likely to result from:

A)Misallocating direct labor costs.

B)Under pricing the product.

C)Over costing another product.

D)Overstating total product costs.

  • If a company would like to increase its degree of operating leverage it should:

A)Increase its inventories relative to its receivables.

B)Increase its receivable relative to its inventories.

C)Increase its variable costs relative to its fixed costs.

D)Increase its fixed costs relative to its variable costs.

  • Design of an ABC system requires:

A)That the job bid process be redesigned.

B)That a cause-and-effect relationship exists between resource costs and individual activities.

C)An adjustment to product mix.

D)Both B and C are correct.

Question Three: (10 Marks)

Answer the following questions using the information below:

First Option Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled:

Product / No. of
Setups / Number of
Components / Number of
Direct Labor Hours
Standard / 22 / 8 / 375
Deluxe / 28 / 12 / 225
Overhead costs / $40,000 for setups / $80,000 for comp
  • Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the standard model?

A)$49,600

B)$70,400

C)$75,000

D)$45,000

  • Number of setups and number of components are identified as activity-cost drivers for overhead.Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?

A)$49,600

B)$70,400

C)$75,000

D)$45,000

  • Number of setups and number of components are identified as activity-cost drivers for overhead.Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe model?

A)$49,600

B)$70,400

C)$75,000

D)$45,000

Good Luck

1