‫بسم الله الرحمن‬

‫الرحيم‬
Prof. Salem A Helles
Advanced Managerial Accounting Faculty of Commerce
Final Exam Accounting Department
Date: Sat. 22.01.2011 MBA & Master of Accounting and
Finance
: ‫الرقم الجامعي‬ : ‫اسم الطالب‬

ANSWER EIGHT QUESTIONS ONLY: (7.5 Mark for each Question)

Question One:
GD Company is a retailer that is preparing its budget for the upcoming
fiscal year. Management has prepared the following summary of its
budgeted cash flows:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Total cash receipts $180,000 $330,000 $210,000 $230,000
Total cash disbursements $260,000 $230,000 $220,000 $240,000
The company's beginning cash balance for the upcoming fiscal year
will be $20,000. The company requires a minimum cash balance of
$10,000 and may borrow any amount needed from a local bank at a
quarterly interest rate of 3%. The company may borrow any amount at
the beginning of any quarter and may repay its loans, or any part of its
loans, at the end of any quarter. Interest payments are due on any
principal at the time it is repaid. For simplicity, assume that interest is
.not compounded
:Required
.Prepare the company's cash budget for the upcoming fiscal year

Question Two:
MPs, Inc., manufactures auto accessories. One of the company's products
is a set of seat covers that can be adjusted to fit nearly any small car. The
company has a standard cost system in use for all of its products.
According to the standards that have been set for the seat covers, the
factory should work 2,850 hours each month to produce 1,900 sets of
covers. The standard costs associated with this level of production are:
Total Per Set of Covers
Direct materials $42,560 $22.40
Direct labor $17,100 9.00
Variable manufacturing overhead
(based on direct labor-hours) $6,840 3.60
$35.00
During August, the factory worked only 2,800 direct labor-hours and
produced 2,000 sets of covers. The following actual costs were recorded
:during the month

1
 Total Per set of Covers
Direct materials (12000 Yards) $45,600 $22.80
Direct labor $18,200 9.10
Variable manufacturing overhead $7000 3.50

$35.40
At standard, each set of covers should require 5.6 yards of material. All of
.the materials purchased during the month were used in production
:Required
:Compute the following variances for August
.The direct materials price and quantity variances .1
.The direct labor rate and efficiency variances .2
.The variable overhead rate and efficiency variances .3

:Question Three
Selected sales and operating data for three divisions of different structural
:engineering firms are given as follows
Division A Division B Division C
Sales $12,000,000 $14,000,000 $25,000,000
Average operating assets $3,000,000 $7,000,000 $5,000,000
Net operating income $600,000 $560,000 $800,000
Minimum required rate 14% 10% 16%
of return

:Required
Compute the return on investment (ROI) for each division using the .1
.formula stated in terms of margin and turnover
.Compute the residual income for each division .2
Assume that each division is presented with an investment .3
.opportunity that would yield a 15% rate of return
If performance is being measured by ROI, which division or .a
?divisions will probably accept the opportunity? Reject? Why
If performance is being measured by residual income, which .b
division or divisions will probably accept the opportunity? Reject?
?Why

2
:Question Four
The RC Company manufactures three types of bicycles-a dirt bike, a
mountain bike, and a racing bike. Data on sales and expenses for the past
:quarter follow
Total Dirt Mountain Racing
Bikes Bikes Bikes
$300,00 $90,000 $150,000 $60,000
Sales
0
Variable manufacturing
and selling expenses 120,000 27,000 60,000 33,000
Contribution Margin 180,000 63,000 90,000 27,000
Fixed expenses:
Advertising, traceable 30,000 10,000 14,000 6,000
Depreciation of special
equipment 23,000 6,000 9,000 8,000
Salaries of product-line
managers 35,000 12,000 13,000 10,000
Allocated common fixed
expenses* 60,000 18,000 30,000 12,000
Total fixed expenses 148,000 46,000 66,000 36,000
Net operating
income (loss) $32,000 $17,000 $24,000 $(9,000)
* Allocated on the basis of sales dollars
Management is concerned about the continued losses shown by the racing
bikes and wants a recommendation as to whether or not the line should be
discontinued. The special equipment used to produce racing bikes has
. no resale value and does not wear out
:Required
Should production and sale of the racing bikes be discontinued? .1
.Explain. Show computations to support your answer
Recast the above data in a format that would be more usable to .2
management in assessing the long-run profitability of the various
. product lines

Question Five:
MC distributes a single product. The Company's sales and expenses for
last month follow:
Total Per Unit
Sales $450,000 $30
Variable expenses 180,000 12
Contribution margin 270,000 18
Fixed expenses 216,000
Net operating income $ 54,000
3
 :Required
What is the monthly break-even point, in units sold and in sales .1
?dollars
?What is the total contribution margin at the break-even point .2
How many units would have to be sold each month to earn a target .3
?profit after tax of $90,000 while tax rate 20%
Refer to the original data. Compute the company's margin of safety .4
.in both dollar and percentage terms
What is the company's CM ratio? If sales increase by $50,000 per .5
month. And there is no change in fixed expenses by how much
?would you expect monthly net operating income to increase

:Question Six
The Gaza Fruit Farm has always hired workers to pick its annual
cherry crop. Ahmad Ali, the farm manager, has just received
information on a cherry picking machine that is being purchased by
many, fruit farms. The machine is a motorized device that shakes the
cherry tree, causing the cherries to fall onto plastic tarps that funnel
the cherries into bins. Mr. Ahmad has gathered the following
information to decide whether a cherry picker would be a profitable
.investment for the Gaza Fruit Farm
Currently, the farm is paying an average of $40,000 per year to .a
.workers to pick the cherries
The cherry picker would cost $94,500, and it would have an .b
estimated 12-year useful life. The farm uses straight-line
depreciation on all assets and considers salvage value in
computing depreciation deductions. The estimated salvage value
.of the cherry picker is $4,500
Annual out-of-pocket costs associated with the cherry picker would .c
be: cost of an operator and an assistant, $14,000; insurance, $200;
.fuel, $1,800; and a maintenance contract, $3,000
:Required
Determine the annual savings in cash operating costs that would .1
.be realized if the cherry picker were purchased
Compute the simple rate of return expected from the cherry picker. .2
Would the cherry picker be purchased if Gaza Fruit Farm's
?required rate of return is 16%
Compute the payback period on the cherry picker. The Gaza Fruit .3
Farm will not purchase equipment unless it has a payback period
?of five years or less. Would the cherry picker be purchased
Compute (to the nearest whole percent) the internal rate of return .4
promised by the cherry picker. Based on this computation, does it appear
?that the simple rate of return is an accurate guide in investment decisions
4
 ‫السؤال السابع ‪-:‬‬
‫ا( ل تختلف نقطة تماثل التكاليف عن نقطة تماثل السعر ‪" .‬ناقش‬
‫العبارة السابقة" ؟‬
‫ب( َيستخدم قسم خدمات النقل بوزارة السكان والشغال العامة )‬
‫‪ (200,000‬لتر من السولر خلل السنة ويتم شراء اللتر الواحد بسعر )‬
‫‪ ($1‬ويتم تخرينها بمستودع خاص بالوزارة ويتكلف إصدار أمر شراء‬
‫السولر )‪ . ($60‬تكاليف التخزين تقدر بحوالى )‪ ($0.06‬لكل لتر في‬
‫السنة وعدد أيام العمل في السنة تقدر بحوالي ‪ 250‬يوم ‪ ،‬وفترة التوريد‬
‫هي ‪ 5‬أيام ‪.‬‬
‫ويستخدم السولر بمعدل ثابت تقريبا ً إل أنه قد تحدث بعض التقلبات في بعض‬
‫الحالت وللحماية من آثار نفاذ المخزون خلل الظروف الطارئة تقوم الوزارة‬
‫بالحتفاظ بمخزون أمان يكفي لمدة ‪ 15‬يوم عمل ‪.‬‬
‫المطلــــوب ‪-:‬‬
‫‪ .1‬حساب كمية الطلب المثلى من السولر لقسم خدمات‬
‫النقل ‪.‬‬
‫‪ .2‬تحديد نقطة إعادة الطلب ‪.‬‬
‫‪ .3‬تحديد إجمالي تكلفة المخزون السنوي للقسم ‪.‬‬

‫‪:Question Eight‬‬
‫‪The administrator of Alwafa Hospital would like a cost formula linking‬‬
‫‪the administrative costs involved in admitting patients to the number of‬‬
‫‪patients admitted during a month. The admitting department's costs and‬‬
‫‪the number of patients admitted during the immediately preceding eight‬‬
‫‪:months are given in the following table‬‬

‫‪Number of‬‬ ‫‪Admitting‬‬

‫‪Month‬‬ ‫‪Patients‬‬ ‫‪Department‬‬
‫‪Admitted‬‬ ‫‪Cost‬‬
‫‪May‬‬ ‫‪1,800‬‬ ‫‪$14,700‬‬
‫‪June‬‬ ‫‪1,900‬‬ ‫‪$15,200‬‬
‫‪July‬‬ ‫‪1,700‬‬ ‫‪$13,700‬‬
‫‪August‬‬ ‫‪1,600‬‬ ‫‪$14,000‬‬
‫‪September‬‬ ‫‪1,500‬‬ ‫‪$14,300‬‬
‫‪October‬‬ ‫‪1,300‬‬ ‫‪$13,100‬‬
‫‪November‬‬ ‫‪1,100‬‬ ‫‪$12,800‬‬
‫‪December‬‬ ‫‪1,500‬‬ ‫‪$14,600‬‬

‫‪Required:‬‬
‫‪Use the high-low method to establish the fixed and variable .1‬‬
‫‪.components of admitting costs‬‬
‫‪.Compute admitting department cost if number of patient is 1200 .2‬‬

‫‪5‬‬
Question Nine:
Faculty of commerce has two service departments and two operating
departments. Selected data on the four departments are presented below:-
Service Depts. Operating Depts.
Computer
Administration Accounting Finance
Services
Departmental
costs before $180,000 $90,000 $190,000 $900,000
allocations
Number of
15 5 20 80
employees
Number of PCs 12 20 18 102
The Faculty of Commerce allocates service department costs by the step
method in the following order : Administration ( number of employees) and
Computer Services (number of personal computers PCs ). The Faculty
makes no distinction between fixed and variable service department costs.
Required : Using the Step Method , allocate the service department costs
to the operating department.
Question Ten: FG Company makes two products, P1 and P2. Data
:regarding the two products follow
Direct Labor Annual
Hours per Unit Production
P1 0.80 10,000 units
P2 0.40 40,000 units
:Additional information about the company follows
.a. P1 require $32 in direct materials per unit, and P2 require $18
.b. The direct labor wage rate is $15 per hour
c. P1 are more complex to manufacture than P2 and they require special
.equipment
:d. The ABC system has the following activity cost pools
Estimated Activity
Overhead
Activity Cost Pool Activity Measure Total P1 P2
cost
Machine setups Number of setups $72,000 400 100 300
Special processing Machine-hours $200,000 5,000 5,000 -
General factory Direct labor-hours $816,000 24,000 8,000 16,000
Required:
.Compute the activity rate for each activity cost pool .1
Determine the unit cost of each product according to the ABC .2
.system, including direct materials and direct labor
GOOD LUCK