Q1 (18 marks): Pick three industries and describe how the risks faced by companies can influence their  planning, controlling, and decision-making activities. You are required to give examples for the potential risks. (No more than 300 words for each industries)

Q2 (11.5 marks): Company Q's relevant range of activity is 2,000 units to 8,000 units. When it produces and sells 4,600 units, its average costs per unit are as follows:

Required:

a.    (2 marks) For financial reporting purposes, what is the total amount of product (manufacturing) costs incurred to make 4,600 units?

b.   (3 marks) If 5,600 units are sold, what is the variable cost per unit sold? (Round "Per unit" answer to

2 decimal places.)

c.    (1 mark) If 5,600 units are sold, what is the total amount of variable costs related to the units sold?

d.   (1 mark) If 5,600 units are produced, what is the average fixed manufacturing cost per unit produced? (Round "Per unit" answer to 2 decimal places.)

e.    (1 mark) If 5,600 units are produced, what is the total amount of fixed manufacturing cost incurred?

f.    (1.5 marks) If 5,600 units are produced, what is the total amount of manufacturing overhead cost incurred? What is this total amount expressed on a per unit basis? (Round "Per unit" answer to 2 decimal places.)

g.    (2 marks) If 3,600 units are produced, what is the total amount of direct and indirect manufacturing

cost incurred?

Q3 (20.5 marks) Company Z has provided the following contribution format income statement. All

questions concern situations that are within the relevant range.

Sales (5,000 units)

Variable expenses

Contribution margin

Fixed expenses

Net operating income

$ 300,000

240,000  

60,000

58,800  

$ 1,200  

Required:

a.     (4 marks) What is the Unit contribution margin and contribution margin ratio?

b.     (1 mark) If sales increase to 5,040 units, what would be the estimated increase in net operating income?

c.     (5 marks) If the selling price increases by $4 per unit and the sales volume decreases by 400 units, what would be the estimated net operating income?

d.     (1 mark) What is the break-even point in unit sales?

e.     (1 mark) What is the margin of safety in dollars?

f.      (1 mark) What is the degree of operating leverage?

g.     (7.5 mark) In response to a request from your immediate supervisor, you have prepared a CVP         graph portraying the cost and revenue characteristics of your company's product and operations.    Explain how the lines on the graph and the break-even point would change if (1) the selling price      per unit decreased, (2) fixed cost increased throughout the entire range of activity portrayed on the graph, and (3) variable cost per unit increased.

Q4 (20 marks) ABC company employs a traditional costing system and applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours. The company has two products, AR and BS, about which it has provided the following data:

Direct materials per unit

Direct labor per unit

Direct labor-hours per unit

Annual production (units)

$ 19.80

$ 25.60

0.70

30,800

$ 57.90

$ 64.40

2.40

22,000

The company's estimated total manufacturing overhead for the year is $3,485,185 and the company's estimated total direct labor-hours for the year is 74,360.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

Supporting direct labor (direct labor-hours) Setting up machines (setups)

Parts administration (part types)

Total

$ 817,960

648,985

2,018,240

$ 3,485,185

(For all requirements, round your intermediate calculations and final answers to 2 decimal places.)

Required:

a.     (2 marks) Determine the unit product cost of each of the company's two products under the traditional costing system.

b.     (10 marks) Determine the unit product cost of each of the company's two products under activity- based costing system.

c.     (8 marks) By giving examples, please explain why do companies use predetermined overhead rates rather than actual manufacturing overhead costs to apply overhead to jobs?

Q5 (17 marks) Company Z uses customers served as its measure of activity. The following report compares the planning budget to the actual operating results for the month of November:

Customers served                                                            45,000               44,000

Revenue ($3.50q)                                                       $ 157,200          $ 154,000          $ 3,200 F        

Expenses:

Wages and salaries ($24,400 + $1.34q)                  84,700               83,360             1,340 U

Supplies ($0.74q)                                                        30,860               32,560             1,700 F

Insurance ($6,300)                                                        6,300                  6,300                     0 None

Miscellaneous expense ($5,300 + $0.43q)             22,520                24,220             1,700 F        

Total expense                                                                144,380             146,440             2,060 F        

Net operating income                                                 $ 12,820              $ 7,560          $ 5,260 F        

Required:

a.     (11 marks) Prepare the company's flexible budget performance report for November. Label each variance as favorable (F) or unfavorable (U).

b.     (6 marks) "The principal purpose of the cash budget is to see how much cash the company will have in the bank at the end of the year." Do you agree? Explain.

Q6 (13 marks) Company M is considering a project that would have a five-year life and would require a $667,000 investment in equipment. At the end of five years, the project would terminate and the          equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.):

Sales

Variable expenses

Contribution margin

Fixed expenses:

Fixed out-of-pocket cash expenses

Depreciation

Net operating income

The company's required rate of return is 14%.

Required:

$ 1,800,000

1,250,000

550,000

$ 320,000

133,400

$ 96,600

a.    (1 mark) Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

b.   (1 mark) Compute the project's internal rate of return. (Round your final answer to the nearest whole percent.)

c.    (1 mark) Compute the project's payback period. (Round your answer to 2 decimal place.)