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Midterm

ADMS1500 - Mid Term 2 - Topic B.doc

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Department
Administrative Studies
Course
ADMS 1500
Professor
All Professors
Semester
Fall

Description
STUDENT LAST NAME STUDENT FIRST NAME (print)____________________________________ (print)______________ STUDENT NUMBER ____________________________ SIGN IN # _________ YORK UNIVERSITY FLA&PS - School of Administrative Studies AP/ADMS1500 3.0 – Mid term Exam II, Winter 2010 Topic B Instructions • Turn off your cell phone. Please place books, notes, backpacks, coats, etc. to the side, rear or the front of the classroom before the midterm commences. • Make sure that there is at least one empty seat between you and any other student seating beside you in the same row. • Place photo identification on your desk during the examination to facilitate verification. • Put your name and student number at the top of the page and in the Scantron (pink in colour) sheet. • This is a closed book examination, no collaboration is allowed and no formula sheets are allowed or will be provided. • Two hours are allowed to complete the exam (total of 25 marks). No additional time provided for lateness. • You are allowed the use of a simple (non-programmable) calculator. Sharing of calculators is not permitted. Cell phones are not allowed as calculators. • Answer the multiple choice questions in the pink in colour Scantron page prior completing it properly with pencil. To work out your answer you can use the examination paper. • PLEASE DO NOT ASK ANY QUESTIONS from the Professor or the Invigilators. If it is necessary, state your assumptions on the midterm pages. • You may write with a pencil or pen. • If you leave early, please respect your fellow students by leaving quietly. Do not leave the room in the last 15 minutes of the exam. • DO NOT TAKE THE MIDTERM PAPER WITH YOU. Chapters - Topics Multipl MC Problems Total e marks marks choices 6 Budgeting 9 4.5 5 9.5 7 Introduction to a Standard Cost System 14 7 0 7 Include Appendix 7A Exclude Appendix 7B Process costing 8 Activity-Based Management & Costing 7 3.5 5 8.5 Totals 30 15 10 25 ********** Multiple choice questions – To be answered on the Scantron pink sheet (0.5 marks each correct answer, 50 questions, total marks available 25) Use the following data to answer Questions 1 to 11 1Killarney Wholesale Foods distributes canned goods to independently owned groceries and supermarkets in Northern Ontario. The company has gathered the following data on three types of customer: Corner Supermarkets Groceries stores Monthly sales revenue $800,000 $500,000 $200,000 Gross profit % 10% 12% 15% Monthly costs (overhead): Sales visits ($500 each) 1 1 1 Order processing ($200 each) 5 5 3 Deliveries ($1,000 each) 5 6 4 Rush deliveries ($2,000 each) 0 3 1 Sales promotions $0 $500 $500 Corner Corner Supermarkets Groceries stores Monthly sales revenue $800,000 $500,000 $200,000 Gross profit % 10% 12% 15% Gross profit $ 80,000 # $ 60,000 # $ 30,000 # Monthly costs Sales visits ($500 each) $ 500 1 $ 500 1 $ 500 1 Order processing ($200 each) 1,000 5 1,000 5 600 3 Deliveries ($1,000 each) 5,000 5 6,000 6 4,000 4 Rush deliveries ($2,000 each) 0 0 6,000 3 2,000 1 Sales promotions 0 500 500 Total overhead cost $ 6,500 $ 14,000 $ 7,600 Customer profit $ 73,500 $ 46,000 $ 22,400 Customer profit as % of sales 9.2% 9.2% 11.2% 1) The total gross profit of groceries is: a) $500,000 b) $440,000 c) $60,000 d) $46,000 e) cannot be calculated with the data provided ANS: C 2) The total costs for order processing of supermarkets is: a) $500 b) $1,000 c) $5,000 d) $6,000 e) cannot be calculated with the data provided ANS: B 3) The total overhead cost of supermarkets is: a) $7,600 b) $6,500 c) $3,700 d) $1,700 e) cannot be calculated with the data provided ANS: B 4) The total costs for deliveries of groceries is: a) $500 b) $1,000 c) $5,000 d) $6,000 e) cannot be calculated with the data provided ANS: D 5) The total costs for sales promotions of groceries is: a) $500 b) $1,000 c) $5,000 d) $6,000 e) cannot be calculated with the data provided ANS: A 6) The total costs for rush deliveries of supermarkets is: a) $500 b) $1,000 c) $5,000 d) $6,000 e) nil ANS: E 7) The total overhead cost of corner stores is: a) $7,600 b) $6,500 c) $3,700 d) $1,700 e) cannot be calculated with the data provided ANS: A 8) The total customer profit of groceries is: a) $500,000 b) $440,000 c) $60,000 d) $46,000 e) cannot be calculated with the data provided ANS: D 9) The profitability of corner stores as % of sales revenue is: a) loss (profit margin is negative) b) 7.2% c) 9.2% d) 11.2% e) cannot be calculated with the data provided ANS: D 10) The return on assets of supermarkets is: a) loss (ROA is negative) b) 7.2% c) 9.2% d) 11.2% e) cannot be calculated with the data provided ANS: E 11) Which of the three types of clients has the lowest profitability measured as % of sales? a)Supermarkets b)Groceries c)Corner store d)A and C but not B e)A and B but not C ANS: A Use the following data to answer Questions 12 to 19 Argenti1 has a cash balance of $1,500,000 on January 1, 2010. Relevant budgeted information includes the following: Year 2010 Year 2011 Cash collected from customers $9,500,000 $9,000,000 Payments to suppliers 2,000,000 2,500,000 Direct labour expense 3,000,000 3,500,000 Production overhead expense 2,000,000 2,000,000 Selling and administrative expense 2,000,000 2,000,000 All expenses are paid in the year incurred. The production overhead expense includes $500,000 of amortization of plant. 2010 2011 Opening cash balance $ 1,500,000 $ 2,500,000 Cash collected from customers 9,500,000 9,000,000 Cash available $11,000,000 $11,500,000 Payments to suppliers 2,000,000 2,500,000 Direct labour expense 3,000,000 3,500,000 Production overhead expense 2,000,000 2,000,000 Selling and administrative expense 2,000,000 2,000,000 Less amortization (500,000) (500,000) Total cash payments $ 8,500,000 $9,500,000 Ending cash balance $ 2,500,000 $ 2,000,000 12) Total amount of cash available of the year 2010 a) $1,500,000 b) $2,500,000 c) $11,000,000 d) $11,500,000 e) none of the above ANS: C 13) Total cash payments of the year 2010 a) $8,500,000 b) $9,000,000 c) $9,500,000 d) $10,000,000 e) none of the above ANS: A 14) Ending cash balance of the year 2010 a) $1,500,000 b) $2,500,000 c) $11,000,000 d) $11,500,000 e) none of the above ANS: B 15) Total amount of cash available of the year 2011 a) $1,500,000 b) $2,500,000 c) $11,000,000 d) $11,500,000 e) none of the above ANS: D 16) Total cash payments of the year 2011 a) $8,500,000 b) $9,000,000 c) $9,500,000 d) $10,000,000 e) none of the above ANS: C 17) Ending cash balance of the year 2011 a) $1,500,000 b) $2,500,000 b) $11,000,000 c) $11,500,000 e) none of the above ANS: E It is $2,000,000 18) Beginning cash balance of the year 2011 a) $1,500,000 b) $2,500,000 b) $11,000,000 c) $11,500,000 e) none of the above ANS: B 19) Beginning cash balance of the year 2012 a) $1,500,000 b) $2,500,000 c) $11,000,000 d) $11,500,000 e) none of the above ANS: E It is $2,000,000 Use the following data to answer Questions 20 to 23 1Federal Financial provides financial advice to its clients on investment, retirement planning, and tax management. Federal has calculated the cost of providing retirement planning at $200 per client, as follows: Ho & Robinson’s “Personal Financial $ 20.00 Planning” Photocopying 5.00 Advisor’s time: 2 hours @ $30 60.00 Computer simulation fee 15.00 Direct costs $100.00 Overhead (100% of direct costs) 100.00 Total $200.00 1The overhead is typical for this type of business and consists of 40% variable costs and 60% fixed costs. In 2004 Federal Financial advised 250 clients on retirement planning. 1RP Inc., a specialist retirement planning company, has offered to service all Federal Financial’s retirement planning clients. 20) The total relevant costs of providing the service is: a) nil b) $100 c) $160 d) $200 e) $219.80 ANS: C Direct costs $100.00 Variable part of overhead ($100 × 40% ) 40.00 Total relevant cost $160.00 21) If the offer from RP Inc. is $180 per client, should the offer be accepted? a) Yes. b) No. c) Indifferent between yes or no. d) More quantitative data is needed. e) This is a strategic decision that cannot be answered on the basis of costs. ANS: B Clearly, we do not expect to eliminate any of the fixed costs. The offer from RP Inc. is $180. If none of the existing costs are saved, that cannot be a good idea as it just adds $180 to whatever the existing costs are. If all the variable costs ($160) are eliminated, then the net loss will be an increase of costs of $20 ($160 – $180). That would make the offer not worthwhile to accept. 22) 1If the offer from RP Inc. is a $38,000 lump sum, for which they would advise up to 300 clients, please indicate the total relevant costs of providing the service a) $25,000 b) $30,000 c) $40,000 d) $48,000 e) $54,950 ANS: C Relevant cost per client: $160 Total relevant cost for existing clients = $160 × 250 = $40,000 23) If the offer from RP Inc. is a $38,000 lump sum, for which they would advise up to 300 clients, should the offer be accepted? a) Yes. b) No. c) Indifferent between yes or no. d) More quantitative data is needed. e) This is a strategic decision that cannot be answered on the basis of costs. Yes, the $38,000 offer should be accepted. Use the following data to answer Questions 24 to 29 1Kawartha Inc. has budgeted production overhead of $600,000 per year. The company allocates overhead costs to products on the basis of machine hours. In 2005 the company budgeted to use 10,000 machine hours. Products are priced by calculating the estimated raw materials, direct labour, and production overhead, and then adding 50% to cover selling and administration and a profit margin. Job #05.2005 X32 has had the following estimates prepared: Raw materials $50,000 Direct labour 200 hours @ $50 Machine time 50 hours 24) The overhead recovery (or allocation) rate is: a) $600,000 b) 50% of direct labour c) $60 per machine hour d) 10,000 machine hours e) none of the above ANS: C Overhead recovery rate: Production overhead ÷ Machine hours = $600,000/10,000 hrs = $60 25) The total cost for job #05.2005 X32 is: a) $50,000 b) $60,000 c) $62,400 d)
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