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Exam Solution - ADMS 3510 - Mid Term 2.pdf

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Administrative Studies
ADMS 3510
Douglas Kong

ADMS 3510 York University 2013 FallMid Term Exam 2Solutions Question 1 Scenario 1Only the incremental costs and benefits are relevant In particular only the variable manufacturing overhead and the cost of the special tool are relevant overhead costs in this situation The other manufacturing overhead costs are fixed and are not affected by the decision 5 marksPer Total Unit 10 braceletsIncremental revenue 34995 349950Incremental costsLess Variable costsDirect materials 14300 143000Direct labour 8600 86000Variable manufacturing overhead 700 7000Special filigree600 6000Total variable cost 24200 242000 Fixed costsPurchase of special tool46500Total incremental cost 288500Incremental operating income61450Even though the price for the special order is below the companys regular price for such an item the special order would add to the companys operating income by61450 and should be accepted 2 marks Scenario 213 marks A B C1 Contribution margin per unit18 36 202 Direct labour cost per unit12 32 163 Direct labour rate per hour8 8 84 Direct labourhours required per unit 2315 40 20 Contribution margin per direct labourhour 14129 102 The company should concentrate its labour time on producing product A
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