Nova ACT5140 final exam 2105

QUESTION 1

1. a) What is a transfer price?

b) How can firms use transfer prices to improve performance? Be specific in your explanations.

QUESTION 2

1. Consider the following information, prepared based on a monthly capacity of 100,000 units:

Category	Cost per Unit
Variable manufacturing costs	$27.00
Fixed manufacturing costs	$9.00
Variable selling costs	$6.00
Fixed selling costs	$5.00

2.

3. Capacity cannot be added in the short run and the firm currently sells the product for $53 per unit.

4.

5. The company is currently producing 85,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. Since the potential customer approached the firm, there will be no variable selling costs incurred. What is the minimum amount that the firm should be willing to accept for this order?

QUESTION 3

1. A company is considering out-sourcing maintenance to an outside provider. What factors (financial and non-financial) should the company consider in making this decision?Be specific in your responses.

QUESTION 4

1. Consider the following information, prepared based on a monthly capacity of 100,000 units:

   Category	Cost per Unit
   Variable manufacturing costs	$27.00
   Fixed manufacturing costs	$9.00
   Variable selling costs	$6.00
   Fixed selling costs	$5.00

   Capacity cannot be added in the short run and the firm currently sells the product for $53 per unit.

   The company is currently producing 100,000 units per month. A potential customer has contacted the firm and offered to purchase 10,000 units this month only. The customer is willing to pay $49 per unit. Since the potential customer approached the firm, there will be no variable selling costs incurred. Should the company accept the special order? Why or why not? Be specific.

QUESTION 5

1. Assume a company produces and sells four different products. Each product sells for a different amount, has different variable costs, and requires a different amount of machine hours to produce. Unfortunately, the company does not have enough machine hours to produce all the units of each product that it could sell. How should the company decide how many machine hours to use for each product?Be sure to explain and justify your recommendation.

QUESTION 6

1. The following is budgeted information for the Leon Corporation:

	Product XYZ	Product ABC
Annual production & sales	36,000	24,000
Projected selling price	$50	$80
Variable Direct Production Cost Information
Materials (per unit)	$10	$18
Direct Labor (per unit)	$12	$24

2.

3. Additional information:

· Manufacturing overhead costs (a mixed cost) are budgeted to be $450,000 at the production and sales listed above. The variable component is $5 per unit (same for each product).

· Selling & administrative costs (a mixed cost) are budgeted to be $270,000 at the production and sales listed above. The fixed component is $90,000, and each product uses the same amount of variable selling and administrative costs per unit.

· Leon’s marginal tax rate is 30%.

Assuming the budgeted sales mix remains intact, how manyunits of each productdoes Leon need to sell in order to earn a net income of $126,000?

QUESTION 7

1.

a. List and describe the four perspectives of the Balanced Scorecard.

b. One of the most important things to consider in developing a Balanced Scorecard is to include “leading measures” or “forward-looking measures” on the Scorecard. What are “leading measures,” and how are they different from non-leading measures?

c. What does it mean that performance measures on a Balanced Scorecard are “integrated?