BS2107 Sample Test 2

Answer all questions. Time allowed: 90 minutes

Note: This test covers topics covered in weeks 5 to 8 only. You should also work through Sample Test 1 and the Mid-term Test as the test in week 10 will cover all topics covered in the first 8 weeks up to and including Pricing Decisions. Question 1 The difference between the sales price needed to capture a predetermined market share and the desired profit per unit is: A B C D Variable cost Production cost Target cost Target price

Question 2 Which of the following is not a lead indicator? A B C D Number of rejects Customer loyalty Gross profit margin Employee turnover

Question 3 Delegation of decision making authority to lower management levels within an organisation is: A B C D Transfer pricing Centralisation Goal congruence Decentralisation

Question 4 Which is not an objective of transfer pricing? A B C D To maximise the profit of the parent company To promote goal congruence Greater divisional autonomy Result in a reasonable measure of managerial performance of the divisions

Question 5 In a balanced scorecard, which of the following is a measure of performance of customer value? A B C D Gross margin ratio Retention of existing customers Hours of job related training Process cycle time

Question 6 The following data relates to operations at Speedy Ltd: Throughput time Delivery cycle time Process time Queue time 4 hours 8 hours 1 hour 2 hours

The wait time for this operation would be: A B C D 4 hours 2 hours 8 hours cannot be determined from information provided

Question 7 The following information relates to last years operations at the Bread division of Dele ctable Bakery. Residual Income Net operating Income Sales Average operating assets 12,000 60,000 300,000 400,000

What was the Bread divisions minimum required rate of return last year? A B C D 12% 4% 15% 20%

Use the following to answer questions 8 11 A Division of a large multi-national company has some missing data but has recorded operating data for the past two years as follows: Year 1 Year 2 Return on investment 12% 24% Shareholders equity 500,000 200,000 Net Operating Income ? 288,000 (Asset) Turnover ? 2 Sales 1,600,000 ? The Divisions margin in Year 2 was 150% of the margin in Year 1. Question 8 What were the average operating assets for Year 2? A B C D 750 000 400,000 1,200,000 800,000

Question 9 What were the sales for Year 2? A B C D 750,000 2,000,000 3,846,154 2,400,000

Question 10 What was the net operating income for Year 1? A 192,000 B 128,000 C 266,667 D 208,000

Question 11 What was the (asset) turnover in Year 1? A B C D 10.0 2.0 1.5 3.2

Use the following to answer questions 12 & 13 Division K has provided the following data for last years operations: Sales Net operating income Average operating assets Stockholders equity Minimum required rate of return 100,000 6,000 40,000 25,000 10%

Question 12 Division Ks residual income is: A B C D 2,000 4,000 3,500 2,500

Question 13 Division Ks return on investment (ROI) is: A B C D 6% 10% 15% 24%

Use the following to answer questions 14 to 16. The Manufacturing Division of Ministry of Noise PLC makes compact disk players which it currently sells to outside customers. Budgeted costs for next month for the division are as follows: Sales of compact disks to outside customers Selling price per compact disk Unit variable production costs 2,800 units 185 120

Maxi-Loud a Retail Division of Ministry of Noise PLC would like to purchase 1,000 compact disk players from the Manufacturing Division of the company. Alternatively Maxi-Loud can purchase similar compact disc players for 170 each from an outside supplier.

Question 14 Assume that the Manufacturing Divisions monthly production capacity is 2,800 units. If the Manufacturing Division sells 1,000 compact disk players (internally) to Maxi-Loud for 170 each, the monthly effect on the profits of the Manufacturing Division will be a: A B C D 42,000 decrease 50,000 increase 15,000 decrease No change

Question 15 Assume the Manufacturing Divisions m onthly production capacity is 4,000 units. If the manufacturing Division sells 1,000 compact disks to Maxi-Loud for 170 each, the monthly effect on the profits of the Manufacturing Division will be: A B C D 65,000 decrease 185,000 increase 170,000 increase 50,000 increase

Question 16 Assume the Manufacturing Divisions m onthly production capacity is 3,200 units and the Maxi-Loud Division will acquire the compact disk players from the outside supplier if they are not available from the Manufacturing Division. If the Manufacturing Division sells 1,000 compact disks to Maxi-Loud for 170 each, the effect on the monthly profits of Ministry of Noise as a whole will be: A B C D 9,000 decrease 74,000 decrease 20,000 increase 11,000 increase

Question 17 Edith Ltd. believes that every 7% increase in the selling price of its most popular product leads to an 18% decrease in the products total unit sales. The products price elasticity of demand is closest to: A B C D -2.93 -1.13 -3.76 -2.62

Question 18 Edith Ltd. recently changed the selling price of one of its products. Data concerning sales for comparable periods before and after the price change are presented below: Selling price 30.00 29.00 Unit sales 7,800 8,400

The products variable cost is 14.10 per unit. The products profit maximising price is closest to: A B C D 15.65 26.34 27.06 25.99

Question 19 The following information relates to Solar plcs Saturn division for 2011: Sales Variable costs Traceable fixed costs Common fixed costs Average operating assets Minimum required rate of return Saturns residual income was: A B C D 144,000 150,000 156,000 200,000 500,000 300,000 50,000 30,000 100,000 6%

Question 20 FuF Co has two stores, F and G. During the most recent month Store F had a segment margin of 10,000, traceable fixed expenses of 26,000, and variable expenses equal to 55% of sales. FuFs market as a whole had a combined segment margin of 15%, a contribution margin ratio of 40%, and total sales of 180,000. Based on this information, the traceable fixed expenses in Store G were: A B C D 17,000 30,000 19,000 36,000

Use the following data to answer questions 21 & 22 Division X of XY Ltd. produces a part that it sells to other companies. Sales and cost data for the part are: Capacity in units Selling price per unit Variable cost per unit Fixed costs per unit at capacity 60,000 40 28 9

Division Y, another division of XY Ltd, would like to buy this part from Division X. Division Y currently purchases the part from an outside supplier at 38 per unit. If Division X sells to Division Y, 1 in variable costs can be avoided.

Question 21 Assume that Division X is operating at full capacity. What is the lowest acceptable transfer price from the viewpoint of the selling division? A B C D 37 39 36 38

Question 22 Assume that Division X has ample capacity to handle all of Division Ys requirements without any increase in fixed costs or reduction of sales to external customers. What is the lowest acceptable transfer price from the viewpoint of the selling division? A B C D 40 39 28 27

Question 23 A company prices its product at the full cost of 4.75 per unit plus 70%. A competitor has just launched a similar product selling for 7.99 per unit. The company wishes to change the price of the product to match that of its competitor. The product mark-up percentage should be changed to: A B C D 1.1% 1.8% 40.6% 68.2%

Question 24 SuS Co. has two stores: R and T. During the most recent month Store R had a segment margin of 26,000, traceable fixed expenses of 34,000 and a contribution margin of 20%. Store T had sales of 180,000, a contribution margin of 40% and a segment margin ratio of 5%. Variable expenses for the company as a whole totalled: A B C D 342,000 240,000 348,000 312,000

Question 25 AlA Inc. recorded sales of 500,000 for the past year when the average operating assets totalled 250,000. What is the margin that the company needs to earn in order to achieve a ROI of 12%? A B C D 2% 8.33% 6% 9.45%