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School: MIM Exam code: T.51135
Form ✘ On paper Print in: Kleur
Print&Scan (ABCD) ✘ Zwart wit
Digital
On paper + Digital
Name preliminary Financial and Management Accounting 3
examination:
Name teacher(s): Hidde Bulten
Intended for group(s): IB year 2

Exam date:
Start time: End time:

Number of assignments / 5 Number of pages (this form included): 8

questions:
Extra aid(s) allowed (except If so: which aid(s)?
from calculators):

Yes No
Remarks lecturer / You can score 100 points for this exam. The final grade is the number of points divided by
Assessment criteria ten.
Calculator Programmable Graphing
Not programmable None
Examination Lines (double) Squared (double) On exam form
paper
Print & Scan (ABCD) form Answer form None
Scrap paper Lines (single) Squared (single) None
Assignment 1 (20pts)

Part 1 Boemerang Inc. produces a range of chemical products for industries on getting bulk orders. It
uses a job-costing system to calculate the cost of a particular job. Materials and labors used in the
manufacturing process are direct in nature, but manufacturing overhead is allocated to different jobs
using direct manufacturing labor costs. Boemerang provides the following information:

Required:
1. Compute the actual and budgeted manufacturing overhead rates for 2020.
2. Compute the cost of Job 635 using (a) actual costing and (b) normal costing.

Part 2 Bike Brakes assembles and sells bikes and uses standard costing. Actual data relating two
months of the year are as follows:

The selling price per bike is $305. The budgeted level of production used to calculate the budgeted
fixed manufacturing cost per unit is 4800 units. Any production-volume variance is written off to cost
of goods sold in the month in which it occurs.

Required:
3. Prepare the income statement for May under variable costing.
4. Calculate the ending inventory in dollars under variable costing for May.
Assignment 2 (20pts)

Part 1 A. Sax Ventures produces three different products. Information about these products can be
found below.

Required:
1. If considerable market demand exists for all products, which product would be most
profitable to produce?
2. If there is only a limited demand for each product as shown below, how many of each
product should be produced per week using the short-run profit maximizing strategy?

Part 2 The Mayfield Corporation manufactures filing cabinets in two operations: machining and
finishing. It provides the following information:
Machining Finishing
Annual capacity 100,000 units 80,000 units
Annual production 80,000 units 80,000 units
Fixed operating costs (excluding direct materials) $640,000 $400,000
Fixed operating costs/unit produced $8 per unit * $5 per unit **

* $640,000/80,000 ** $400,000/80,000)

Each cabinet sells for $72 and has direct material costs of $32 incurred at the start of the machining
operation. Mayfield has no other variable costs. Mayfield can sell whatever output it produces. The
following requirements refer only to the preceding data. There is no connection between the
requirements.

Required:
1. An outside contractor makes the following offer: if Mayfield will supply them with 12,000
machined units, they will finish them at $10 per unit, double the $5 per unit that it costs
Mayfield to do the finishing in-house. Should Mayfield accept the subcontractor's offer?
Explain/defend your answer, showing supporting calculations.

2. The Hunt Corporation offers to machine 4,000 units at $4 per unit, half the $8 per unit that it
costs Mayfield to do the machining in-house. Should Mayfield accept Hunt's offer?
Explain/defend your answer, showing supporting calculations.
Assignment 3 (20pts)
Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the
existing grinder. Below you’ll find the necessary data for the company to decide whether or not they
should replace the grinder.

The company expects the following earnings before depreciation, interest and taxes.

The following MACRS recovery rates are available.

Required:
1. Calculate the initial investment associated with the replacement of the existing grinder by
the new one.
2. Below you can see a schedule of the incremental cash flows for the first five years. Calculate
the missing numbers.

3. The terminal cash flow is $51,580. Give the relevant cash flows for the replacement of the
grinder.
4. Calculate the Net Present Value (NPV) and give a meaningful comment.
Assignment 4 (20pts)
Part 1 The (partial) financial statements of The Beanery Ltd. a distributor of coffee beans and
accessories, for the year ended 31 December last year are:

Required:
1. What is the firm’s cash conversion cycle.
2. How much resources are needed to support this cash conversion cycle?
3. If the firm can decrease the inventory turnover period by 7 days, what will be the effect
on profit? The company pays 13% for its resource investment.

Part 2 Moonshine company has two invoices, both dated at August 25, that need to be paid. The
company’s cost of short-term financing is 14% and the credit terms for the two invoices are as
follows.
1. 2/12 net 60 EOM
2. 2,5/10 net 55 date of invoice

Required:
4. Calculate the cost of giving up the discount for invoice 2 and indicate if Moonshine
company should give up the cash discount or not.
Assignment 5 (20pt)

Part 1) The rather high bad debt expense and long average settlement period for trade receivables is
causing some strain on the liquidity of the business, which results in an overdraft at the bank. See the
details in the table below.

The company is considering whether to use factoring business to improve its liquidity position.
Details about this possible arrangement can be found below.

The company needs to calculate the cost for the existing arrangement and finish the calculations for
the factoring arrangement.

Required:
1. Calculate the costs of the existing arrangement.
2. Calculate the interest cost on the loan and the total costs of the factoring arrangement.
3. What would you recommend the company to do? Explain.
Part 2) Trading company Dragon, located in the Netherlands sells Pelicans made of wood for garden
decoration. One of the sales people of Dragon met some businessmen from the USA. One of them is
CEO of a big wholesaler and seems to be very interested in buying a lot of Pelicans.
As the CEO of Dragon is very risk averse, he wants to know how he can minimize the risk of selling
the first bunch of 1000 Pelicans to the USA.

Required:

4. What would be an advantage and a disadvantage for Dragon to use a Letter of Credit instead
of a Documentary Collection?
Solutions

Assignment 1
Part 1
1)

2)

Part 2

Key inputs

3 and 4)
5pt per item

Assignment 2

Part 1

Part 2

1) (40-10)x12,000 = 360.000 increase

2) machining is not the bottleneck. Only increasing cost

5pt per item

Assignment 3
1)

2)

3 and 4)
NPV is positive, they can replace the grinder.

5pt per item

Assignment 4

Part 2
(2,5/100-2,5)) * ((365/45)) = 20,8%
For the second invoice the company should take the discount.

5pt per item

Assignment 5
1 and 2) 4pt per item
3) cost of factoring is higher. Don’t do it, all other things being equal. 2pts

4) advantage: less risk involved disadvantage: more costs/hassle 5pts

Assignment 6
1) Jobs created, governments savings, companies active after 3 years.
2) DATA ON GHG EMISSIONS & MONITORING
a. COMPANY FLEET
b. WATER USAGE
c. ENERGY USAGE

5pts per item