Practice Midterm Questions

page 1 of 6 Question 1 Joe's Copy Centre hires a new employee. Joe knows he has to be patient with the employee until the employee gains enough experience to meet production standards. Joe is unsure of the learning curve in his operation, but he knows the first job by a new employee takes 40 minutes and the second job takes 32 minutes. Assume all jobs to be equal in size. Required: (1) What is the learning-curve percentage, assuming the cumulative average-time method? (2) What is the time for a new employee to do 32 jobs with this learning curve using the cumulative average-time method?
page 2 of 6 Question 2 Cross Distribution Company uses two different independent variables (number of orders and weight of orders) in two different equations to evaluate costs of the packaging department. The most recent results of the two regressions are as follows: Number of orders: Variable Coefficient Standard Error t -Value Constant $854.50 $571.02 2.10 Predictor Variable $12.40 $1.47 7.12 r 2 = 0.87 Weight of orders: Variable Coefficient Standard Error t -Value Constant $1,642.54 $705.33 1.50 Predictor Variable $9.80 $2.10 4.65 r 2 = 0.72 There were twenty degrees of freedom. The critical value at the 95% level is around 2. Required: (1) What are the estimating equations for each cost driver? (2) Which cost driver is best and why? Comment on the appropriateness of this cost equation compared to the results obtained in requirement (1).
page 3 of 6 Question 3 The following information is for Winnie Company: Product A: Revenue $4.00 Variable Cost $1.00 Product B: Revenue $6.00 Variable Cost $2.00 Total fixed costs are 40,000 (1) What is the break-even point assuming the sales mix consists of two units of Product A and one unit of Product B? (2) What is the operating income assuming actual sales are 300,000 units, and the sales mix is one unit of Product A and two units of Product B?
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