Management Accounting

Quantitative Techniques Applied in Business

Seatwork

Name : ______________________________________________ Score : ___________________

Problem 1

The probabilities shown in the table represent the estimate of sales for a new
product.

Sales (Units) Probability

0 - 200 15%
201 - 400 45
401 - 600 25
601 - 800 15

1. What is the probability of selling between 201 and 600 units of the product?

The total probability of sellibng between 201 to 600 units is 70% (45% + 25%)

2. What is the best estimate of the expected sales of the new product?

Sales (in units) Midpoint Probability Expected Sales

0-200 100 15% 15
201-400 300 45 135
401-600 500 25 125
601-800 700 15 105
TOTAL 380

Problem 2

AAA Company has three sales departments, each contributing the following
percentages of total sales : clothing, 50%, hardware, 30%, and household sundries,
20%. Each department has had the following average annual damaged goods rates:
clothing, 2%, hardware 5%, and household sundries, 2.5%. A random corporate
audit has found a weekly damaged goods rate of sufficient magnitude to alarm AAA’s
management. The probability (rounded) that this rate occurred in the Clothing
Department is ?

Total Sales Error Rates Joint Probability

Clothing 50% 2.0% 1.0%
Hardwarre 30% 5.0% 1.5%
Household Sundries 20% 2.5% 0.5%
TOTAL 3.0%
Therefore the probability that an error would occur in the Clothing Department is 33
1/3% (1%/3%.

Problem 3

AAA is a company specializing in door opening solutions. One part of the company
focuses on manufacturing pin tumbler and lever locks for multiple brands including
Union, Yale and Multi – Lock. The production line used to protect padlocks is a
perfect example of a network system, the steps are shown below.

1. Draw the Project Network using CPM

2. Identify the Critical Path

Activity Description Immediate Duration (Hours)

Predecessor
A Receiving raw - 0.5
materials
B Bolt cutting A 1.0
C Transfer machine B 1.5
(series of drilling
and cutting
operations)
D Transfers B 1.4
machines
(barrels)
E Barrel Pinning D 1.2
F Shackle groove B 0.8
cutting
G Shackle bending F 1.0
H Insert shackle into C,E,G 0.4
body
I Insert shackle into H 1.4
body and test key
set
J Packaging of I 0.5
padlock
ET(1) = 0
ET(2) = ET(1) + 0.5 = 0.5
ET(3) = ET(2) + 1 = 1.5
ET(4) = ET(3) + 0.8 = 2.3
ET(5) = ET(3) + 1.4 = 2.9
ET(6) = ET(4) + 1 = 3.3
ET(7) = ET(5) + 1.2 = 4.1

ET(6) + 0 = 3.3
ET(8) = max between : ET(3) + 1.5 = 3
ET(7) + 0 = 4.1

ET(9) = ET(8) + 0.4 = 4.5

ET(10) = ET(9) + 1.4 = 5.9
ET(11) = ET(10) + 0.5 = 6.4 (Longest time to complete activities)

Problem 4

A company orders 10,000 units ( a one-year supply) of Material X at one time.

Material X costs P1 per unit, and order costs amount to P500 each time an order is
placed. The costs to carry Material X in inventory amount to 20% of the materials
cost. For an entire year, the inventory carrying costs and order costs are?

10,000 x P500 + P1 x .20 x 10,000 = P1,500

10,000 2

Problem 5

There are 1,000 trolls in stock, and 1,500 are due in from orders that were placed
previously. The company sells Trolls at the rate of 100 per day and finds that it takes
an average of 20 days for an order to be received. Because usage and lead times are
known with certainty and because the company has determined that an order must
be placed now, the desired safety stock quantity must be equal to ?
 1,000 + 1,500 = (100x 20) + SSQ
SSQ = 500 units

Problem 6

Jess Company has a plant that manufactures transistor radios. One component is an
XT transistor. Expected demand is for 5,200 of these transistors in March 2018. Jess
estimates the ordering cost per purchase order to be P250. The carrying cost for one
unit of XT in stock is P5. What is the EOQ for the XT Transistor?

EOQ = 2 x 5,200 x P250

P5
= 721