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Faculty of Economic Science and Business Administration

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| | Course: الرقابة الإدارية | | | Duration: 120 minutes | Faculty of Economic Scienceand Business AdministrationSetion1 | | | Final exams – First semester - Academic year 2012-2013Master Professional (M2) |

Question 1
Management is often faced with the alternative of continuing to make a product or component internally, or go to an external source and purchase the product or component. In gathering relevant information for these two alternatives, briefly identify the quantitative factors that should be considered. Are there any qualitative factors that should also be considered?

Question 2
Khalil, president of Video Adventure, has heard about operating leverage and asks you to explain this term. What is operating leverage? How does a company increase its operating leverage?

Question 3 Manal operates a bed and breakfast hotel in a resort area in the Cedar Mountains. Depreciation on the hotel is $60,000 per year. Manal employs a maintenance person at an annual salary of $32,000 and a cleaning person at an annual salary of $24,000. Real estate taxes are $10,000 per year. The rooms rent at an average price of $60 per person per night including breakfast. Other costs are laundry and cleaning service at a cost of $8.00 per person per night and the cost of food which is $4.00 per person per night.

Instructions:
(a) Determine the number of rentals and the sales revenue Manal needs to break even using the contribution margin technique.
(b) If the current level of rentals is 3,000, by what percentage can rentals decrease before Manal has to worry about having a net loss?
(c) Manal is considering upgrading the breakfast service to attract more business and increase prices. This will cost an additional $3.00 for food costs per person per night. Manal feels she can increase the room rate to $65 per person per night. Determine the number of

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