Midterm: Investment and Law Firm
*MGSC 1205*
MIDTERM EXAM
Winter 2013
Wednesday Feb. 27, 2013
TIME ALLOWED 75 min.
Please read the questions carefully!
Show your methodology, final answers carry near zero points.
There are 6 pages including the cover page in this exam. Please make sure all pages are attached.
TURN YOUR CELL PHONE OFF!!
Student Name: ___________________________________________ Student number: ____________________________ Section: _____ Question | Maximum mark | Student mark | 1 | 11 | | 2 | 10 | | 3 | 12 | | 4 | 17 | | TOTAL | 50 | |
Question 1: (11 marks)
The law firm of Smith, Jones, and Greene provides accounting service for some of its clients. The person who handles this service and her secretary cost the law firm an average of $80,000 per year in salary and benefits. Furthermore, the law firm incurs an additional charge of $50 per client for computer time, postage, and supplies. Clients are charged $300 a year for these accounting services. a) Determine the cost, revenue, and profit functions for the law firm in terms of the number of clients. You can use “x” to denote the number of clients. (3)
C(x) = 80,000 + 50x
R(x) = 300x
P(x) = -80,000 + 250x b) What profit/loss would the firm realize if 354 clients use its accounting service each year? (2)
P(x) = -80,000 + 250x
P(x = 354) = -80,000 + 250(354)
P(x = 354) = -8,500 (a loss of $8,500) c) A local accounting firm has offered to provide comparable service to the law firm for a fee of $600 per client. The law firm needs to decide whether to offer the accounting service to its clients in-house or outsource them to the accounting firm. Assuming 300 clients per year, would the law firm be better off using its own staff, or using the outside accounting firm? (3)
Cost incurred if accounting service provided in in-house:
C(x = 300) = 80,000 + 50(300) = $95,000
Cost incurred if accounting service provided outside accounting firm:
MIDTERM EXAM
Winter 2013
Wednesday Feb. 27, 2013
TIME ALLOWED 75 min.
Please read the questions carefully!
Show your methodology, final answers carry near zero points.
There are 6 pages including the cover page in this exam. Please make sure all pages are attached.
TURN YOUR CELL PHONE OFF!!
Student Name: ___________________________________________ Student number: ____________________________ Section: _____ Question | Maximum mark | Student mark | 1 | 11 | | 2 | 10 | | 3 | 12 | | 4 | 17 | | TOTAL | 50 | |
Question 1: (11 marks)
The law firm of Smith, Jones, and Greene provides accounting service for some of its clients. The person who handles this service and her secretary cost the law firm an average of $80,000 per year in salary and benefits. Furthermore, the law firm incurs an additional charge of $50 per client for computer time, postage, and supplies. Clients are charged $300 a year for these accounting services. a) Determine the cost, revenue, and profit functions for the law firm in terms of the number of clients. You can use “x” to denote the number of clients. (3)
C(x) = 80,000 + 50x
R(x) = 300x
P(x) = -80,000 + 250x b) What profit/loss would the firm realize if 354 clients use its accounting service each year? (2)
P(x) = -80,000 + 250x
P(x = 354) = -80,000 + 250(354)
P(x = 354) = -8,500 (a loss of $8,500) c) A local accounting firm has offered to provide comparable service to the law firm for a fee of $600 per client. The law firm needs to decide whether to offer the accounting service to its clients in-house or outsource them to the accounting firm. Assuming 300 clients per year, would the law firm be better off using its own staff, or using the outside accounting firm? (3)
Cost incurred if accounting service provided in in-house:
C(x = 300) = 80,000 + 50(300) = $95,000
Cost incurred if accounting service provided outside accounting firm: