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Marvel Parts, Inc. manufactures auto accessories including seat covers. The company uses a standard costing system to set budgets. In August, actual production and costs differed from standards. Direct materials cost $1,234 more than standard due to an unfavorable price variance of $456 and no quantity variance. Direct labor cost $3,456 less than standard due to a favorable rate variance of $789 and an unfavorable efficiency variance of $1,234. Variable overhead cost $567 more than standard due to an unfavorable rate variance of $234 and a favorable efficiency variance of $123.
Marvel Parts, Inc. manufactures auto accessories including seat covers. The company uses a standard costing system to set budgets. In August, actual production and costs differed from standards. Direct materials cost $1,234 more than standard due to an unfavorable price variance of $456 and no quantity variance. Direct labor cost $3,456 less than standard due to a favorable rate variance of $789 and an unfavorable efficiency variance of $1,234. Variable overhead cost $567 more than standard due to an unfavorable rate variance of $234 and a favorable efficiency variance of $123.
Marvel Parts, Inc. manufactures auto accessories including seat covers. The company uses a standard costing system to set budgets. In August, actual production and costs differed from standards. Direct materials cost $1,234 more than standard due to an unfavorable price variance of $456 and no quantity variance. Direct labor cost $3,456 less than standard due to a favorable rate variance of $789 and an unfavorable efficiency variance of $1,234. Variable overhead cost $567 more than standard due to an unfavorable rate variance of $234 and a favorable efficiency variance of $123.
Marvel Parts, Inc., manufactures auto accessories. One of the company's
products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should or! "#$ hours each month to produce %,&$$ sets of covers. The standard costs associated ith this level of production are' Total Per (et of )overs *irect materials +,-,%#$ +%%.#$ *irect labor +",..% %.#% /ariable manufacturing overhead 0based on direct labor1 hours2 +3,,&$ $.&$ +%&.%%
*uring August, the factory or!ed only "#$ direct labor1hours and produced %,"$$ sets of covers. The folloing actual costs ere recorded during the month' Total Per (et of )overs *irect materials 0#,-3$ yards2 +&%,."$ +%..3$ *irect labor +#,33% ..$$ /ariable manufacturing overhead +.,3%$ 3.3& %".%&
At standard, each set of covers should re4uire . yards of material. All of the materials purchased during the month ere used in production. Requirement 1: )ompute the direct materials price and 4uantity variances for August (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! Round your ans%ers to the nearest dollar amount! &mit the "'" sign in your res$onse!#'
Materials price variance + + (Click to select)Favorable None Unfavorable Materials 4uantity variance + + (Click to select)NoneFU Requirement (: )ompute the direct labor rate and efficiency variances for August (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! Round your ans%ers to the nearest dollar amount! &mit the "'" sign in your res$onse!#'
5abor rate variance + + (Click to select)UNoneF 5abor efficiency variance + (Click to select)Favorable None Unfavorable Requirement ): )ompute the variable overhead rate and efficiency variances for August(Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#'
/ariable overhead rate variance + (Click to select)None Unfavorable Favorable /ariable overhead efficiency variance + (Click to select)UNoneF 6%
7rie )ompany manufactures a small )* player called the 8ogging Mate. The company uses standards to control its costs. The labor standards that have been set for one 8ogging Mate )* player are as follos' (tandard 9ours (tandard :ate per 9our (tandard )ost %; minutes +& +%.; *uring August, #,;-$ hours of direct labor time ere needed to ma!e 3-,,$$ units of the 8ogging Mate. The direct labor cost totaled +,$,$-3 for the month. Requirement 1: ( a# <hat direct labor cost should have been incurred to ma!e 3-,,$$ units of the 8ogging Mate= (&mit the "'" sign in your res$onse!# (tandard direct labor cost +
( b# >y ho much does this differ from the cost that as incurred= (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!# Total variance + (Click to select)NoneUF
Requirement (: >rea! don the difference in cost from :e4uirement 3 above into a labor rate variance and a labor efficiency variance. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
5abor rate variance + (Click to select)FUNone 5abor efficiency variance + (Click to select)UNoneF
Requirement ): The budgeted variable manufacturing overhead rate is +;., per direct labor1hour. *uring August, the company incurred +;;,3;# in variable manufacturing overhead cost. )ompute the variable overhead rate and efficiency variances for the month. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
/ariable Overhead :ate /ariance + (Click to select)NoneUF /ariable Overhead 7fficiency /ariance + (Click to select)UNoneF 6. 9uron )ompany produces a commercial cleaning compound !non as ?oom. The direct materials and direct labor standards for one unit of ?oom are given belo' (tandard @uantity or 9ours (tandard Price or :ate (tandard )ost *irect materials "., pounds +%.- per pound +%3.", *irect labor $.. hours +-.# per hour +%.-;
*uring the most recent month, the folloing activity as recorded' a. %$,&,$ pounds of material ere purchased at a cost of +%." per pound. b. All of the material purchased as used to produce %,,$$ units of ?oom. c. &"$ hours of direct labor time ere recorded at a total labor cost of +",&.#. Requirement 1: )ompute the direct materials price and 4uantity variances for the month. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#!In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
Materials price variance + (Click to select)UNoneF Materials 4uantity variance + (Click to select)NoneUF
Requirement (: )ompute the direct labor rate and efficiency variances for the month. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#!In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
5abor rate variance + (Click to select)NoneFU 5abor efficiency variance + (Click to select)UNoneF 6; *ason Toys, 5td., produces a toy called the MaAe. The company has recently established a standard cost system to help control costs and has established the folloing standards for the MaAe toy'
*irect materials' " microns per toy at +$.. per micron *irect labor' 3.; hours per toy at +&.# per hour
*uring 8uly, the company produced ;,-$$ MaAe toys. Production data for the month on the toy follo'
*irect materials: "3,$$$ microns ere purchased at a cost of +$.%" per micron. %#,3%, of these microns ere still in inventory at the end of the month. *irect labor: ",3&$ direct labor1hours ere or!ed at a cost of +,$,#.&.
Requirement 1' )ompute the direct materials price and 4uantity variances for 8uly. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! Round your ans%ers to the nearest dollar amount! &mit the "'" sign in your res$onse!#
Material price variance + (Click to select)NoneFU Material 4uantity variance + (Click to select)UFNone 6, /ictoria )hocolates, 5td., ma!es premium handcrafted chocolate confections in 5ondon. The oner of the company is setting up a standard cost system and has collected the folloing data for one of the company's products, the 7mpire Truffle. This product is made ith the finest hite chocolate and various fillings. The data belo pertain only to the hite chocolate used in the product 0the currency is stated in pounds denoted here as B2'
Material re4uirements, !ilograms of hite chocolate per doAen truffles $.#& !ilograms Alloance for aste, !ilograms of hite chocolate per doAen truffles $.$. !ilograms Alloance for rejects, !ilograms of hite chocolate per doAen truffles $.$% !ilograms Purchase price, finest grade hite chocolate B3$ per !ilogram Purchase discount .C of purchase price (hipping cost from the supplier in >elgium B$.%, per !ilogram :eceiving and handling cost B$.3, per !ilogram
Requirement 1: *etermine the standard price of a !ilogram of hite chocolate. (Round your ans%er to ( decimal $laces! &mit the "+" sign in your res$onse!# (tandard price B
Requirement (: *etermine the standard 4uantity of hite chocolate for a doAen truffles. (Round your ans%er to ( decimal $laces!#
(tandard 4uantity !ilograms Requirement ): *etermine the standard cost of the hite chocolate in a doAen truffles. (Round your ans%er to ( decimal $laces! &mit the "+" sign in your res$onse!#
(tandard cost B 6& Management of Mittel :hein AD of EFln, Dermany, ould li!e to reduce the amount of time beteen hen a customer places an order and hen the order is shipped. Gor the first 4uarter of operations during the current year the folloing data ere reported'
Inspection time $., days <ait time 0from order to start of production2 3&." days Process time %.# days Move time 3., days @ueue time ;.. days
Requirement 1: )ompute the throughput time. (Round your ans%er to 1 decimal $lace!#
Throughput time days Requirement (: )ompute the manufacturing cycle efficiency 0M)72 for the 4uarter. (Round your ans%er to ( decimal $laces!#
Manufacturing cycle efficiency
Requirement ): <hat percentage of the throughput time as spent in non1value1added activities= (Round your ans%er to the nearest %hole number! &mit the "," sign in your res$onse!#
Throughput time C Requirement -: )ompute the delivery cycle time.(Round your ans%er to 1 decimal $lace!# *elivery cycle time days Requirement .: If by using 5ean Production all 4ueue time during production is eliminated, hat ill be the ne M)7= (Round your ans%er to ) decimal $laces!#
Manufacturing cycle efficiency
6" 5ogistics (olutions provides order fulfillment services for dot.com merchants. The company maintains arehouses that stoc! items carried by its dot.com clients. <hen a client receives an order from a customer, the order is forarded to 5ogistics (olutions, hich pulls the item from storage, pac!s it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor1hours.
In the most recent month, %$$,$$$ items ere shipped to customers using -,-$$ direct labor hours. The company incurred a total of +.$,3-, in variable overhead costs.
According to the company's standards, $.$, direct labor1hours are re4uired to fulfill an order for one item and the variable overhead rate is +..3 per direct laborHhour. (a # <hat variable overhead cost should have been incurred to fill the orders for the %$$,$$$ items= (&mit the "'" sign in your res$onse!#
/ariable overhead cost +
(b # 9o much does this differ from the actual variable overhead cost= (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!# Total variable overhead variance + (Click to select)FUNone 0) >rea! don the difference computed in :e4uirement 3 above into a variable overhead rate variance and a variable overhead efficiency variance. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
/ariable overhead rate variance + (Click to select)UNoneF /ariable overhead efficiency variance + (Click to select)NoneUF 6# (!y)hefs, Inc., prepares in1flight meals for a number of major airlines. One of the company's products is grilled salmon in dill sauce ith baby ne potatoes and spring vegetables. *uring the most recent ee!, the company prepared ",$$$ of these meals using 3,;.$ direct labor1hours. The company paid these direct labor or!ers a total of +3;,&,# for this or!, or +3$.%, per hour.
According to the standard cost card for this meal, it should re4uire $.%3 direct labor1hours at a cost of +3$ per hour. (a # <hat direct labor cost should have been incurred to prepare ",$$$ meals= (&mit the "'" sign in your res$onse#
*irect labor cost +
(b # 9o much does this differ from the actual direct labor cost= (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!# Total direct labor variance + (Click to select)UNoneF 0) >rea! don the difference computed in :e4uirement 3 above into a labor rate variance and a labor efficiency variance. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
5abor rate variance + (Click to select)UNoneF 5abor efficiency variance + (Click to select)UFNone 6- >andar Industries >erhad of Malaysia manufactures sporting e4uipment. One of the company's products, a football helmet for the Iorth American mar!et, re4uires a special plastic. *uring the 4uarter ending 8une .$, the company manufactured .",$$$ helmets, using %%,-;$ !ilograms of plastic. The plastic cost the company :M3-",%#;. 0The currency in Malaysia is the ringgit, hich is denoted here by :M.2 According to the standard cost card, each helmet should re4uire $.,; !ilograms of plastic, at a cost of :M- per !ilogram. Requirement 1: (a # <hat cost for plastic should have been incurred to ma!e .",$$$ helmets= (&mit the "R/" sign in your res$onse!#
)ost incurred :M (b # 9o much greater or less is this than the cost that as incurred= (&mit the "R/" sign in your res$onse!# (tandard cost is (Click to select)greaterless by :M than the actual cost incurred.
Requirement (: >rea! don the difference computed in :e4uirement 3 above into a materials price variance and a materials 4uantity variance. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "R/" sign in your res$onse!#
Materials price variance :M (Click to select)UFNone Materials 4uantity variance :M (Click to select)UNoneF 63$ )ompanhia >radesco, (.A., of >raAil, an industrial supply store chain, has to divisions. The company's contribution format income statement segmented by divisions for last year is given belo 0the currency in >raAil is the real, denoted here by :2' *ivision Total )ompany Plastics Dlass (ales :.,;--,-$$ :%,$$3,$$$ :3,;-#,-$$ /ariable eJpenses 3,"3;,$,3 -&$,;#$ ",.,,"3 )ontribution margin 3,"#,,#;- 3,$;$,,%$ ";,,.%- Traceable fiJed eJpenses'
Advertising &$-,%$$ %-",$$$ .3%,%$$ *epreciation %%&,.$$ 33.,$$$ 33.,.$$ Administration ;.;,-,- %3$,$$$ %%;,-,- Total 3,%"$,;,- &%$,$$$ &,$,;,- *ivision segment margin ,3,,.-$ :;%$,,%$ :-;,#"$ )ommon fiJed eJpenses .#",$$$ Iet operating income :3%#,.-$ Top management doesn't understand hy the Dlass *ivision has such a lo segment margin hen its sales are only %, less than sales in the Plastics *ivision. Accordingly, management has directed that the Dlass *ivision be further segmented into product lines. The folloing information is available on the product lines in the Dlass *ivision' Dlass *ivision Product 5ines Glat Dlass Auto Dlass (pecialty Dlass (ales :,$.,$$$ "$3,-$$ %-;,$$$ Traceable fiJed eJpenses'
Advertising :#$,;$$ :33%,;$$ :33-,;$$ *epreciation :%;,-$$ :,,,"$$ :.%,"$$ Administration :%-,&$$ :.,,3$$ :;3,"$$ /ariable eJpenses as a percentage of sales &,C .-C ,%C Analysis shos that :33#,,,- of the Dlass *ivision's administration eJpenses are common to the product lines. Requirement 1: Prepare a contribution format segmented income statement for the Dlass *ivision ith segments defined as product lines. (egative amounts other than the e0$enses should be indicated by a minus sign! &mit the "R" sign in your res$onse!# Product 5ine Dlass *ivision Glat Dlass Auto Dlass (pecialty Dlass (ales : : : : /ariable eJpenses )ontribution margin
Traceable fiJed eJpenses'
Advertising *epreciation Administration Total Product line segment margin : : : )ommon fiJed eJpenses
Administration *ivisional segment margin : Requirement (: Management is surprised by (pecialty Dlass's poor shoing and ould li!e to have the product line segmented by mar!et. The folloing information is available about the to mar!ets in hich (pecialty Dlass is sold' (pecialty Dlass Mar!ets
Advertising :.-,&$$ :"-,#$$ /ariable eJpenses as a percentage of sales ;.C "$C All of (pecialty Dlass's depreciation and administration eJpenses are common to the mar!ets in hich the product is sold. )alculate the folloing for the (pecialty Dlass product line ith segments defined as mar!ets. (egative amounts should be indicated by a minus sign! &mit the "R" sign in your res$onse!# *omestic mar!et segment margin : Goreign mar!et segment margin : Product line segment margin : Requirement ): (a # :efer to the statement prepared in 0:e4uirement 32 above. The sales manager ants to run a special promotional campaign on one of the product lines over the neJt month. A mar!et study indicates that such a campaign ould increase sales of Glat Dlass by :%$$,$$$ or sales of Auto Dlass by :3;&,$$$. The campaign ould cost :%-,$$$. )alculate the increased net operating income. (&mit the "R" sign in your res$onse!# Glat Dlass Auto Dlass Iet operating income : : (b # <hich product line should be chosen=
(Click to select)Auto Glass Flat Glass 633 <ingate )ompany, a holesale distributor of videotapes, has been eJperiencing losses for some time, as shon by its most recent monthly contribution format income statement, hich follos'
(ales +3,,%$,$$$ /ariable eJpenses ,;;,&$$ )ontribution margin -",,;$$ GiJed eJpenses 3,$".,$$$ Iet operating income 0loss2 1+-",&$$
In an effort to isolate the problem, the president has as!ed for an income statement segmented by division. Accordingly, the Accounting *epartment has developed the folloing information'
*ivision 7ast )entral <est (ales +;&$,$$$ +&$$,$$$ +;&$,$$$ /ariable eJpenses as a percentage of sales ,%C %3C .-C Traceable fiJed eJpenses +3$",$$$ +.%3,$$$ +%$#,$$$
Requirement 1: Prepare a contribution format income statement segmented by divisions, as desired by the president. (In$ut all amount as $ositive value e0ce$t divisional segment loss and net o$erating loss %hich should be indicated %ith a minus sign! &mit the "'" sign in your res$onse!#
*ivisional segment margin + + + )ommon fiJed eJpenses not traceable to divisions
Iet operating (Click to select)incomeloss +
Requirement (:
(a # As a result of a mar!eting study, the president believes that sales in the <est *ivision could be increased by 3;C if monthly advertising in that division ere increased by +%3,$$$. )ompute the Incremental net operating income. (egative amount should be indicated by a minus sign! &mit the "'" sign in your res$onse!#
Incremental net operating income +
(b # <ould you recommend the increased advertising= (Click to select)NoYes 63% :aner, 9arris, K )han is a consulting firm that specialiAes in information systems for medical and dental clinics. The firm has to offices1one in )hicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. Assume that Minneapolis' sales by major mar!et are as follos' Mar!et Minneapolis Medical *ental (ales +,3$,$$$ 3$$C +.;$,$$$ 3$$C +3"$,$$$ 3$$C /ariable eJpenses .$&,$$$ &$C %%3,$$$ &,C #,,$$$ ,$C )ontribution margin %$;,$$$ ;$C 33-,$$$ .,C #,,$$$ ,$C Traceable fiJed eJpenses &3,%$$ 3%C 3",$$$ ,C ;;,%$$ %&C Mar!et segment margin 3;%,#$$ %#C +3$%,$$$ .$C +;$,#$$ %;C )ommon fiJed eJpenses not traceable to mar!ets 3,,.$$ .C Office segment margin +3%",,$$ %,C
The company ould li!e to initiate an intensive advertising campaign in one of the to mar!ets during the neJt month. The campaign ould cost +&,#$$. Mar!eting studies indicate that such a campaign ould increase sales in the Medical mar!et by +,-,,$$ or increase sales in the *ental mar!et by +,3,$$$. Required: *etermine the increase in net operating income in each mar!et if the advertising campaign ere to be initiated in that mar!et. (&mit the "'" sign in your res$onse!# Medical *ental Increase in net operating income + + 63. :aner, 9arris, K )han is a consulting firm that specialiAes in information systems for medical and dental clinics. The firm has to officesLone in )hicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format income statement for the company's most recent year is given belo'
Office Total )ompany )hicago Minneapolis (ales +3,$,$,$$ $ 3$$C +%3$,$$$ 3$$C +#;$,$$$ 3$$C /ariable eJpenses ,&",$$$ ,;C &.,$$$ .$C ,$;,$$$ &$C )ontribution margin ;#.,$$$ ;&C 3;",$$$ "$C ..&,$$$ ;$C Traceable fiJed eJpenses %.,,%$$ %%C 3$-,%$$ ,%C 3%&,$$$ 3,C Office segment margin %;",#$$ %;C +.",#$$ 3#C +%3$,$$$ %,C )ommon fiJed eJpenses not traceable to offices 3&#,$$$ 3&C Iet operating income +"-,#$$ #C Requirement 1: >y ho much ould the company's net operating income increase if Minneapolis increased its sales by +3$,,$$$ per year= Assume no change in cost behavior patterns. (&mit the "'" sign in your res$onse!#
Iet operating income + :efer to the original data. Assume that sales in )hicago increase by +"$,$$$ neJt year and that sales in Minneapolis remain unchanged. Assume no change in fiJed costs. Prepare a ne segmented income statement for the company. (Round your $ercentage amounts to ( decimal $laces! In$ut all amount as $ositive value! &mit the "'" and "," signs in your res$onse!#
(egments Total )ompany )hicago Minneapolis Amount C Amount C Amount C (ales + + + /ariable eJpenses
)ontribution margin
Traceable fiJed eJpenses
Office segment margin + + )ommon fiJed eJpenses not traceable to segments
Iet operating income + 63; (elected sales and operating data for three divisions of different structural engineering firms are given as follos'
*ivision A *ivision > *ivision ) (ales +,,3$$,$$$ +-,$$$,$$$ +#,&$$,$$$ Average operating assets +3,,-$,$$$ +,,-$$,$$$ +3,,$$,$$$ Iet operating income +.$,,$$$ +#-&,$$$ +..$,$$$ Minimum re4uired rate of return %$C %.C %%C Requirement 1: )ompute the return on investment 0:OI2 for each division using the formula stated in terms of margin and turnover. (Round all calculations to ( decimal $laces, e!g!, !1()- as 1(!)-! &mit the "," sign in your res$onse!#
:OI *ivision A C *ivision > C *ivision ) C )ompute the residual income for each division. (1eave no cells blan2, be certain to enter "3" %herever required! egative amounts should be indicated by a minus sign! &mit the "'" sign in your res$onse!#
*ivision A *ivision > *ivision ) :esidual income + + + 63, (elected operating data for to divisions of Outbac! >reing, 5td., of Australia are given belo 0the currency is the Australian dollar, denoted here as +2' *ivision @ueensland Ie (outh <ales (ales +3,$$$,$$$ +3,",$,$$$ Average operating assets +,$$,$$$ +,$$,$$$ Iet operating income +-$,$$$ +3$,,$$$ Property, plant, and e4uipment 0net2 +%,$,$$$ +%$$,$$$
Requirement 1: )ompute the rate of return for each division using the return on investment 0:OI2 formula stated in terms of margin and turnover. (Round all calculations to ( decimal $laces! &mit the "," sign in your res$onse!# :OI @ueensland C Ie (outh <ales C
Requirement (: <hich divisional manager seems to be doing the better job= (Click to select) New South WalesQueensland #16 Meiji Isetan )orp. of 8apan has to regional divisions ith head4uarters in Osa!a and Mo!ohama. (elected data on the to divisions follo 0in millions of yen, denoted by N2' *ivision Osa!a Mo!ohama (ales N#,,$$,$$$ N%$,-$$,$$$ Iet operating income N-%$,$$$ N%,,"$,$$$ Average operating assets N%,#$$,$$$ N#,.$$,$$$
Requirement 1: Gor each division, compute the return on investment 0:OI2 in terms of margin and turnover. (Round your ans%ers to ( decimal $laces! &mit the "," sign in your res$onse!# Osa!a Mo!ohama :eturn on investment C C
Requirement (: Assume that the company evaluates performance using residual income and that the minimum re4uired rate of return for any division is %$C. )ompute the residual income for each division. (&mit the "4" sign in your res$onse!# Osa!a Mo!ohama :esidual income N N
Requirement ): Is Mo!ohama's greater amount of residual income an indication that it is better managed= (Click to select)YesNo 63" :oyal 5ancare )ompany produces and sells to pac!aged products, <eedban and Dreengro. :evenue and cost information relating to the products follo' Product <eedban Dreengro (elling price per unit +3$.$$ +...$$ /ariable eJpenses per unit +..$$ +3;.$$ Traceable fiJed eJpenses per year +3%#,$$$ +;-,$$$
)ommon fiJed eJpenses in the company total +333,$$$ annually. 5ast year the company produced and sold .#,,$$ units of <eedban and %3,$$$ units of Dreengro. Required: Prepare a contribution format income statement for the year segmented by product lines. (In$ut all amount as $ositive value! &mit the "'" sign in your res$onse!# Total <eedban Dreengro (ales + + + /ariable eJpenses )ontribution margin Traceable fiJed eJpenses
Product line segment margin + + )ommon fiJed eJpenses not traceable to products
Iet operating income + 63# >andar Industries >erhad of Malaysia manufactures sporting e4uipment. One of the company's products, a football helmet for the Iorth American mar!et, re4uires a special plastic. *uring the 4uarter ending 8une .$, the company manufactured ;.,$$$ helmets, using %;,-;$ !ilograms of plastic. The plastic cost the company :M3#-,,;;. 0The currency in Malaysia is the ringgit, hich is denoted here by :M.2 According to the standard cost card, each helmet should re4uire $., !ilograms of plastic, at a cost of :M# per !ilogram. Requirement 1: (a # <hat cost for plastic should have been incurred to ma!e ;.,$$$ helmets= (&mit the "R/" sign in your res$onse!#
)ost incurred :M (b # 9o much greater or less is this than the cost that as incurred= (&mit the "R/" sign in your res$onse!# (tandard cost is (Click to select)lessgreater by :M than the actual cost incurred.
Requirement (: >rea! don the difference computed in :e4uirement 3 above into a materials price variance and a materials 4uantity variance. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "R/" sign in your res$onse!#
Materials price variance :M (Click to select)NoneFU Materials 4uantity variance :M (Click to select)UNoneF 63- (!y)hefs, Inc., prepares in1flight meals for a number of major airlines. One of the company's products is grilled salmon in dill sauce ith baby ne potatoes and spring vegetables. *uring the most recent ee!, the company prepared 3;,$$$ of these meals using .,;&$ direct labor1hours. The company paid these direct labor or!ers a total of +..,$;. for this or!, or +-.,, per hour.
According to the standard cost card for this meal, it should re4uire $.%, direct labor1hours at a cost of +-.. per hour. Requirement 1: (a # <hat direct labor cost should have been incurred to prepare 3;,$$$ meals= (&mit the "'" sign in your res$onse#
*irect labor cost +
(b # 9o much does this differ from the actual direct labor cost= (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!# Total direct labor variance + (Click to select)FNoneU Requirement (: >rea! don the difference computed in :e4uirement 3 above into a labor rate variance and a labor efficiency variance. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
5abor rate variance + (Click to select)NoneUF 5abor efficiency variance + (Click to select)NoneUF 6%$ 5ogistics (olutions provides order fulfillment services for dot.com merchants. The company maintains arehouses that stoc! items carried by its dot.com clients. <hen a client receives an order from a customer, the order is forarded to 5ogistics (olutions, hich pulls the item from storage, pac!s it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor1hours.
In the most recent month, 3"$,$$$ items ere shipped to customers using &,"$$ direct labor hours. The company incurred a total of +%.,33, in variable overhead costs.
According to the company's standards, $.$; direct labor1hours are re4uired to fulfill an order for one item and the variable overhead rate is +.., per direct laborHhour. Requirement 1: (a # <hat variable overhead cost should have been incurred to fill the orders for the 3"$,$$$ items= (&mit the "'" sign in your res$onse!#
/ariable overhead cost +
(b # 9o much does this differ from the actual variable overhead cost= (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!# Total variable overhead variance + (Click to select)FNoneU Requirement (: >rea! don the difference computed in :e4uirement 3 above into a variable overhead rate variance and a variable overhead efficiency variance. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
/ariable overhead rate variance + (Click to select)NoneFU /ariable overhead efficiency variance + (Click to select)UFNone 6%3 Management of Mittel :hein AD of EFln, Dermany, ould li!e to reduce the amount of time beteen hen a customer places an order and hen the order is shipped. Gor the first 4uarter of operations during the current year the folloing data ere reported'
Inspection time $.; days <ait time 0from order to start of production2 3,.# days Process time %." days Move time $.& days @ueue time ..- days
Requirement 1: )ompute the throughput time. (Round your ans%er to 1 decimal $lace!#
Throughput time days Requirement (: )ompute the manufacturing cycle efficiency 0M)72 for the 4uarter. (Round your ans%er to ( decimal $laces!#
Manufacturing cycle efficiency
Requirement ): <hat percentage of the throughput time as spent in non1value1added activities= (Round your ans%er to the nearest %hole number! &mit the "," sign in your res$onse!#
Throughput time C Requirement -: )ompute the delivery cycle time.(Round your ans%er to 1 decimal $lace!# *elivery cycle time days Requirement .: If by using 5ean Production all 4ueue time during production is eliminated, hat ill be the ne M)7= (Round your ans%er to ) decimal $laces!#
Manufacturing cycle efficiency
6%% /ictoria )hocolates, 5td., ma!es premium handcrafted chocolate confections in 5ondon. The oner of the company is setting up a standard cost system and has collected the folloing data for one of the company's products, the 7mpire Truffle. This product is made ith the finest hite chocolate and various fillings. The data belo pertain only to the hite chocolate used in the product 0the currency is stated in pounds denoted here as B2'
Material re4uirements, !ilograms of hite chocolate per doAen truffles $."; !ilograms Alloance for aste, !ilograms of hite chocolate per doAen truffles $.$% !ilograms Alloance for rejects, !ilograms of hite chocolate per doAen truffles $.$3 !ilograms Purchase price, finest grade hite chocolate B- per !ilogram Purchase discount &C of purchase price (hipping cost from the supplier in >elgium B$.;, per !ilogram :eceiving and handling cost B$.3 per !ilogram
Requirement 1: *etermine the standard price of a !ilogram of hite chocolate. (Round your ans%er to ( decimal $laces! &mit the "+" sign in your res$onse!# (tandard price B
Requirement (: *etermine the standard 4uantity of hite chocolate for a doAen truffles. (Round your ans%er to ( decimal $laces!#
(tandard 4uantity !ilograms Requirement ): *etermine the standard cost of the hite chocolate in a doAen truffles. (Round your ans%er to ( decimal $laces! &mit the "+" sign in your res$onse!#
(tandard cost B 6%. *ason Toys, 5td., produces a toy called the MaAe. The company has recently established a standard cost system to help control costs and has established the folloing standards for the MaAe toy'
*irect materials' & microns per toy at +$... per micron *irect labor' 3., hours per toy at +&.- per hour
*uring 8uly, the company produced ;,&$$ MaAe toys. Production data for the month on the toy follo'
*irect materials: ".,$$$ microns ere purchased at a cost of +$.%- per micron. .#,,$$ of these microns ere still in inventory at the end of the month. *irect labor: ",.$$ direct labor1hours ere or!ed at a cost of +,%,,&$. Requirement 1' )ompute the direct materials price and 4uantity variances for 8uly. (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! Round your ans%ers to the nearest dollar amount! &mit the "'" sign in your res$onse!#
Material price variance + (Click to select)NoneFU Material 4uantity variance + (Click to select)UNoneF 6%; 9uron )ompany produces a commercial cleaning compound !non as ?oom. The direct materials and direct labor standards for one unit of ?oom are given belo' (tandard @uantity or 9ours (tandard Price or :ate (tandard )ost *irect materials "., pounds +. per pound +%%., *irect labor $.. hours +3$.; per hour +..3%
*uring the most recent month, the folloing activity as recorded' a. %3,3$$ pounds of material ere purchased at a cost of +%.- per pound. b. All of the material purchased as used to produce %,&$$ units of ?oom. c. "$$ hours of direct labor time ere recorded at a total labor cost of +#,&3$. Requirement 1: )ompute the direct materials price and 4uantity variances for the month. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#!In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
Materials price variance + (Click to select)UNoneF Materials 4uantity variance + (Click to select)NoneFU
Requirement (: )ompute the direct labor rate and efficiency variances for the month. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#!In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
5abor rate variance + (Click to select)UFNone 5abor efficiency variance + (Click to select)UFNone 6%, 7rie )ompany manufactures a small )* player called the 8ogging Mate. The company uses standards to control its costs. The labor standards that have been set for one 8ogging Mate )* player are as follos' (tandard 9ours (tandard :ate per 9our (tandard )ost .$ minutes +,.; +%." *uring August, 3$,%%$ hours of direct labor time ere needed to ma!e 3-,;$$ units of the 8ogging Mate. The direct labor cost totaled +,.,3;; for the month. Requirement 1: ( a# <hat direct labor cost should have been incurred to ma!e 3-,;$$ units of the 8ogging Mate= (&mit the "'" sign in your res$onse!# (tandard direct labor cost +
( b# >y ho much does this differ from the cost that as incurred= (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!# Total variance + (Click to select)UFNone
Requirement (: >rea! don the difference in cost from :e4uirement 3 above into a labor rate variance and a labor efficiency variance. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
5abor rate variance + (Click to select)NoneUF 5abor efficiency variance + (Click to select)NoneFU
Requirement ): The budgeted variable manufacturing overhead rate is +;., per direct labor1hour. *uring August, the company incurred +,3,3$$ in variable manufacturing overhead cost. )ompute the variable overhead rate and efficiency variances for the month. (Indicate the efect of the variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#
/ariable Overhead :ate /ariance + (Click to select)FNoneU /ariable Overhead 7fficiency /ariance + (Click to select)NoneFU 6%& Marvel Parts, Inc., manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should or! "#$ hours each month to produce 3,-,$ sets of covers. The standard costs associated ith this level of production are' Total Per (et of )overs *irect materials +.#,&3$ +3-.#$ *irect labor +&,-;% ..,& /ariable manufacturing overhead 0based on direct labor1 hours2 +%,.;$ 3.%$ +%;.,&
*uring August, the factory or!ed only "-$ direct labor1hours and produced %,3$$ sets of covers. The folloing actual costs ere recorded during the month' Total Per (et of )overs *irect materials 0&,,3$ yards2 +.-,$&$ +3#.&$ *irect labor +",-$$ .."& /ariable manufacturing overhead +;,";$ %.%& %;.&%
At standard, each set of covers should re4uire . yards of material. All of the materials purchased during the month ere used in production. Requirement 1: )ompute the direct materials price and 4uantity variances for August (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! Round your ans%ers to the nearest dollar amount! &mit the "'" sign in your res$onse!#'
Materials price variance + (Click to select)UNoneF Materials 4uantity variance + (Click to select)NoneFU Requirement (: )ompute the direct labor rate and efficiency variances for August (Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! Round your ans%ers to the nearest dollar amount! &mit the "'" sign in your res$onse!#'
5abor rate variance + (Click to select)FNoneU 5abor efficiency variance + (Click to select)UNoneF Requirement ): )ompute the variable overhead rate and efficiency variances for August(Indicate the efect of each variance by selecting "F" for favorable, "U" for unfavorable, and "one" for no efect (i!e!, "ero variance#! In$ut all amounts as $ositive values! &mit the "'" sign in your res$onse!#'
/ariable overhead rate variance + (Click to select)NoneFU /ariable overhead efficiency variance + (Click to select)NoneUF 6%" :oyal 5ancare )ompany produces and sells to pac!aged products, <eedban and Dreengro. :evenue and cost information relating to the products follo' Product <eedban Dreengro (elling price per unit +#.$$ +.,.$$ /ariable eJpenses per unit +%.-$ +3$.$$ Traceable fiJed eJpenses per year +3.,,$$$ +,$,$$$ )ommon fiJed eJpenses in the company total +-&,$$$ annually. 5ast year the company produced and sold ;.,,$$ units of <eedban and %%,,$$ units of Dreengro. Required: Prepare a contribution format income statement for the year segmented by product lines. (In$ut all amount as $ositive value! &mit the "'" sign in your res$onse!# Total <eedban Dreengro (ales + + + /ariable eJpenses )ontribution margin Traceable fiJed eJpenses
Product line segment margin + + )ommon fiJed eJpenses not traceable to products
Iet operating income + 6%# Meiji Isetan )orp. of 8apan has to regional divisions ith head4uarters in Osa!a and Mo!ohama. (elected data on the to divisions follo 0in millions of yen, denoted by N2' *ivision Osa!a Mo!ohama (ales N-,,$$,$$$ N3-,&$$,$$$ Iet operating income N-.$,$$$ N%,&"$,$$$ Average operating assets N%,#$$,$$$ N-,;$$,$$$
Requirement 1: Gor each division, compute the return on investment 0:OI2 in terms of margin and turnover. (Round your ans%ers to ( decimal $laces! &mit the "," sign in your res$onse!# Osa!a Mo!ohama :eturn on investment C C
Requirement (: Assume that the company evaluates performance using residual income and that the minimum re4uired rate of return for any division is 3.C. )ompute the residual income for each division. (&mit the "4" sign in your res$onse!# Osa!a Mo!ohama :esidual income N N
Requirement ): Is Mo!ohama's greater amount of residual income an indication that it is better managed= (Click to select)NoYes 6%- (elected operating data for to divisions of Outbac! >reing, 5td., of Australia are given belo 0the currency is the Australian dollar, denoted here as +2' *ivision @ueensland Ie (outh <ales (ales +3,$$$,$$$ +3,.,$,$$$ Average operating assets +%,$,$$$ +",$,$$$ Iet operating income +&$,$$$ +3;#,,$$ Property, plant, and e4uipment 0net2 +%&$,$$$ +%%$,$$$
Requirement 1: )ompute the rate of return for each division using the return on investment 0:OI2 formula stated in terms of margin and turnover. (Round all calculations to ( decimal $laces! &mit the "," sign in your res$onse!# :OI @ueensland C Ie (outh <ales C
Requirement (: <hich divisional manager seems to be doing the better job= (Click to select) Queensland New South Wales #30 (elected sales and operating data for three divisions of different structural engineering firms are given as follos'
*ivision A *ivision > *ivision ) (ales +&,3$$,$$$ +3$,&$$,$$$ +#,,$$,$$$ Average operating assets +3,,-$,$$$ +,,$$$,$$$ +%,.$$,$$$ Iet operating income +%-3,$$$ +#-;,$$$ +%"&,$$$ Minimum re4uired rate of return 3$C 3.C 3%C
Requirement 1: )ompute the return on investment 0:OI2 for each division using the formula stated in terms of margin and turnover. (Round all calculations to ( decimal $laces, e!g!, !1()- as 1(!)-! &mit the "," sign in your res$onse!#
:OI *ivision A C *ivision > C *ivision ) C Requirement (: )ompute the residual income for each division. (1eave no cells blan2, be certain to enter "3" %herever required! egative amounts should be indicated by a minus sign! &mit the "'" sign in your res$onse!#
*ivision A *ivision > *ivision ) :esidual income + + + 6.3 :aner, 9arris, K )han is a consulting firm that specialiAes in information systems for medical and dental clinics. The firm has to officesLone in )hicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format income statement for the company's most recent year is given belo'
Office Total )ompany )hicago Minneapolis (ales +&$$,$$$ 3$$C +3%$,$$$ 3$$C +;#$,$$$ 3$$C /ariable eJpenses .%;,$$$ ,;C .&,$$$ .$C %##,$$$ &$C )ontribution margin %"&,$$$ ;&C #;,$$$ "$C 3-%,$$$ ;$C Traceable fiJed eJpenses 3.;,;$$ %%C &%,;$$ ,%C "%,$$$ 3,C Office segment margin 3;3,&$$ %;C +%3,&$$ 3#C +3%$,$$$ %,C )ommon fiJed eJpenses not traceable to offices -&,$$$ 3&C Iet operating income +;,,&$$ #C Requirement 1: >y ho much ould the company's net operating income increase if Minneapolis increased its sales by +&$,$$$ per year= Assume no change in cost behavior patterns. (&mit the "'" sign in your res$onse!#
Iet operating income + Requirement (: :efer to the original data. Assume that sales in )hicago increase by +;$,$$$ neJt year and that sales in Minneapolis remain unchanged. Assume no change in fiJed costs. Prepare a ne segmented income statement for the company. (Round your $ercentage amounts to ( decimal $laces! In$ut all amount as $ositive value! &mit the "'" and "," signs in your res$onse!#
(egments Total )ompany )hicago Minneapolis Amount C Amount C Amount C (ales + + + /ariable eJpenses
)ontribution margin
Traceable fiJed eJpenses
Office segment margin + + )ommon fiJed eJpenses not traceable to segments
Iet operating income + 6.% :aner, 9arris, K )han is a consulting firm that specialiAes in information systems for medical and dental clinics. The firm has to offices1one in )hicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. Assume that Minneapolis' sales by major mar!et are as follos' Mar!et Minneapolis Medical *ental (ales +&-$,$$$ 3$$C +;&$,$$$ 3$$C +%.$,$$$ 3$$C /ariable eJpenses ;3;,$$$ &$C %--,$$$ &,C 33,,$$$ ,$C )ontribution margin %"&,$$$ ;$C 3&3,$$$ .,C 33,,$$$ ,$C Traceable fiJed eJpenses #%,#$$ 3%C %.,$$$ ,C ,-,#$$ %&C Mar!et segment margin 3-.,%$$ %#C +3.#,$$$ .$C +,,,%$$ %;C )ommon fiJed eJpenses not traceable to mar!ets %$,"$$ .C Office segment margin +3"%,,$$ %,C
The company ould li!e to initiate an intensive advertising campaign in one of the to mar!ets during the neJt month. The campaign ould cost +-,%$$. Mar!eting studies indicate that such a campaign ould increase sales in the Medical mar!et by +#$,,$$ or increase sales in the *ental mar!et by +&-,$$$. Required: *etermine the increase in net operating income in each mar!et if the advertising campaign ere to be initiated in that mar!et. (&mit the "'" sign in your res$onse!# Medical *ental Increase in net operating income + + 6.. <ingate )ompany, a holesale distributor of videotapes, has been eJperiencing losses for some time, as shon by its most recent monthly contribution format income statement, hich follos'
(ales +3,.;$,$$$ /ariable eJpenses ,3.,%$$ )ontribution margin #%&,#$$ GiJed eJpenses -$-,$$$ Iet operating income 0loss2 1+#%,%$$
In an effort to isolate the problem, the president has as!ed for an income statement segmented by division. Accordingly, the Accounting *epartment has developed the folloing information'
*ivision 7ast )entral <est (ales +.3$,$$$ +,"$,$$$ +;&$,$$$ /ariable eJpenses as a percentage of sales ;#C %&C ;"C Traceable fiJed eJpenses +3$#,$$$ +.%",$$$ +%$$,$$$
Requirement 1: Prepare a contribution format income statement segmented by divisions, as desired by the president. (In$ut all amount as $ositive value e0ce$t divisional segment loss and net o$erating loss %hich should be indicated %ith a minus sign! &mit the "'" sign in your res$onse!#
*ivisional segment margin + + + )ommon fiJed eJpenses not traceable to divisions
Iet operating (Click to select)lossincome +
Requirement (:
(a # As a result of a mar!eting study, the president believes that sales in the <est *ivision could be increased by 3&C if monthly advertising in that division ere increased by +%,,$$$. )ompute the Incremental net operating income. (egative amount should be indicated by a minus sign! &mit the "'" sign in your res$onse!#
Incremental net operating income +
(b # <ould you recommend the increased advertising= (Click to select)YesNo 6.; )ompanhia >radesco, (.A., of >raAil, an industrial supply store chain, has to divisions. The company's contribution format income statement segmented by divisions for last year is given belo 0the currency in >raAil is the real, denoted here by :2' *ivision Total )ompany Plastics Dlass (ales :.,,$%,&$$ :3,--#,$$$ :3,,$;,&$$ /ariable eJpenses 3,".;,..& -,-,$;$ "",,%-& )ontribution margin 3,"&#,%&; 3,$.#,-&$ "%-,.$; Traceable fiJed eJpenses'
Advertising &$",#$$ %-&,$$$ .33,#$$ *epreciation %..,$$$ 33#,$$$ 33,,$$$ Administration ;3-,#&; %3$,$$$ %$-,#&; Total 3,%&$,&&; &%;,$$$ &.&,&&; *ivision segment margin ,$",&$$ :;3;,-&$ :-%,&;$ )ommon fiJed eJpenses .#&,$$$ Iet operating income :3%3,&$$ Top management doesn't understand hy the Dlass *ivision has such a lo segment margin hen its sales are only %, less than sales in the Plastics *ivision. Accordingly, management has directed that the Dlass *ivision be further segmented into product lines. The folloing information is available on the product lines in the Dlass *ivision' Dlass *ivision Product 5ines Glat Dlass Auto Dlass (pecialty Dlass (ales :;--,$$$ &--,&$$ .$&,$$$ Traceable fiJed eJpenses'
Advertising :#$,.$$ :33%,3$$ :33-,;$$ *epreciation :%,,.$$ :,&,%$$ :..,,$$ Administration :.$,3$$ :.;,&$$ :;3,"$$ /ariable eJpenses as a percentage of sales &&C ;3C ,%C Analysis shos that :3$.,;&; of the Dlass *ivision's administration eJpenses are common to the product lines. Requirement 1: Prepare a contribution format segmented income statement for the Dlass *ivision ith segments defined as product lines. (egative amounts other than the e0$enses should be indicated by a minus sign! &mit the "R" sign in your res$onse!# Product 5ine Dlass *ivision Glat Dlass Auto Dlass (pecialty Dlass (ales : : : : /ariable eJpenses )ontribution margin
Traceable fiJed eJpenses'
Advertising *epreciation Administration Total Product line segment margin : : : )ommon fiJed eJpenses
Administration *ivisional segment margin :
Requirement (: Management is surprised by (pecialty Dlass's poor shoing and ould li!e to have the product line segmented by mar!et. The folloing information is available about the to mar!ets in hich (pecialty Dlass is sold' (pecialty Dlass Mar!ets
Advertising :.-,"$$ :"-,"$$ /ariable eJpenses as a percentage of sales ;.C "$C All of (pecialty Dlass's depreciation and administration eJpenses are common to the mar!ets in hich the product is sold. )alculate the folloing for the (pecialty Dlass product line ith segments defined as mar!ets. (egative amounts should be indicated by a minus sign! &mit the "R" sign in your res$onse!# *omestic mar!et segment margin : Goreign mar!et segment margin : Product line segment margin : Requirement ): (a # :efer to the statement prepared in 0:e4uirement 32 above. The sales manager ants to run a special promotional campaign on one of the product lines over the neJt month. A mar!et study indicates that such a campaign ould increase sales of Glat Dlass by :3--,$$$ or sales of Auto Dlass by :3;",$$$. The campaign ould cost :.$,$$$. )alculate the increased net operating income. (&mit the "R" sign in your res$onse!# Glat Dlass Auto Dlass Iet operating income : : (b # <hich product line should be chosen=