Question
4

The Finishing Department of Paragon
Manufacturing Co. prepared the following factory overhead cost budget for
October of the current year, during which it expected to operate at a 100%
capacity of 10,000 machine hours:

During October, the plant was operated for 9,000 machine hours and the factory
overhead costs incurred were as follows: indirect factory wages, $16,400; power
and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000;
depreciation of plant and equipment, $8,800; insurance and property taxes,
$3,200.

Prepare a factory overhead cost
variance report for October. (The budgeted amounts for actual amount produced
should be based on 9,000 machine hours.)

Question 5 (EX 24-5)

In
divisional income statements prepared for franklin Electrical Company, the
Payroll Department costs are charged back to user divisions on the basis of the
number of payroll checks, and the Purchasing Department costs are charged back
on the basis of the number of purchase requisitions. The Payroll Department had expenses of 44010,
and the Purchasing Department had expenses of 18720 for the year. The following annual data for Residential,
Commercial, and Government Contract Divisions were obtained from corporate
records:

Residential
Commercial Government Contract

Sales 420000 500000 1800000

Number
of employees:

Weekly payroll (52 weeks per
year) 144 72 108

Monthly payroll 25 20 18

Number of purchase requisition per
year 1800 1530 1350

a.
Determine the total amount
of payroll checks and purchase requisitions processed per year by each
division.

b.
Using the activity base
information in (a), determine the annual amount of payroll and purchasing costs
charged back to the Residential, Commercial, and Government Contract Divisions
from payroll and purchasing services.

c.
Why does the Residential
Division have a larger service department charge than the other two divisions,
even though its sales are lower?

(Question 6) EX24-9

Outdoor
Athletic Equipment Co. operates two divisions—the Winter Sports Division and
the Summer Sports Division. The following income and expense accounts were
provided from the trail balance as of June 30, 2008, the end of the current
fiscal year, after all adjustments, including those for inventories, were
recorded and posted:

Sales—Winter
Sports (WS)Division………………………………………………….950000

Sales—Summer
Sorts (SS) Division……………………………………………………1437500

Cost
of Goods Sold—Winter Sports (WS) Division—————————512500

Cost
of Goods Sold—Summer Sports (SS)Division………………………………..687500

Sales
Expense—Winter Sports (WS)Division……………………………………….150000

Sales
Expense—Summer Sports (SS) Division……………………………………..205000

Administrative
Expense—Winter Sports (WS) Division………………………97000

Administrative
Expense—Summer Sport (SS) Division…………………………128000

Advertising
Expense………………………………………………………………………….64500

Transportation
Expense…………………………………………………………………..100700

Accounts
Receivable Collection Expense…………………………………………58100

Warehouse
Expense………………………………………………………………………..120000

The
bases to be used in allocating expenses, together with other essential
information, are as follows:

a.
Advertising expense-incurred at headquarters, charged back to
divisions on the basis of usage: Winter Sports Division, 28000; Summer Sports
Division, 36500.

b. Transportation
expense-charged back to divisions at a transfer price of 7.60 per bill of
lading: Winter Sports Division, 6000 bills of lading; Summer Sports Division,
7250 bills of lading.

c.
Accounts receivable collection expense—incurred at
headquarters, charged back to divisions at a transfer price of 5.60 per
invoice: Winter Sports Diviosn, 4500 sales invoices; Summer Sports Division,
5875 sales invoices.

d. Warehouse expense—charged
back to divisions on the basis of floor space used in storing division
products: Winter Sports Division, 25000 square feet; Summer Sports Division,
12500 square feet.

Prepare a
divisional income statement with two column headings: Winter Sports Division
and Summer Sports Division. Provide supporting schedules for determining service
department charges.

Question 7 (EX24-20

Materials
used by the Industrial Division of Crow Manufacturing are currently purchased
from outside suppliers at a cost of 120 per unit. However, the same materials are available
from the Materials Division. The
Materials Division has unused capacity and can produce the materials needed by
the Industrial Division at a variable cost of 95 per unit.

a.
If a transfer price of 105
per unit is established and 40000 units of materials are transferred, with no
reduction in the Materials Division’s current sales, how much would Crow
Manufacturing’s total income from operations increase?

b.
How much would the
Industrial Division’s income from operations increase?

c.
How much would the
Materials Division’s income from operations increase?

Question 8 (PR24-5A)

The
vice president of operations of I4 computer Inc. is evaluating the performance
of two divisions organized as investment centers. Invested assets and condensed
income statement data for the past year for each division are as follows:

Personal
Computing Division Business Computing
Division

Sales 800000 1200000

Cost
of goods sold 460000 780000

Operating
Expenses 180000 156000

Invested
assets 500000 2000000

Instructions:

1.
Prepare condensed
divisional income statements for the year ended Dec. 31 assuming that there
were no service department charges.

2.
Using the DuPont formula
for rate of return on investment, determine the profit margin, investment
turnover, and rate of return on investment for each division.

3.
If management’s minimum acceptable
rate or return is 15%, determine the residual the residual income for each
division.

4.
Discuss the evaluation of
the two divisions, using the performance measures determined in parts (1), (2),
and (3).

information for the first two months of the coming year:

The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are expected to be collected in full in the month of the sale and
the remainder in the month following the sale. One-fourth of the manufacturing
costs are expected to be paid in the month in which they are incurred and the
other three-fourths in the following month. Depreciation, insurance, and
property taxes represent $6,400 of the probable monthly selling and
administrative expenses. Insurance is paid in February and a $40,000
installment on income taxes is expected to be paid in April. Of the remainder
of the selling and administrative expenses, one-half are expected to be paid in
the month in which they are incurred and the balance in the following month.
Capital additions of $250,000 are expected to be paid in March.

Current assets as of March 1 are composed of cash of $45,000 and accounts
receivable of $51,000. Current liabilities as of March 1 are composed of
accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for
operating expenses). Management desires to maintain a minimum cash balance of
$20,000.

Prepare a monthly cash budget for
March and April.

Question
2

Trapp Co. was organized
on August 1 of the current year. Projected sales for the next three months are
as follows:

The company expects to sell 40% of its merchandise for cash. Of the sales on
account, one third are expected to be collected in the month of the sale and
the remainder in the following month.

Prepare a schedule indicating cash
collections of accounts receivable for August, September, and October.

Question 3

Diamond Company produces a chair that requires 5 yds. of material
per unit. The standard price of one yard of material is $7.50. During the
month, 8,500 chairs were manufactured, using 43,700 yards at a cost of $7.60.

Determine the (a) price
variance, (b) quantity variance, and (c) cost variance.