acct 212 home work 4 chapter 21

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acct 212 home work 4 chapter 211.

award:
3.38 out of
4.50 points

Exercise 21-2 Activity-based costing of overhead L.O. P2

Pane
Company produces two types of glass shelving, rounded edge and squared edge,
on the same production line. For the current period, the company reports the following
data.

Rounded Edge

Squared Edge

Total

Direct
materials

$

9,700

$

21,700

$

31,400

Direct
labor

6,100

11,900

18,000

Overhead
(300% of direct labor cost)

18,300

35,700

54,000







Total
cost

$

34,100

$

69,300

$

103,400













Quantity
produced

10,700

ft.

14,200

ft.

Average
cost per ft.

$

3.19

$

4.88










Pane’s
controller wishes to apply activity-based costing (ABC) to allocate the
$54,000 of overhead costs incurred by the two product lines to see whether
cost per foot would change markedly from that reported above. She has
collected the following information.

Overhead
Cost Category (Activity Cost Pool)

Cost

Supervision

$

2,160

Depreciation
of machinery

28,840

Assembly
line preparation

23,000



Total
overhead

$

54,000






She has
also collected the following information about the cost drivers for each
category (cost pool) and the amount of each driver used by the two product
lines.

Usage


Overhead
Cost Category
(Activity Cost Pool)

Driver

Rounded Edge

Squared Edge

Total

Supervision

Direct
labor cost ($)

$

6,100

$

11,900

$

18,000

Depreciation
of machinery

Machine
hours

200

hours

700

hours

900

hours

Assembly
line preparation

Setups
(number)

31

times

95

times

126

times


1.

Assign
these three overhead cost pools to each of the two products using ABC. (Do not round your intermediate calculations and round
final answers to the nearest dollar amount. Omit the “$” sign in
your response.)

2.

Determine
average cost per foot for each of the two products using ABC. (Do not round your intermediate calculations. Round your
answers to 2 decimal places. Omit the “$” sign in your response.)

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Worksheet

Difficulty: Hard

Exercise 21-2 Activity-based costing of overhead L.O. P2

Learning Objective: 21-P2 Assign overhead costs using activity-based
costing.

2.

award:
4.50 out of
4.50 points

Exercise 21-5 Service department expenses allocated to operating
departments L.O. P3

Advertising
and purchasing department expenses of Bookworm Bookstore are allocated to
operating departments on the basis of dollar sales and purchase orders,
respectively. Information about the allocation bases for the three operating
departments follows.

Department

Sales

Purchase Orders

Books

$

449,000

423

Magazines

144,000

310

Newspapers

208,000

265




Total

$

801,000

998








Complete
the following table by allocating the expenses of the two service departments
(advertising and purchasing) to the three operating departments. (Negative amounts should be indicated by a minus sign. Do
not round your intermediate percentages of expense allocation and round
intermediate dollar amounts and final answers to the nearest whole number.
Omit the “$” sign in your response.)

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Difficulty: Hard

Exercise 21-5 Service department expenses allocated to operating
departments L.O. P3

Learning Objective: 21-P3 Prepare departmental income statements and
contribution reports.

3.

award:
4.50 out of
4.50 points

Exercise 21-6 Indirect payroll expense allocated to departments L.O. C1

Monica
Gellar works in both the jewelry department and the hosiery department of a
retail store. Gellar assists customers in both departments and arranges and
stocks merchandise in both departments. The store allocates Gellar’s $20,000
annual wages between the two departments based on a sample of the time worked
in the two departments. The sample is obtained from a diary of hours worked
that Gellar kept in a randomly chosen two-week period. The diary showed the
following hours and activities spent in the two departments.

Selling
in jewelry department

64 hours

Arranging
and stocking merchandise in jewelry department

6 hours

Selling
in hosiery department

12 hours

Arranging
and stocking merchandise in hosiery department

12 hours

Idle
time spent waiting for a customer to enter one of the selling departments

4 hours


Allocate
Gellar’s annual wages between the two departments. (Round
your percentage answers to 1 decimal place. Omit the “$” &
“%” signs in your response.)

Hours Worked

% of Total

Cost

Jewelry
Dept.

70 .gif” alt=”correct”>

74.5 .gif” alt=”correct”>%

$ 14,900 .gif” alt=”correct”>

Hosiery
Dept.

24 .gif” alt=”correct”>

25.5 .gif” alt=”correct”>

5,100 .gif” alt=”correct”>




Totals

94 .gif” alt=”correct”>

100.0 .gif” alt=”correct”> %

$ 20,000 .gif” alt=”correct”>








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Difficulty: Hard

Exercise 21-6 Indirect payroll expense allocated to departments L.O.
C1

Learning Objective: 21-C1 Distinguish between direct and indirect
expenses and identify bases for allocating indirect expenses to departments.

4.

award:
4.50 out of
4.50 points

Exercise 21-8 Investment center analysis L.O. A1

You
must prepare a return on investment analysis for the regional manager of
Out-and-In Burgers. This growing chain is trying to decide which outlet of
two alternatives to open. The first location (A) requires a $500,000
investment and is expected to yield annual net income of $75,000. The second
location (B) requires a $200,000 investment and is expected to yield annual
net income of $44,000.

Compute
the return on investment for each Out-and-In Burgers alternative. (Omit the “%” sign in your response.)

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Difficulty: Medium

Exercise 21-8 Investment center analysis L.O. A1

Learning Objective: 21-A1 Analyze investment centers using return on
assets, residual income, and balanced scorecard.

5.

award:
5 out of
5.00 points

Exercise 21-9 Computing performance measures L.O. A1

Comart,
a retailer of consumer goods, provides the following information on two of
its departments (each considered an investment center).

Investment Center

Sales

Net
Income

Average
Invested Assets

Electronics

$

10,600,000

$

586,500

$

3,450,000

Sporting
goods

9,000,000

896,000

5,600,000


(1.1)

Compute
return on investment for each department. (Do
not round your intermediate calculations and round your final answers to the
nearest whole percentages. Omit the “%” sign in your response.)

(1.2)

Using
return on investment, which department is most efficient at using assets to
generate returns for the company?

Electronics .gif” alt=”correct”>

(2.1)

Assume
a target income level of 11.7% of average invested assets. Compute residual
income for each department. (Omit the
“$” sign in your response.)

(3)

Assume
that the Electronics department is presented with a new investment
opportunity that will yield a 15% return on assets. (Assume a target income
level of 11.7% of average invested assets.) Should the new investment
opportunity be accepted?

6.

award:
4.50 out of
4.50 points

Exercise 21-10 Computing performance measures L.O. A2

Comart,
a retailer of consumer goods, provides the following information on two of
its departments (each considered an investment center).

Compute
profit margin for each department. (Round
your answers to 2 decimal places. Omit the “%” sign in your
response.)

Compute
investment turnover for each department. (Round
your answers to 2 decimal places.)

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Worksheet

Difficulty: Medium

Exercise 21-10 Computing performance measures L.O. A2

Learning Objective: 21-A2 Analyze investment centers using profit
margin and investment turnover.

7.

award:
4.50 out of
4.50 points

Exercise 21-12A Determining transfer prices L.O. C3

The
Trailer department of Soni Bicycles makes bike trailers that attach to
bicycles and can carry children or cargo. The trailers have a retail price of
$99 each. Each trailer incurs $37 of variable manufacturing costs. The
Trailer department has capacity for 27,000 trailers per year, and incurs
fixed costs of $540,000 per year.

Required

1.

Assume
the Assembly division of Soni Bicycles wants to buy 5,600 trailers per year
from the Trailer division. If the Trailer division can sell all of the trailers
it manufactures to outside customers, what price should be used on transfers
between Soni Bicycle’s divisions? (Omit the
“$” sign in your response.)

2.

Assume
the Trailer division currently only sells 10,700 trailers to outside
customers, and the Assembly division wants to buy 5,600 trailers per year
from the Trailer division. What is the range of acceptable prices that could
be used on transfers between Soni Bicycle’s divisions? (Omit the “$” sign in your response.)

3.

Assume
transfer prices of either $37 per trailer or $67 per trailer are being
considered. What will be the range of transfer price by which the top
management of Soni Bicycle’s will be indifferent? (Omit the “$” sign in your response.)

8.

award:
0 out of
4.50 points

Exercise 21-13B Joint real estate costs assigned L.O. C4

Tidy
Home Properties is developing a subdivision that includes 460 home lots. The
210 lots in the Garden section are below a ridge and do not have views of the
neighboring gardens and hills; the 250 lots in the Premier section offer
unobstructed views. The expected selling price for each Garden lot is $54,000
and for each Premier lot is $100,000. The developer acquired the land for
$1,900,000 and spent another $2,900,000 on street and utilities improvements.

Assign
the joint land and improvement costs to the lots using the value basis of
allocation and determine the average cost per lot. (Round your intermediate calculations to nearest whole
percent. Round your answers to nearest dollar amount. Omit the
“$” sign in your response.)

9.

award:
4.50 out of
4.50 points

Exercise 21-15 Profit margin and investment turnover L.O. A2

L’Oreal
reports the following for a recent year for the major divisions in its
Cosmetics branch.

(€
millions)

Sales

Income

Total Assets
End of Year

Total Assets
Beginning of Year

Professional
products

€

2,477

€

520

€

2,506

€

2,430

Consumer
products

8,356

1,577

5,486

5,351

Luxury
products

4,171

765

4,049

2,685

Active
cosmetics

1,290

258

807

808









Total

€

16,294

€

3,120

€

12,848

€

11,274


















1.1

Compute
profit margin for each division. (Round your
answers to 2 decimal places. Omit the “%” sign in your response.)

1.2

Which
L’Oreal division has the highest profit margin?

2.1

Compute
investment turnover for each division. (Do
not round intermediate calculations and round your final answers to 2 decimal
places.)

2.2

Which
L’Oreal division has the best investment turnover?

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Difficulty: Hard

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