Accounting Homework

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 work 780 hours each month to produce 2,600 sets of covers. The standard costs associated with this level of production are:
	Total	Per Set of Covers
Direct materials	$59,280	$22.80
Direct labor	$7,332	2.82

Variable manufacturing overhead

(based on direct labor-hours)	$1,560	0.60
		$26.22

During August, the factory worked only 780 direct labor-hours and produced 2,700 sets of covers. The following actual costs were recorded during the month:

	Total	Per Set of Covers
Direct materials (8,910 yards)	$62,370	$23.10
Direct labor	$8,112	3.00
Variable manufacturing overhead	$3,120	1.16
		27.26

At standard, each set of covers should require 3 yards of material. All of the materials purchased during the month were used in production.

Requirement 1:
Compute the direct materials price and quantity variances for August (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.):

Materials price variance	$ $	(Click to select)Favorable None Unfavorable
Materials quantity variance	$ $	(Click to select)NoneFU

Requirement 2:
Compute the direct labor rate and efficiency variances for August (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.):

Labor rate variance	$ $	(Click to select)UNoneF
Labor efficiency variance	$	(Click to select)Favorable None Unfavorable

Requirement 3:
Compute the variable overhead rate and efficiency variances for August(Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.):

Variable overhead rate variance	$	(Click to select)None Unfavorable Favorable
Variable overhead efficiency variance	$	(Click to select)UNoneF

Erie Company manufactures a small CD player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows:

Standard Hours	Standard Rate per Hour	Standard Cost
24 minutes	$6	$2.4

During August, 8,490 hours of direct labor time were needed to make 19,500 units of the Jogging Mate. The direct labor cost totaled $50,091 for the month.
Requirement 1:
(a)	What direct labor cost should have been incurred to make 19,500 units of the Jogging Mate? (Omit the “$” sign in your response.)
Standard direct labor cost	$

(b)	By how much does this differ from the cost that was incurred? (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)

Total variance

(Click to select)NoneUF

Requirement 2:

Break down the difference in cost from Requirement 1 above into a labor rate variance and a labor efficiency variance. (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Labor rate variance	$	(Click to select)FUNone
Labor efficiency variance	$	(Click to select)UNoneF

Requirement 3:

The budgeted variable manufacturing overhead rate is $4.5 per direct labor-hour. During August, the company incurred $44,148 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Variable Overhead Rate Variance	$	(Click to select)NoneUF
Variable Overhead Efficiency Variance	$	(Click to select)UNoneF

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct materials	7.5 pounds	$2.9 per pound	$21.75
Direct labor	0.3 hours	$9.8 per hour	$2.94

During the most recent month, the following activity was recorded:
a.	20,650 pounds of material were purchased at a cost of $2.7 per pound.
b.	All of the material purchased was used to produce 2,500 units of Zoom.
c.	670 hours of direct labor time were recorded at a total labor cost of $7,638.

Requirement 1:
Compute the direct materials price and quantity variances for the month. (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance).Input all amounts as positive values. Omit the “$” sign in your response.)

Materials price variance	$	(Click to select)UNoneF
Materials quantity variance	$	(Click to select)NoneUF

Requirement 2:

Compute the direct labor rate and efficiency variances for the month. (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance).Input all amounts as positive values. Omit the “$” sign in your response.)


Labor rate variance	$	(Click to select)NoneFU
Labor efficiency variance	$	(Click to select)UNoneF

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

Direct materials: 7 microns per toy at $0.3 per micron

Direct labor: 1.4 hours per toy at $6.8 per hour

During July, the company produced 4,900 Maze toys. Production data for the month on the toy follow:

Direct materials:	71,000 microns were purchased at a cost of $0.27 per micron. 28,125 of these microns were still in inventory at the end of the month.
Direct labor:	7,160 direct labor-hours were worked at a cost of $50,836.

Requirement 1:

Compute the direct materials price and quantity variances for July. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.)


Material price variance	$	(Click to select)NoneFU
Material quantity variance	$	(Click to select)UFNone

Victoria Chocolates, Ltd., makes premium handcrafted chocolate confections in London. The owner of the company is setting up a standard cost system and has collected the following data for one of the company’s products, the Empire Truffle. This product is made with the finest white chocolate and various fillings. The data below pertain only to the white chocolate used in the product (the currency is stated in pounds denoted here as £):


Material requirements, kilograms of white chocolate per dozen truffles	0.86	kilograms
Allowance for waste, kilograms of white chocolate per dozen truffles	0.03	kilograms
Allowance for rejects, kilograms of white chocolate per dozen truffles	0.02	kilograms
Purchase price, finest grade white chocolate	£10	per kilogram
Purchase discount	3%	of purchase price
Shipping cost from the supplier in Belgium	£0.25	per kilogram
Receiving and handling cost	£0.15	per kilogram

Requirement 1:

Determine the standard price of a kilogram of white chocolate. (Round your answer to 2 decimal places. Omit the “£” sign in your response.)

Standard price

Requirement 2:

Determine the standard quantity of white chocolate for a dozen truffles. (Round your answer to 2 decimal places.)

Standard quantity

kilograms

Requirement 3:

Determine the standard cost of the white chocolate in a dozen truffles. (Round your answer to 2 decimal places. Omit the “£” sign in your response.)

Standard cost

Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported:


Inspection time	0.5	days
Wait time (from order to start of production)	16.7	days
Process time	2.8	days
Move time	1.5	days
Queue time	4.3	days

Requirement 1:

Compute the throughput time. (Round your answer to 1 decimal place.)

Throughput time

days

Requirement 2:

Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your answer to 2 decimal places.)

Manufacturing cycle efficiency

Requirement 3:

What percentage of the throughput time was spent in non-value-added activities? (Round your answer to the nearest whole number. Omit the “%” sign in your response.)

Throughput time

Requirement 4:
Compute the delivery cycle time.(Round your answer to 1 decimal place.)
Delivery cycle time		days
Requirement 5:
If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Round your answer to 3 decimal places.)

Manufacturing cycle efficiency

Logistics Solutions provides order fulfillment services for dot.com merchants. The company maintains warehouses that stock items carried by its dot.com clients. When a client receives an order from a customer, the order is forwarded to Logistics Solutions, which pulls the item from storage, packs it, and ships it to the customer. The company uses a predetermined variable overhead rate based on direct labor-hours.

In the most recent month, 200,000 items were shipped to customers using 9,900 direct labor hours. The company incurred a total of $30,195 in variable overhead costs.

According to the company’s standards, 0.05 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.1 per direct labor−hour.


(a)	What variable overhead cost should have been incurred to fill the orders for the 200,000 items? (Omit the “$” sign in your response.)

Variable overhead cost

(b)	How much does this differ from the actual variable overhead cost? (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)

Total variable overhead variance

(Click to select)FUNone

(C Break down the difference computed in Requirement 1 above into a variable overhead rate variance and a variable overhead efficiency variance. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Variable overhead rate variance	$	(Click to select)UNoneF
Variable overhead efficiency variance	$	(Click to select)NoneUF

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 7,000 of these meals using 1,430 direct labor-hours. The company paid these direct labor workers a total of $14,658 for this work, or $10.25 per hour.

According to the standard cost card for this meal, it should require 0.21 direct labor-hours at a cost of $10 per hour.

(a)	What direct labor cost should have been incurred to prepare 7,000 meals? (Omit the “$” sign in your response)

Direct labor cost

(b)	How much does this differ from the actual direct labor cost? (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)

Total direct labor variance

(Click to select)UNoneF

(C Break down the difference computed in Requirement 1 above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Labor rate variance	$	(Click to select)UNoneF
Labor efficiency variance	$	(Click to select)UFNone

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 37,000 helmets, using 22,940 kilograms of plastic. The plastic cost the company RM197,284. (The currency in Malaysia is the ringgit, which is denoted here by RM.)
According to the standard cost card, each helmet should require 0.54 kilograms of plastic, at a cost of RM9 per kilogram.
Requirement 1:
(a)	What cost for plastic should have been incurred to make 37,000 helmets? (Omit the “RM” sign in your response.)

Cost incurred

(b)	How much greater or less is this than the cost that was incurred? (Omit the “RM” sign in your response.)
Standard cost is (Click to select)greaterless by RM than the actual cost incurred.

Requirement 2:

Break down the difference computed in Requirement 1 above into a materials price variance and a materials quantity variance. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “RM” sign in your response.)


Materials price variance	RM	(Click to select)UFNone
Materials quantity variance	RM	(Click to select)UNoneF

#10

Companhia Bradesco, S.A., of Brazil, an industrial supply store chain, has two divisions. The company’s contribution format income statement segmented by divisions for last year is given below (the currency in Brazil is the real, denoted here by R):
	Division
	Total Company	Plastics	Glass
Sales	R3,499,900	R2,001,000	R1,498,900
Variable expenses	1,714,051	960,480	753,571
Contribution margin	1,785,849	1,040,520	745,329
Traceable fixed expenses:
Advertising	609,200	297,000	312,200
Depreciation	226,300	113,000	113,300
Administration	434,959	210,000	224,959
Total	1,270,459	620,000	650,459
Division segment margin	515,390	R420,520	R94,870
Common fixed expenses	387,000
Net operating income	R128,390

Top management doesn’t understand why the Glass Division has such a low segment margin when its sales are only 25 less than sales in the Plastics Division. Accordingly, management has directed that the Glass Division be further segmented into product lines. The following information is available on the product lines in the Glass Division:
	Glass Division Product Lines
	Flat Glass	Auto Glass	Specialty Glass
Sales	R503,000	701,900	294,000
Traceable fixed expenses:
Advertising	R80,400	R112,400	R119,400
Depreciation	R24,900	R55,700	R32,700
Administration	R29,600	R35,100	R41,700
Variable expenses as a percentage of sales	65%	39%	52%

Analysis shows that R118,559 of the Glass Division’s administration expenses are common to the product lines.
Requirement 1:
Prepare a contribution format segmented income statement for the Glass Division with segments defined as product lines. (Negative amounts other than the expenses should be indicated by a minus sign. Omit the “R” sign in your response.)

	Product Line
	Glass Division	Flat Glass	Auto Glass	Specialty Glass
Sales	R	R	R	R
Variable expenses
Contribution margin
Traceable fixed expenses:
Advertising
Depreciation
Administration
Total
Product line segment margin		R	R	R
Common fixed expenses
Administration
Divisional segment margin	R

Requirement 2:
Management is surprised by Specialty Glass’s poor showing and would like to have the product line segmented by market. The following information is available about the two markets in which Specialty Glass is sold:

	Specialty Glass Markets

	Domestic	Foreign
Sales	R196,000	R98,000
Traceable fixed expenses:
Advertising	R39,600	R79,800
Variable expenses as a percentage of sales	43%	70%

All of Specialty Glass’s depreciation and administration expenses are common to the markets in which the product is sold. Calculate the following for the Specialty Glass product line with segments defined as markets. (Negative amounts should be indicated by a minus sign. Omit the “R” sign in your response.)

Domestic market segment margin	R
Foreign market segment margin	R
Product line segment margin	R
Requirement 3:

(a)	Refer to the statement prepared in (Requirement 1) above. The sales manager wants to run a special promotional campaign on one of the product lines over the next month. A market study indicates that such a campaign would increase sales of Flat Glass by R200,000 or sales of Auto Glass by R146,000. The campaign would cost R29,000. Calculate the increased net operating income. (Omit the “R” sign in your response.)
	Flat Glass	Auto Glass
Net operating income	R	R

(b)	Which product line should be chosen?

	(Click to select)Auto Glass Flat Glass

#11

Wingate Company, a wholesale distributor of videotapes, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement, which follows:


Sales	$1,520,000
Variable expenses	544,600
Contribution margin	975,400
Fixed expenses	1,073,000
Net operating income (loss)	-$97,600

In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

	Division
	East	Central	West
Sales	$460,000	$600,000	$460,000
Variable expenses as a percentage of sales	52%	21%	39%
Traceable fixed expenses	$107,000	$321,000	$208,000

Requirement 1:

Prepare a contribution format income statement segmented by divisions, as desired by the president. (Input all amount as positive value except divisional segment loss and net operating loss which should be indicated with a minus sign. Omit the “$” sign in your response.)

			Division
	Total Company	East	Central	West
Sales	$	$	$	$
Variable expenses
Contribution margin
Traceable fixed expenses
Divisional segment margin		$	$	$
Common fixed expenses not traceable to divisions
Net operating (Click to select)incomeloss	$

Requirement 2:

(a)

As a result of a marketing study, the president believes that sales in the West Division could be increased by 14% if monthly advertising in that division were increased by $21,000. Compute the Incremental net operating income. (Negative amount should be indicated by a minus sign. Omit the “$” sign in your response.)

Incremental net operating income

(b)	Would you recommend the increased advertising?
	(Click to select)NoYes

#12

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs.
Assume that Minneapolis’ sales by major market are as follows:
			Market
	Minneapolis	Medical	Dental
Sales	$510,000	100%	$340,000	100%	$170,000	100%
Variable expenses	306,000	60%	221,000	65%	85,000	50%
Contribution margin	204,000	40%	119,000	35%	85,000	50%
Traceable fixed expenses	61,200	12%	17,000	5%	44,200	26%
Market segment margin	142,800	28%	$102,000	30%	$40,800	24%
Common fixed expenses not traceable to markets	15,300	3%
Office segment margin	$127,500	25%

The company would like to initiate an intensive advertising campaign in one of the two markets during the next month. The campaign would cost $6,800. Marketing studies indicate that such a campaign would increase sales in the Medical market by $59,500 or increase sales in the Dental market by $51,000.

Required:
Determine the increase in net operating income in each market if the advertising campaign were to be initiated in that market. (Omit the “$” sign in your response.)
	Medical	Dental
Increase in net operating income	$	$

#13

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices—one in Chicago 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 below:

			Office
	Total Company	Chicago	Minneapolis
Sales	$1,050,000	100%	$210,000	100%	$840,000	100%
Variable expenses	567,000	54%	63,000	30%	504,000	60%
Contribution margin	483,000	46%	147,000	70%	336,000	40%
Traceable fixed expenses	235,200	22%	109,200	52%	126,000	15%
Office segment margin	247,800	24%	$37,800	18%	$210,000	25%
Common fixed expenses not traceable to offices	168,000	16%
Net operating income	$79,800	8%

Requirement 1:

By how much would the company’s net operating income increase if Minneapolis increased its sales by $105,000 per year? Assume no change in cost behavior patterns. (Omit the “$” sign in your response.)

Net operating income	$

Refer to the original data. Assume that sales in Chicago increase by $70,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage amounts to 2 decimal places. Input all amount as positive value. Omit the “$” and “%” signs in your response.)

			Segments
	Total Company	Chicago	Minneapolis
	Amount	%	Amount	%	Amount	%
Sales	$		$		$
Variable expenses
Contribution margin
Traceable fixed expenses
Office segment margin			$		$
Common fixed expenses not traceable to segments
Net operating income	$

#14

Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

	Division A	Division B	Division C
Sales	$5,100,000	$9,000,000	$8,600,000
Average operating assets	$1,590,000	$5,900,000	$1,500,000
Net operating income	$305,000	$896,000	$330,000
Minimum required rate of return	20%	23%	22%

Requirement 1:
Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round all calculations to 2 decimal places, e.g., .1234 as 12.34. Omit the “%” sign in your response.)

	ROI
Division A	%
Division B	%
Division C	%

Compute the residual income for each division. (Leave no cells blank, be certain to enter “0” wherever required. Negative amounts should be indicated by a minus sign. Omit the “$” sign in your response.)

	Division A	Division B	Division C
Residual income	$	$	$

#15

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below (the currency is the Australian dollar, denoted here as $):
	Division
	Queensland	New South Wales
Sales	$1,000,000	$1,750,000
Average operating assets	$500,000	$500,000
Net operating income	$90,000	$105,000
Property, plant, and equipment (net)	$250,000	$200,000

Requirement 1:

Compute the rate of return for each division using the return on investment (ROI) formula stated in terms of margin and turnover. (Round all calculations to 2 decimal places. Omit the “%” sign in your response.)

	ROI
Queensland	%
New South Wales	%

Requirement 2:

Which divisional manager seems to be doing the better job?

(Click to select) New South WalesQueensland

#16

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow (in millions of yen, denoted by ¥):
	Division
	Osaka	Yokohama
Sales	¥8,500,000	¥20,900,000
Net operating income	¥920,000	¥2,570,000
Average operating assets	¥2,800,000	¥8,300,000

Requirement 1:

For each division, compute the return on investment (ROI) in terms of margin and turnover. (Round your answers to 2 decimal places. Omit the “%” sign in your response.)

	Osaka	Yokohama
Return on investment	%	%

Requirement 2:

Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 20%. Compute the residual income for each division. (Omit the “¥” sign in your response.)

	Osaka	Yokohama
Residual income	¥	¥

Requirement 3:

Is Yokohama’s greater amount of residual income an indication that it is better managed?

(Click to select)YesNo

#17

Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow:
	Product
	Weedban	Greengrow
Selling price per unit	$10.00	$33.00
Variable expenses per unit	$3.00	$14.00
Traceable fixed expenses per year	$128,000	$49,000

Common fixed expenses in the company total $111,000 annually. Last year the company produced and sold 38,500 units of Weedban and 21,000 units of Greengrow.
Required:
Prepare a contribution format income statement for the year segmented by product lines. (Input all amount as positive value. Omit the “$” sign in your response.)
	Total	Weedban	Greengrow
Sales	$	$	$
Variable expenses
Contribution margin
Traceable fixed expenses
Product line segment margin		$	$
Common fixed expenses not traceable to products
Net operating income	$

#18

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 43,000 helmets, using 24,940 kilograms of plastic. The plastic cost the company RM189,544. (The currency in Malaysia is the ringgit, which is denoted here by RM.)
According to the standard cost card, each helmet should require 0.5 kilograms of plastic, at a cost of RM8 per kilogram.
Requirement 1:
(a)	What cost for plastic should have been incurred to make 43,000 helmets? (Omit the “RM” sign in your response.)

Cost incurred

(b)	How much greater or less is this than the cost that was incurred? (Omit the “RM” sign in your response.)
Standard cost is (Click to select)lessgreater by RM than the actual cost incurred.

Requirement 2:


Materials price variance	RM	(Click to select)NoneFU
Materials quantity variance	RM	(Click to select)UNoneF

#19

SkyChefs, Inc., prepares in-flight meals for a number of major airlines. One of the company’s products is grilled salmon in dill sauce with baby new potatoes and spring vegetables. During the most recent week, the company prepared 14,000 of these meals using 3,460 direct labor-hours. The company paid these direct labor workers a total of $33,043 for this work, or $9.55 per hour.

According to the standard cost card for this meal, it should require 0.25 direct labor-hours at a cost of $9.3 per hour.

Requirement 1:

(a)	What direct labor cost should have been incurred to prepare 14,000 meals? (Omit the “$” sign in your response)

Direct labor cost

(b)	How much does this differ from the actual direct labor cost? (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)

Total direct labor variance	$	(Click to select)FNoneU
Requirement 2:
Break down the difference computed in Requirement 1 above into a labor rate variance and a labor efficiency variance. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Labor rate variance	$	(Click to select)NoneUF
Labor efficiency variance	$	(Click to select)NoneUF

#20

In the most recent month, 170,000 items were shipped to customers using 6,700 direct labor hours. The company incurred a total of $23,115 in variable overhead costs.

According to the company’s standards, 0.04 direct labor-hours are required to fulfill an order for one item and the variable overhead rate is $3.5 per direct labor−hour.

Requirement 1:
(a)	What variable overhead cost should have been incurred to fill the orders for the 170,000 items? (Omit the “$” sign in your response.)

Variable overhead cost

(b)	How much does this differ from the actual variable overhead cost? (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)

Total variable overhead variance	$	(Click to select)FNoneU
Requirement 2:
Break down the difference computed in Requirement 1 above into a variable overhead rate variance and a variable overhead efficiency variance. (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Variable overhead rate variance	$	(Click to select)NoneFU
Variable overhead efficiency variance	$	(Click to select)UFNone

#21


Inspection time	0.4	days
Wait time (from order to start of production)	15.8	days
Process time	2.7	days
Move time	0.6	days
Queue time	3.9	days

Requirement 1:

Compute the throughput time. (Round your answer to 1 decimal place.)

Throughput time

days

Requirement 2:

Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your answer to 2 decimal places.)

Manufacturing cycle efficiency

Requirement 3:

What percentage of the throughput time was spent in non-value-added activities? (Round your answer to the nearest whole number. Omit the “%” sign in your response.)

Throughput time

Requirement 4:
Compute the delivery cycle time.(Round your answer to 1 decimal place.)
Delivery cycle time		days
Requirement 5:
If by using Lean Production all queue time during production is eliminated, what will be the new MCE? (Round your answer to 3 decimal places.)

Manufacturing cycle efficiency

#22


Material requirements, kilograms of white chocolate per dozen truffles	0.74	kilograms
Allowance for waste, kilograms of white chocolate per dozen truffles	0.02	kilograms
Allowance for rejects, kilograms of white chocolate per dozen truffles	0.01	kilograms
Purchase price, finest grade white chocolate	£9	per kilogram
Purchase discount	6%	of purchase price
Shipping cost from the supplier in Belgium	£0.45	per kilogram
Receiving and handling cost	£0.1	per kilogram

Requirement 1:

Determine the standard price of a kilogram of white chocolate. (Round your answer to 2 decimal places. Omit the “£” sign in your response.)

Standard price

Requirement 2:

Determine the standard quantity of white chocolate for a dozen truffles. (Round your answer to 2 decimal places.)

Standard quantity

kilograms

Requirement 3:

Determine the standard cost of the white chocolate in a dozen truffles. (Round your answer to 2 decimal places. Omit the “£” sign in your response.)

Standard cost

#23

Dawson Toys, Ltd., produces a toy called the Maze. The company has recently established a standard cost system to help control costs and has established the following standards for the Maze toy:

Direct materials: 6 microns per toy at $0.33 per micron

Direct labor: 1.5 hours per toy at $6.9 per hour

During July, the company produced 4,600 Maze toys. Production data for the month on the toy follow:

Direct materials:	73,000 microns were purchased at a cost of $0.29 per micron. 38,500 of these microns were still in inventory at the end of the month.
Direct labor:	7,300 direct labor-hours were worked at a cost of $52,560.

Requirement 1:


Material price variance	$	(Click to select)NoneFU
Material quantity variance	$	(Click to select)UNoneF

#24

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below:
	Standard Quantity or Hours	Standard Price or Rate	Standard Cost
Direct materials	7.5 pounds	$3 per pound	$22.5
Direct labor	0.3 hours	$10.4 per hour	$3.12

During the most recent month, the following activity was recorded:
a.	21,100 pounds of material were purchased at a cost of $2.9 per pound.
b.	All of the material purchased was used to produce 2,600 units of Zoom.
c.	700 hours of direct labor time were recorded at a total labor cost of $8,610.

Requirement 1:
Compute the direct materials price and quantity variances for the month. (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance).Input all amounts as positive values. Omit the “$” sign in your response.)

Materials price variance	$	(Click to select)UNoneF
Materials quantity variance	$	(Click to select)NoneFU

Requirement 2:


Labor rate variance	$	(Click to select)UFNone
Labor efficiency variance	$	(Click to select)UFNone

#25

Erie Company manufactures a small CD player called the Jogging Mate. The company uses standards to control its costs. The labor standards that have been set for one Jogging Mate CD player are as follows:
Standard Hours	Standard Rate per Hour	Standard Cost
30 minutes	$5.4	$2.7

During August, 10,220 hours of direct labor time were needed to make 19,400 units of the Jogging Mate. The direct labor cost totaled $53,144 for the month.
Requirement 1:
(a)	What direct labor cost should have been incurred to make 19,400 units of the Jogging Mate? (Omit the “$” sign in your response.)
Standard direct labor cost	$

(b)	By how much does this differ from the cost that was incurred? (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)

Total variance

(Click to select)UFNone

Requirement 2:


Labor rate variance	$	(Click to select)NoneUF
Labor efficiency variance	$	(Click to select)NoneFU

Requirement 3:

The budgeted variable manufacturing overhead rate is $4.5 per direct labor-hour. During August, the company incurred $51,100 in variable manufacturing overhead cost. Compute the variable overhead rate and efficiency variances for the month. (Indicate the effect of the variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.)


Variable Overhead Rate Variance	$	(Click to select)FNoneU
Variable Overhead Efficiency Variance	$	(Click to select)NoneFU

#26

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 work 780 hours each month to produce 1,950 sets of covers. The standard costs associated with this level of production are:
	Total	Per Set of Covers
Direct materials	$38,610	$19.80
Direct labor	$6,942	3.56

Variable manufacturing overhead

(based on direct labor-hours)	$2,340	1.20
		$24.56

During August, the factory worked only 790 direct labor-hours and produced 2,100 sets of covers. The following actual costs were recorded during the month:

	Total	Per Set of Covers
Direct materials (6,510 yards)	$39,060	$18.60
Direct labor	$7,900	3.76
Variable manufacturing overhead	$4,740	2.26
		24.62

At standard, each set of covers should require 3 yards of material. All of the materials purchased during the month were used in production.

Requirement 1:
Compute the direct materials price and quantity variances for August (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.):

Materials price variance	$	(Click to select)UNoneF
Materials quantity variance	$	(Click to select)NoneFU

Requirement 2:
Compute the direct labor rate and efficiency variances for August (Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.):

Labor rate variance	$	(Click to select)FNoneU
Labor efficiency variance	$	(Click to select)UNoneF

Requirement 3:
Compute the variable overhead rate and efficiency variances for August(Indicate the effect of each variance by selecting “F” for favorable, “U” for unfavorable, and “None” for no effect (i.e., zero variance). Input all amounts as positive values. Omit the “$” sign in your response.):

Variable overhead rate variance	$	(Click to select)NoneFU
Variable overhead efficiency variance	$	(Click to select)NoneUF

#27

Royal Lawncare Company produces and sells two packaged products, Weedban and Greengrow. Revenue and cost information relating to the products follow:
	Product
	Weedban	Greengrow
Selling price per unit	$8.00	$35.00
Variable expenses per unit	$2.90	$10.00
Traceable fixed expenses per year	$135,000	$50,000

Common fixed expenses in the company total $96,000 annually. Last year the company produced and sold 43,500 units of Weedban and 22,500 units of Greengrow.
Required:
Prepare a contribution format income statement for the year segmented by product lines. (Input all amount as positive value. Omit the “$” sign in your response.)
	Total	Weedban	Greengrow
Sales	$	$	$
Variable expenses
Contribution margin
Traceable fixed expenses
Product line segment margin		$	$
Common fixed expenses not traceable to products
Net operating income	$

#28

Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow (in millions of yen, denoted by ¥):
	Division
	Osaka	Yokohama
Sales	¥9,500,000	¥19,600,000
Net operating income	¥930,000	¥2,670,000
Average operating assets	¥2,800,000	¥9,400,000

Requirement 1:

For each division, compute the return on investment (ROI) in terms of margin and turnover. (Round your answers to 2 decimal places. Omit the “%” sign in your response.)

	Osaka	Yokohama
Return on investment	%	%

Requirement 2:

Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 13%. Compute the residual income for each division. (Omit the “¥” sign in your response.)

	Osaka	Yokohama
Residual income	¥	¥

Requirement 3:

Is Yokohama’s greater amount of residual income an indication that it is better managed?

(Click to select)NoYes

#29

Selected operating data for two divisions of Outback Brewing, Ltd., of Australia are given below (the currency is the Australian dollar, denoted here as $):
	Division
	Queensland	New South Wales
Sales	$1,000,000	$1,350,000
Average operating assets	$250,000	$750,000
Net operating income	$60,000	$148,500
Property, plant, and equipment (net)	$260,000	$220,000

Requirement 1:

	ROI
Queensland	%
New South Wales	%

Requirement 2:

Which divisional manager seems to be doing the better job?

(Click to select) Queensland New South Wales

#30

Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

	Division A	Division B	Division C
Sales	$6,100,000	$10,600,000	$8,500,000
Average operating assets	$1,590,000	$5,000,000	$2,300,000
Net operating income	$291,000	$894,000	$276,000
Minimum required rate of return	10%	13%	12%

Requirement 1:

Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round all calculations to 2 decimal places, e.g., .1234 as 12.34. Omit the “%” sign in your response.)

	ROI
Division A	%
Division B	%
Division C	%

Requirement 2:

	Division A	Division B	Division C
Residual income	$	$	$

#31

			Office
	Total Company	Chicago	Minneapolis
Sales	$600,000	100%	$120,000	100%	$480,000	100%
Variable expenses	324,000	54%	36,000	30%	288,000	60%
Contribution margin	276,000	46%	84,000	70%	192,000	40%
Traceable fixed expenses	134,400	22%	62,400	52%	72,000	15%
Office segment margin	141,600	24%	$21,600	18%	$120,000	25%
Common fixed expenses not traceable to offices	96,000	16%
Net operating income	$45,600	8%

Requirement 1:
By how much would the company’s net operating income increase if Minneapolis increased its sales by $60,000 per year? Assume no change in cost behavior patterns. (Omit the “$” sign in your response.)

Net operating income	$
Requirement 2:
Refer to the original data. Assume that sales in Chicago increase by $40,000 next year and that sales in Minneapolis remain unchanged. Assume no change in fixed costs. Prepare a new segmented income statement for the company. (Round your percentage amounts to 2 decimal places. Input all amount as positive value. Omit the “$” and “%” signs in your response.)

			Segments
	Total Company	Chicago	Minneapolis
	Amount	%	Amount	%	Amount	%
Sales	$		$		$
Variable expenses
Contribution margin
Traceable fixed expenses
Office segment margin			$		$
Common fixed expenses not traceable to segments
Net operating income	$

#32

Raner, Harris, & Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs.
Assume that Minneapolis’ sales by major market are as follows:
			Market
	Minneapolis	Medical	Dental
Sales	$690,000	100%	$460,000	100%	$230,000	100%
Variable expenses	414,000	60%	299,000	65%	115,000	50%
Contribution margin	276,000	40%	161,000	35%	115,000	50%
Traceable fixed expenses	82,800	12%	23,000	5%	59,800	26%
Market segment margin	193,200	28%	$138,000	30%	$55,200	24%
Common fixed expenses not traceable to markets	20,700	3%
Office segment margin	$172,500	25%

The company would like to initiate an intensive advertising campaign in one of the two markets during the next month. The campaign would cost $9,200. Marketing studies indicate that such a campaign would increase sales in the Medical market by $80,500 or increase sales in the Dental market by $69,000.

Required:
Determine the increase in net operating income in each market if the advertising campaign were to be initiated in that market. (Omit the “$” sign in your response.)
	Medical	Dental
Increase in net operating income	$	$

#33

Wingate Company, a wholesale distributor of videotapes, has been experiencing losses for some time, as shown by its most recent monthly contribution format income statement, which follows:


Sales	$1,340,000
Variable expenses	513,200
Contribution margin	826,800
Fixed expenses	909,000
Net operating income (loss)	-$82,200

In an effort to isolate the problem, the president has asked for an income statement segmented by division. Accordingly, the Accounting Department has developed the following information:

	Division
	East	Central	West
Sales	$310,000	$570,000	$460,000
Variable expenses as a percentage of sales	48%	26%	47%
Traceable fixed expenses	$108,000	$327,000	$200,000

Requirement 1:

			Division
	Total Company	East	Central	West
Sales	$	$	$	$
Variable expenses
Contribution margin
Traceable fixed expenses
Divisional segment margin		$	$	$
Common fixed expenses not traceable to divisions
Net operating (Click to select)lossincome	$

Requirement 2:

(a)

As a result of a marketing study, the president believes that sales in the West Division could be increased by 16% if monthly advertising in that division were increased by $25,000. Compute the Incremental net operating income. (Negative amount should be indicated by a minus sign. Omit the “$” sign in your response.)

Incremental net operating income

(b)	Would you recommend the increased advertising?
	(Click to select)YesNo

#34

Companhia Bradesco, S.A., of Brazil, an industrial supply store chain, has two divisions. The company’s contribution format income statement segmented by divisions for last year is given below (the currency in Brazil is the real, denoted here by R):
	Division
	Total Company	Plastics	Glass
Sales	R3,502,600	R1,998,000	R1,504,600
Variable expenses	1,734,336	959,040	775,296
Contribution margin	1,768,264	1,038,960	729,304
Traceable fixed expenses:
Advertising	607,800	296,000	311,800
Depreciation	233,000	118,000	115,000
Administration	419,864	210,000	209,864
Total	1,260,664	624,000	636,664
Division segment margin	507,600	R414,960	R92,640
Common fixed expenses	386,000
Net operating income	R121,600

Top management doesn’t understand why the Glass Division has such a low segment margin when its sales are only 25 less than sales in the Plastics Division. Accordingly, management has directed that the Glass Division be further segmented into product lines. The following information is available on the product lines in the Glass Division:
	Glass Division Product Lines
	Flat Glass	Auto Glass	Specialty Glass
Sales	R499,000	699,600	306,000
Traceable fixed expenses:
Advertising	R80,300	R112,100	R119,400
Depreciation	R25,300	R56,200	R33,500
Administration	R30,100	R34,600	R41,700
Variable expenses as a percentage of sales	66%	41%	52%

Analysis shows that R103,464 of the Glass Division’s administration expenses are common to the product lines.
Requirement 1:
Prepare a contribution format segmented income statement for the Glass Division with segments defined as product lines. (Negative amounts other than the expenses should be indicated by a minus sign. Omit the “R” sign in your response.)

	Product Line
	Glass Division	Flat Glass	Auto Glass	Specialty Glass
Sales	R	R	R	R
Variable expenses
Contribution margin
Traceable fixed expenses:
Advertising
Depreciation
Administration
Total
Product line segment margin		R	R	R
Common fixed expenses
Administration
Divisional segment margin	R

Requirement 2:

Management is surprised by Specialty Glass’s poor showing and would like to have the product line segmented by market. The following information is available about the two markets in which Specialty Glass is sold:

	Specialty Glass Markets

	Domestic	Foreign
Sales	R204,000	R102,000
Traceable fixed expenses:
Advertising	R39,700	R79,700
Variable expenses as a percentage of sales	43%	70%

All of Specialty Glass’s depreciation and administration expenses are common to the markets in which the product is sold. Calculate the following for the Specialty Glass product line with segments defined as markets. (Negative amounts should be indicated by a minus sign. Omit the “R” sign in your response.)

Domestic market segment margin	R
Foreign market segment margin	R
Product line segment margin	R
Requirement 3:

(a)	Refer to the statement prepared in (Requirement 1) above. The sales manager wants to run a special promotional campaign on one of the product lines over the next month. A market study indicates that such a campaign would increase sales of Flat Glass by R199,000 or sales of Auto Glass by R147,000. The campaign would cost R30,000. Calculate the increased net operating income. (Omit the “R” sign in your response.)
	Flat Glass	Auto Glass
Net operating income	R	R

(b)	Which product line should be chosen?

	(Click to select)Auto GlassFlat Glass

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