acct 212 home work 4 chapter 21

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acct 212 home work 4 chapter 211.

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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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Worksheet

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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Worksheet

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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Worksheet

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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Worksheet

Difficulty: Hard

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