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Homework answers / question archive / Week 5 Assignment 2) QS 24-3 Responsibility accounting report LO P1 Jose Ruiz manages a car dealer's service department
Week 5 Assignment
2) QS 24-3 Responsibility accounting report LO P1
Jose Ruiz manages a car dealer's service department. His department is organized as a cost center. Costs for a recent quarter are shown below.
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Cost of parts |
$ 8,228 |
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Mechanics’ wages |
6,151 |
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Manager’s salary |
3,100 |
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Building depreciation (allocated) |
600 |
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Shop supplies |
1,235 |
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Utilities (allocated) |
868 |
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Administrative costs (allocated) |
2,850 |
Calculate the total costs that would appear on a responsibility accounting report for the service department.
Total controllable costs ------
3)
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Investment Center |
A |
B |
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Sales |
$ ? |
$11,000,000 |
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Net income |
$ 365,000 |
$ ? |
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Average invested assets |
$1,460,000 |
$ ? |
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Profit margin |
10% |
?% |
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Investment turnover |
? |
1.5 |
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Return on investment |
?% |
15% |
Use the information in the table above to compute each department's contribution to overhead (both in dollars and as a percent). (Round your final answers to 2 decimal places.)
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Profit Margin: |
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Choose Numerator: |
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Choose Denominator: |
= |
Profit Margin |
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Investment Center |
Net income |
/ |
Sales |
= |
Profit margin |
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A |
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10.00 |
% |
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B |
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% |
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Investment Turnover: |
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Choose Numerator: |
/ |
Choose Denominator |
= |
Investment Turnover |
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Investment Center |
Sales |
/ |
Average invested assets |
= |
Investment turnover |
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A |
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B |
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1.50 |
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Return on investment: |
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Choose Numerator: |
/ |
Choose Denominator: |
= |
Return on investment |
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Investment center |
Net income |
/ |
Average invested assets |
= |
Return on investment |
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A |
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% |
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B |
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15.00 |
% |
4) Arctica manufactures snowmobiles and ATVs. These products are made in different departments, and each department has its own manager. Each responsibility performance report only includes those costs that the particular department manager can control: raw materials, wages, supplies used, and equipment depreciation.
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Budget |
Actual |
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Snowmobile |
ATV |
Combined |
Snowmobile |
ATV |
Combined |
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Raw materials |
$19,990 |
$28,000 |
$47,990 |
$19,920 |
$29,320 |
$49,240 |
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Employee wages |
10,900 |
21,000 |
31,900 |
11,210 |
21,740 |
32,950 |
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Dept. manager salary |
4,800 |
5,700 |
10,500 |
4,900 |
4,900 |
9,800 |
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Supplies used |
3,850 |
1,400 |
5,250 |
3,670 |
1,420 |
5,000 |
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Depreciation-Equip. |
6,500 |
13,000 |
19,500 |
6,500 |
13,000 |
19,500 |
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Utilities |
410 |
590 |
1,000 |
380 |
550 |
930 |
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Totals |
$52,650 |
$76,490 |
$129,140 |
$52,380 |
$77,730 |
$130,110 |
Prepare a responsibility accounting report for the snowmobile department. (Under budget amounts should be indicated by a minus sign.)
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Responsibility Accounting Performance Report |
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Dept. Manager, Snowmobile Department |
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For the year |
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Budgeted Amount |
Actual Amount |
Over (under) Budget |
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Controllable Costs |
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Raw materials |
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Employee wages |
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Supplies used |
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Depreciation-equipment |
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Totals |
$ 0 |
$ 0 |
$ 0 |
6) QS 25-6 Make or buy LO P1
Kando Company incurs a $11.00 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, the company can purchase it for $6.00 per unit and sell it for $11.50 per unit. If it does so, unit sales would remain unchanged and $6.00 of the $11.00 per unit costs of Product A would be eliminated.
1. Prepare Incremental cost analysis. Should the company continue to manufacture Product A or purchase it for resale? (Round your answers to 2 decimal places.)
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Make |
Buy |
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Selling price per unit |
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Cost per unit to make |
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Cost per unit to buy |
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Cost per unit not eliminated if bought |
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Income per unit |
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Company should: |
Make |
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7) QS 25-8 Sell or process further LO P2
Holmes Company produces a product that can be either sold as is or processed further. Holmes has already spent $72,000 to produce 2,250 units that can be sold now for $89,500 to another manufacturer. Alternatively, Holmes can process the units further at an incremental cost of $295 per unit. If Holmes processes further, the units can be sold for $420 each. Should Holmes self the product now or process it further?
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Sell as is |
Process Further |
Incremental Amount |
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Sales |
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Additional processing costs |
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Income (loss) |
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The company should: |
Process further |
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8) Exercise 25-1 Make or buy LO P1
Gilberto Company currently manufactures 78,000 units per year of one of its crucial parts. Variable costs are $2.60 per unit, fixed costs related to making this part are $88,000 per year, and allocated fixed costs are $75,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.80 per unit guaranteed for a three-year period.
Calculate the total incremental cost of making 78,000 and buying 78,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? °
Complete this question by entering your answers in the tabs below.
Costs to Make Costs to Buy Outside Supplier
Calculate the total incremental cost of buying 78,000 units. (Round cost per unit answers to 2 decimal places.)
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Incremental Costs to buy |
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Relevant Amount per Unit |
Relevant Fixed Costs |
Total Relevant Costs |
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Purchase price per unit |
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Total incremental cost to buy |
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Costs to make Outside Supplier
8) Exercise 25-1 Make or buy LO P1
Gilberto Company currently manufactures 78,000 units per year of one of its crucial parts. Variable costs are $2.60 per unit, fixed costs related to making this part are $88,000 per year, and allocated fixed costs are $75,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.80 per unit guaranteed for a three-year period.
Calculate the total incremental cost of making 78,000 and buying 78,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?
Complete this question by entering your answers in the tabs below.
Costs to make Costs to Buy Outside Supplier
Calculate the total incremental cost of making 78,000 units. (Round cost per unit answers to 2 decimal places.)
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Incremental Costs to make |
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Relevant Amount per Unit |
Relevant Fixed Costs |
Total Relevant Costs |
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Variable cost per unit |
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Fixed manufacturing costs |
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Total incremental cost to make |
$ 0 |
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Costs to Buy
9) Exercise 25-3 Sell or process further LO P2
Cobe Company has already manufactured 19,000 units of Product A at a cost of $25 per unit. The 19,000 units can be sold at this stage for $420,000. Alternatively, the units can be further processed at a $240,000 total additional cost and be converted into 5.500 units of Product B and 11,300 units of Product C. Per unit selling price for Product B is $104 and for Product C is $58.
1. Prepare an analysis that shows whether the 19,000 units of Product A should be processed further or not?
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Sell as is |
Process Further |
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Sales |
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Relevant costs: |
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Costs to process further |
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Total relevant costs |
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Income (loss) |
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Incremental net income (or loss) if processed further |
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Incremental income |
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The company should |
Process further |
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10) Exercise 25-7 Sales mix LO P3
Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 3.4 pounds points of the material, S5 uses 2.3 pounds of the material, and G9 uses 6.6 pounds of the material. Demand for all products is strong, but only 57,500 pounds of material are available. Information about the selling price per unit and variable cost per unit of each product follows.
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K1 |
S5 |
G91 |
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Selling price |
$153.42 |
$114.01 |
$217.32 |
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Variable costs |
98.00 |
94.00 |
150.00 |
Calculate the contribution margin per pound for each of the three products. Orders for which product should be produced and filled first, then second, and then third? (Round your answers to 2 decimal places.)
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Contribution margin per pound |
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Product K1 |
Product S5 |
Product G9 |
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Contribution margin per unit |
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Pounds per unit |
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Contribution margin per pound |
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Order in which products should be produced and filled: |
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