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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

Finance

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.

Cost of parts

$ 8,228

Mechanics’ wages

6,151

Manager’s salary

3,100

Building depreciation (allocated)

600

Shop supplies

1,235

Utilities (allocated)

868

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)

Investment Center

A

B

Sales

$             ?

$11,000,000

Net income

$ 365,000

$        ?

Average invested assets

$1,460,000

$         ?

Profit margin

10%

?%

Investment turnover

?

1.5

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.)

Profit Margin:

 

Choose Numerator:

/

Choose Denominator:

=

Profit Margin

 

Investment Center

Net income

/

Sales

=

Profit margin

 

A

 

 

 

 

                          10.00

%

B

 

 

 

 

 

%

 

Investment Turnover:

 

Choose Numerator:

/

Choose Denominator

=

Investment Turnover

 

Investment Center

Sales

/

Average invested assets

=

Investment turnover

 

A

 

 

 

 

 

 

B

 

 

 

 

1.50

 

 

Return on investment:

 

Choose Numerator:

/

Choose Denominator:

=

Return on investment

 

Investment center

Net income

/

Average invested assets

=

Return on investment

 

A

 

 

 

 

 

%

B

 

 

 

 

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.

 

                             Budget

                        Actual

 

Snowmobile

ATV

Combined

Snowmobile

ATV

Combined

Raw materials

$19,990

$28,000

$47,990

$19,920

$29,320

$49,240

Employee wages

10,900

21,000

31,900

11,210

21,740

32,950

Dept. manager salary

4,800

5,700

10,500

4,900

4,900

9,800

Supplies used

3,850

1,400

5,250

3,670

1,420

5,000

Depreciation-Equip.

6,500

13,000

19,500

6,500

13,000

19,500

Utilities

410

590

1,000

380

550

930

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.)

                                             Responsibility Accounting Performance Report

                                                 Dept. Manager, Snowmobile Department

 

                                              For the year

 

Budgeted Amount

Actual Amount

Over (under) Budget

Controllable Costs

 

 

 

Raw materials

 

 

 

Employee wages

 

 

 

Supplies used

 

 

 

Depreciation-equipment

 

 

 

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.)

 

Make

Buy

Selling price per unit

 

 

Cost per unit to make

 

 

Cost per unit to buy

 

 

Cost per unit not eliminated if bought

 

 

Income per unit

 

 

 

 

 

Company should:

   Make

 

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?

 

Sell as is

Process Further

Incremental Amount

Sales

 

 

 

Additional processing costs

 

 

 

Income (loss)

 

 

 

 

The company should:

Process further

 

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.)

                                                              Incremental Costs to buy

 

Relevant Amount per Unit

Relevant Fixed Costs

Total Relevant Costs

Purchase price per unit

 

 

 

Total incremental cost to buy

 

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.)

                                                    Incremental Costs to make

 

Relevant Amount per Unit

Relevant Fixed Costs

Total Relevant Costs

Variable cost per unit

 

 

 

Fixed manufacturing costs

 

 

 

Total incremental cost to make

$                   0

                                                                                                                                           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?

 

Sell as is

Process Further

 

Sales

 

 

 

Relevant costs:

 

 

Costs to process further

 

 

 

 

 

Total relevant costs

 

 

Income (loss)

 

 

 

Incremental net income (or loss) if processed further

 

Incremental income

 

The company should

Process further

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.

 

K1

S5

G91

Selling price

$153.42

$114.01

$217.32

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.)

                                             Contribution margin per pound

 

Product K1

Product S5

Product G9

Contribution margin per unit

 

 

 

Pounds per unit

 

 

 

Contribution margin per pound

 

 

 

 

Order in which products should be produced and filled:

 

 

 

 

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