Solved by verified expert :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.)

eBook LinkView Hint #1

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.)

eBook LinkView Hint #1

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

74.5 %

$ 14,900

Hosiery

Dept.

24

25.5

5,100

Totals

94

100.0 %

$ 20,000

eBook LinkView Hint #1

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.)

eBook LinkView Hint #1

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

(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.)

eBook LinkView Hint #1

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?

eBook LinkView Hint #1

Worksheet

Difficulty: Hard