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179. Piano Company’s costs were over budget by $47,000. The Piano Company is divided in two regions. The
first region’s costs were over budget by $5,000. Determine the amount that the second region’s cost was over or
under budget.
180. Using the data from the Ace Guitar Company, determine the divisional income from operations for the A
and B regions.
A Region
B Region
Sales
$500,000
$900,000
Cost of goods sold
200,000
300,000
Selling expenses
150,000
275,000
Service department expenses
Purchasing
$90,000
Payroll accounting
30,000
Allocate service department expenses proportional to the sales of each region. Round percentage of sales allocation to one decimal place.
181. The Bottlebrush Company has income from operations of $60,000, invested assets of $345,000, and sales
of $786,000. Use the DuPont formula to calculate the rate of return on investment, and show (a) the profit
margin, (b) the investment turnover, and (c) rate of return on investment. Round profit margin percentage to two
decimal places and investment turnover to three decimal places.
182. The Magnolia Company Division A has income from operations of $80,000 and assets of $400,000. The
minimum acceptable rate of return on assets is 12%. What is the residual income for the division?
183. The materials used by the Hibiscus Company Division A are currently purchased from outside supplier at
$55 per unit. Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The
two divisions have recently negotiated a transfer price of $48 per unit for the 20,000 units. By how much will
each division’s income increase as a result of this transfer?
184. The materials used by the Holly Company Division A are currently purchased from outside supplier.
Division B is able to supply Division A with 20,000 units at a variable cost of $42 per unit. The normal price
that Division B normally sells its units is $53 per unit. What is the range of transfer prices that the two division
managers should negotiate?
185. Xang Company’s costs were over budget by $46,000. The Xang Company is divided in two regions. The
first region’s costs were over budget by $7,000.
Required:
Determine the amount that the second region’s cost was over or under budget.
186. Ralston Company has income from operations of $75,000, invested assets of $360,000, and sales of
$790,000.
Required:
Use the DuPont formula to calculate the rate of return on investment, and show (a) the profit margin, (b) the
investment turnover, and (c) rate of return on investment.
Round profit margin percentage to two decimal places and investment turnover to three decimal places.
187. Materials used by the Layton Company Division 1 are currently purchased from outside supplier at $58 per
unit. Division 2 is able to supply Division 1 with 22,000 units at a variable cost of $46 per unit. The two
divisions have recently negotiated a transfer price of $50 per unit for the 20,000 units.
Required:
By how much will each division’s income increase as a result of this transfer?
188. Using the data from the Terrace Industries, determine the divisional income from operations for Districts
1 & 2.
District 1
District 2
Sales
$300,000
$600,000
Cost of goods sold
120,000
150,000
Selling expenses
55,000
75,000
Service department expenses
Purchasing
$70,000
Payroll accounting
80,000
Allocate service department expenses proportional to the sales of each district.
189. Franklin Industries has several divisions. The Northern Division has $350,000 of invested assets, income
from operations of $200,000, and residual income of $158,000. Determine the minimum acceptable rate of
return on divisional assets.
190. The Creative Division of the Barry Company reported the following results for December 2012:
Invested Assets
$1,200,000
Profit Margin
25%
Return on Investment
30%
Required: Based on this information, what were the sales?
191. The budget for Department 10 of Treble Company for the current month ending March 31 is as follows:
Materials
$208,000
Factory wages
265,000
Supervisory salaries
67,800
Depreciation of plant and equipment
35,000
Power and light
22,500
Insurance and property taxes
15,500
Maintenance
9,700
During March, the costs incurred in Department 10 of Treble Company were materials, $204,000; factory wages, $285,000; supervisory salaries,
$63,600; depreciation of plant and equipment, $35,000; power and light, $21,360; insurance and property taxes, $14,400; maintenance, $9,456.
(a)
Prepare a budget performance report for the supervisor of Department 10 of Treble Company for the month of March.
(b)
Are there any significant variances (5% or greater) of the budgeted amounts that should be examined by the supervisor?
192. A department store apportions payroll costs on the basis of the number of payroll checks issued.
Accounting costs are apportioned on the basis of the number of reports. The payroll costs for the year were
$231,000 and the accounting costs for the year totaled $75,500. The departments and the number of payroll
checks and accounting reports for each are as follows:
Number of
Payroll Checks
Number
of Reports
Department R
483
70
Department S
1,470
85
Department T
147
345
Determine the amount of (a) payroll cost and (b) accounting cost to be apportioned to each department.
193. A portion of the divisional income statement for the year just ended is presented below in condensed form.
Department B
Net sales
$ 250,000
Cost of goods sold
190,000
Gross profit
$ 60,000
Operating expenses
90,000
Loss from operations
$ (30,000)
The operating expenses of Department B include $50,000 for direct expenses.
194. Some items are omitted from each of the following condensed divisional income statements of Demi Inc.
Eastern Division
Western Division
Central Division
Sales
$ (1)
$420,000
$580,000
Cost of goods sold
480,000
120,000
$ (5)
Gross profit
$230,000
$ (3)
$200,000
Operating expenses
95,000
160,000
$ (6)
Income from operations
$ (2)
$ (4)
$ 75,000
(a)
Determine the amount of the missing items, identifying them by number.
(b)
Based on income from operations, which division is the most profitable?
195. Using the data from the Coffee & Cocoa Company,
(a)
determine the divisional income from operations for the three regions by allocating the service department expenses proportional to
the sales of the regions.
(b)
determine the increase or decrease in net income if C Region did not operate.
A Region
B Region
C Region
Sales
$600,000
$900,000
$300,000
Cost of goods sold
200,000
350,000
190,000
Selling expenses
150,000
275,000
100,000
Service department expenses
Purchasing
120,000
Payroll accounting
80,000
196. Bentz Co. has two divisions, A and B. Invested assets and condensed income statement data for each
division for the past year ended December 31 are as follows:
Division A
Division B
Revenues
$190,000
$125,500
Operating expenses
112,500
92,750
Service department charges
29,500
12,625
Invested assets
225,000
99,000
(a)
Prepare condensed income statements for the past year for each division.
(b)
Using the expanded expression, determine the profit margin, investment turnover, and rate of return on investment for each division.
197. Data for Divisions A, B, C, D, and E are as follows:
Div.
Sales
Income from
Operations
Inv.
Assets
Rate of
Return
on Inv.
Profit
Margin
Invest.
Turnover
A
(1)
$35,000
$200,000
(2)
(3)
1.6
B
$455,000
(4)
$284,375
16%
(5)
(6)
C
$525,000
$73,500
(7)
(8)
(9)
1.2
D
$800,000
(10)
(11)
(12)
13.0%
2.5
E
(13)
(14)
$250,000
(15)
16.0%
2.0
(a)
Determine the missing items, identifying each by number.
(b)
Which division is most profitable in terms of income from operations?
(c)
Which division is most profitable in terms of rate of return on investment?
Round percentage values to one decimal point.
198. Several items are missing from the following table of rate of return on investment and residual income.
Determine the missing items, identifying each item by the appropriate letter.
Invested
Assets
Income
from
Oper.
Rate of
Return
on Inv.
Min.
Rate of
Return
Min. Amt.
of Income
from
Oper.
Residual
Income
(a)
(b)
(c)
16%
$128,000
$10,000
$850,000
$153,000
(d)
12%
(e)
(f)
$825,000
(g)
20%
(h)
(i)
$24,000
(j)
$129,000
24%
(k)
$ 60,000
(l)
Round percentage values to one decimal point.
199. The sales, income from operations, and invested assets for each division of Grosbeak Company are as
follows:
Sales
Income from
Operations
Invested
Assets
Division E
$5,000,000
$550,000
$2,400,000
Division F
4,800,000
860,000
2,500,000
Division G
7,000,000
860,000
2,900,000
(a)
Using the expanded expression, determine the profit margin, investment turnover, and rate of return on investment for each division.
Round profit margin percentage to two decimal places, investment turnover to four decimal places, and rate of return on investment to
one decimal place.
(b)
Which division is the most profitable per dollar invested?
200. The sales, income from operations, and invested assets for each division of Wren Company are as follows:
Sales
Income from
Operations
Invested
Assets
Division C
$5,000,000
$630,000
$4,000,000
Division D
6,800,000
760,000
3,900,000
Division E
3,750,000
750,000
7,500,000
Management has established a minimum rate of return for invested assets of 8%.
(a)
Determine the residual income for each division.
(b)
Based on residual income, which of the divisions is the most profitable?
201. Materials used by Best Bread Company in producing Division A's product are currently purchased from
outside suppliers at a cost of $30 per unit. However, the same materials are available from Division B. Division
B has unused capacity and can produce the materials needed by Division A at a variable cost of $20 per unit.
(a)
If a transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's current
sales, how much would Best Bread Company's total income from operations increase?
(b)
Assuming transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's
current sales, how much would the income from operations of Division A increase?
(c)
Assuming transfer price of $25 per unit is established and 60,000 units of material are transferred, with no reductions in Division B's
current sales, how much would the income from operations of Division B increase?
(d)
If the negotiated price approach is used, what would be the range of acceptable transfer prices?
202. The sales, income from operations, and invested assets for each division of Marcus Company are as
follows:
