Quick Study 24-11 (continued)
Investment turnover = Sales / Average invested assets
Thus,
Quick Study 24-12 (10 minutes)
Quick Study 24-13 (5 minutes)
1. C 5. F
Quick Study 24-14 (10 minutes)
Process Perspective Actual Occupancy Goal
Note: The U.S. goal arrow should be red (shown black here) and the International
goal arrow should be green (shown gray here).
Quick Study 24-15 (10 minutes)
a
.
Process time………………………………………………………………….15.0 minutes
Quick Study 24-16A (10 minutes)
Without excess capacity, a market-based transfer price of $450 per
windshield should be used. The assembly division should be indifferent to
Quick Study 24-17A (10 minutes)
If the windshield division has excess capacity, a range of acceptable
transfer prices becomes possible. The windshield division will not accept
Quick Study 24-18B (15 minutes)
Quick Study 24-19 (5 minutes)
EXERCISES
Exercise 24-1 (30 minutes)
(1) Items included in performance report
The following items definitely should be included in the performance
report for the auto service department manager because they are
(2) Items excluded from performance report
The following items definitely should be excluded from the performance
report because the department manager cannot control or strongly
influence them:
(3) Items that may or may not be included in performance report
The following items cannot be definitely included or definitely excluded from the performance report
because they may or may not be completely under the manager’s control or strong influence:
Payroll taxes Some portion of this expense relates to the
manager’s salary and is not controllable by the
Utilities Whether this expense is controllable depends on
manager of the auto service department.
Exercise 24-2 (20 minutes)
MARATHON RUNNING SHOP
Departmental Expense Allocation Spreadsheet
For Year Ended December 31, 2015
Allocation of Expenses to Departments .
Alloca-
tion
Base
Expense
Account
Balance
Adver-
tising
Dept.
Admini-
strative
Dept.
Shoes
Dept.
Clothing
Dept.
Direct expenses…………. $161,000 $18,000 $25,000 $103,000 $15,000
Indirect utilities
expenses………………….
Sq.
feet 64,000 5,120 6,400 32,640 19,840
Supporting expense allocation calculations
Utilities expense: $64,000
Square Feet % of Total Cost
Advertising………… 1,120 8% $ 5,120
Ads Placed % of Total Cost
Shoes………………… 90 75% $17,340
Sales % of Total Cost
Exercise 24-3 (25 minutes)
COZY BOOKSTORE
Departmental Expense Allocation Spreadsheet
For Period Ended _______
Allocation of Expenses to Departments .
Alloca-
tion Base
Exp.
Account
Balance
Adver-
tising
Dept.
Purch-
asing
Dept.
Books
Dept.
Maga-zine
s
Dept.
News-pap
ers Dept.
Total dept. exp…………………. $698,000 $24,000 $34,000 $425,000 $90,000 $125,000
Service Dept. Expenses
Computations for allocations of service dept. costs to operating departments
Advertising: $24,000
Sales % of Total Cost
Books Dept…………………………… $495,000 55% $13,200
Purchasing: $34,000
Purchase Orders % of Total Cost
Books Dept…………………………… 516 43% $14,620
Exercise 24-4 (20 minutes)
Allocation of annual wages between the two departments
Hours Worked* % of Total Cost
Jewelry Dept……………………………… 57 75% $22,500
*Computation of hours worked in the two selling departments
Jewelry department
Selling…………………………………………………..51
Instructor note: This analysis ignores idle time because neither department
receives any direct benefit from it. Accordingly, the total wages are allocated
between the departments in proportion to the time worked in each.
Exercise 24-5 (25 minutes)
1. Allocation of Indirect Expenses to Four Operating Departments
Supervision expenses
Department Employees % of Total Cost
Materials…………………………… 27 18% $14,850
Personnel…………………………. 9 6 4,950
Utilities expenses
Department Square Feet % of Total Cost
Materials…………………………… 25,000 25% $12,500
Insurance expenses
Department Assets Value % of Total Cost
Materials…………………………… $ 6,000 10% $ 2,250
2. Report of Indirect Expenses Assigned to Four Operating Departments
Supervision Utilities Insurance Total
Materials……………………………$14,850 $12,500 $ 2,250 $ 29,600
Exercise 24-6 (20 minutes)
(1)
WHOLESALE GUITARS
Departmental Contribution Statements
For Year Ended December 31, 2015
Acoustic Electric
Dept. Dept. Combined
Sales………………………………… $112,500 $105,500 $218,000
Cost of goods sold……………. 55,675 66,750 122,425
(2) Based on departmental contribution to overhead, the electric guitar department should not be
eliminated, as it contributes $14,550 to covering indirect expenses.
Exercise 24-7 (25 minutes)
1.
JANSEN COMPANY
Departmental Income Statement—Ski Department
For Year Ended December 31, 2015
Ski Dept.
Sales…………………………………….. $605,000
Cost of goods sold………………… 425,000
Gross profit……………………………
Operating expenses
180,000
2.
JANSEN COMPANY
Departmental Contribution to Overhead—Ski Department
For Year Ended December 31, 2015
Ski Dept.
Sales…………………………………….. $605,000
Cost of goods sold………………… 425,000
Gross profit……………………………
Direct expenses
Contribution to overhead………..
180,000
3. Based on these performance reports, the ski department should not be
eliminated. It generates a positive contribution to overhead.