Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Problem 24-5BB (60 minutes)
Part 1
Allocations of joint cost on the basis of sales values
Land preparation, seeding, and cultivating: $700,000
Grade
Sales
Value
Percent of
Total
Allocated
Cost
No. 1...............................$ 900,000 62.5% $437,500
Harvesting, sorting, and grading: $40,000
Grade
Sales
Value
Percent
of Total
Allocated
Cost
No. 1...............................$ 900,000 62.5% $ 25,000
Delivery: $17,000 to Grade Nos. 1 & 2
Grade
Sales
Value
Percent
of Total
Allocated
Cost
No. 1...............................$ 900,000 64.3% $10,931
No. 2...............................500,000 35.7 6,069
No. 3 [identified].............. 3,000*
* No. 3 Grade delivery costs are separately identified by the company.
Problem 24-5B (Continued)
Part 2
RITA AND RICK REDDING
Income Statement
For Year Ended December 31, 2015
No. 1 No. 2 No. 3 Combined
Sales (by grade)
No. 1: 500,000 lbs. @ $1.80...........
$900,000
No. 2: 400,000 lbs. @ $1.25........... $500,000
No. 3: 100,000 lbs. @ $0.40........... $40,000
Total sales....................................... $1,440,000
Costs
Land preparation, seeding,
and cultivating.............................. 437,500 242,900 19,600 700,000
Part 3
Delivery costs include both crating and hauling costs. The Reddings are
able to identify the portion of the cost directly related to the No. 3
tomatoes, presumably because the No. 3s are going to a different
destination than the No. 1 and No. 2 tomatoes. If the No. 1s and No. 2s are
going to the same place, then the hauling portion of the delivery cost may
truly be a joint cost, at least for the No. 1 and No. 2 tomatoes.
However, since the No. 1 and No. 2 tomatoes are different grades and are
sold for different prices per pound, it seems safe to assume they are crated
SERIAL PROBLEM — SP 24
Serial Problem, Business Solutions (20 minutes)
1. The balanced scorecard is a system of performance measures that
requires managers to think of their company from four perspectives:
Customer, internal process, innovation and learning, and financial.
2. Below are some examples of balanced scorecard measures that
Santana could use. Other examples are possible:
Customer: Percentage of computer workstations returned, number of
on-time workstation deliveries, number of on-time
Reporting in Action — BTN 24-1
1. Apple revenues by product line
($ in millions)
September
28, 2013
September
29, 2012
September
24, 2011
2. Apple can divide up the operating expenses into product line direct and
indirect expenses. Some of the direct expenses of a particular product
line might be cost of goods sold, the product line manager’s salary,
other product line workers’ salaries, product purchasing department
expense, any direct supplies, and other expenses that can be directly
traced to the particular product line. Indirect expenses that would have
to be allocated (and the basis for allocation) might be rent or store
3. Solution depends on the particular annual report information obtained.
1. Profit margin = Net income/Sales
2. Investment turnover = Investment center sales
Investment center average assets
3. Apple’s profit margin (21.7%) is nearly identical to Google’s (21.6%).
Therefore, for every dollar of sales, the two competitors yield roughly
1. There is an ethical concern in this situation. Pincus is taking actions
he would not otherwise take. He believes that “minor compromises” in
his behavior do not significantly affect clients. However, the problem is
2. Given that Pincus is aware of his behavior, its potential consequences,
and the source of what’s behind his behavior (in this case the focus by
management on meeting the quarterly responsibility performance
budget), he can approach his superiors (at least one or two he trusts)
2. Super Security (the employer) is ultimately responsible for any action
taken by its employees, including Pincus. Management must
establish an ethical code of conduct to ensure that department
managers do not engage in unethical behaviors that compromise the
security of its clients. To facilitate the implementation of such a code
which may suggest some revision in the system to mitigate this
trade-off.
Communicating in Practice — BTN 24-4
Sample solution
MEMORANDUM
include an allocation of home office expenses. These expenses will be
assigned as a percent of store sales.
The home office provides several services to all its stores. These include
assistance with marketing, product selection, distribution, and volume
discounts. These services can help make the local store more profitable
of store managers for all current and future periods.
Taking It to the Net — BTN 24-5
Instructor note: The objective of this assignment is for students to be exposed to the
different accounting and business applications with spreadsheets.
1. The tutorials identified and read by the students will vary. For example,
one tutorial is titled “Return on Investment and Return on Equity
2. Student responses regarding the usefulness of spreadsheets will
depend on the tutorials accessed. For example, the tutorial “Return on
Investment and Return on Equity Business Model” shows how a
spreadsheet can be used to evaluate a company’s ROI and ROE. It
points out that two distinct advantages of using a spreadsheet for these
measures are the ease it provides in conducting financial analysis and
the usefulness of information generated from “what if” financial
analysis.
Teamwork in Action — BTN 24-6
Instructor note: Student answers will vary. The key is to look for clear organizational
structure and sound thinking in designing performance reports.
1. The student must make decisions about geographic area, type of
business segment, and reporting structure. The objective is to have
them think about the many different ways a business can set up
2. Having comparable responsibility accounting reports is necessary to
reliably compare performance within a company (and across different
companies). Differences in performance reports can substantially
1. Departmental income statements can be prepared for each department
once expenses have been allocated to it. The expenses will include both
2. If the indirect expenses are a large portion of total expenses, a
departmental income statement might not be the best measure of each
department’s performance. While the department’s income or loss is
3. United By Blue could use ratings from customer satisfaction surveys,
the number of repeat customers, the percentage of orders returned, and
the percentage of on-line customers successfully completing the
checkout process as nonfinancial measures within a balanced
scorecard. Other answers are possible (refer to Exhibit 24.21).
Hitting the Road — BTN 24-8
1. [Student answers will vary for part (1).] One suggested responsibility
accounting reporting framework is to have (1) concessions and (2)
2. One suggested proposal is
Expense Allocation Basis
Global Decision — BTN 24-9
1. Net sales percentage growth [non-percents in millions₩]
Segment Net sales % change from 2012 to 2013
communications...............................
31.2 %
2. Percentage growth in net sales is higher in the IT and mobile
3. The IT and mobile communications segment earned more operating
4. Samsung’s management can use this information to help establish
long-term goals and strategies and for resource allocation decisions.
An important factor in the valuation of any company is its ability to
