Title: Quick Study 24-15
QA_Ori:
Average invested assets
= (€12,888 + €13,099) / 2
Title: Quick Study 24-16
QA_Ori:
a. Process time 15.0 minutes
Title: Exercise 24-1
QA_Ori:
1. Allocation of Indirect Expenses to Four Operating Departments
Supervision expenses
Department Employees % of Total Cost
Materials 27 18% $14,850
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
b. Manufacturing cycle efficiency (15.0 min./ 60.0 min.) 0.25
2. Report of Indirect Expenses Assigned to Four Operating Departments
Supervision Utilities Insurance Total
Materials $14,850 $12,500 $ 2,250 $ 29,600
Title: Exercise 24-2
QA_Ori:
(1) Items included in performance report
Sales of parts
Wages (hourly)
(2) Items excluded from performance report
The following items definitely should be excluded from the performance report because
(3) Items that may or may not be included in performance report
Utilities Whether this expense is controllable depends on the design of the auto
Title: Exercise 24-3
QA_Ori:
(1)
WHOLESALE GUITARS
Departmental Contribution Statements
For Year Ended December 31, 2013
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.
Title: Exercise 24-4
QA_Ori:
MARATHON RUNNING SHOP
Departmental Expense Allocation Spreadsheet
For Year Ended December 31, 2013
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
Advertising expense: $23,120
Ads Placed % of Total Cost
Administrative expense: $31,400
Sales % of Total Cost
Title: Exercise 24-5
QA_Ori:
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-zi
nes
Dept.
News-pa
pers
Dept.
Total dept. exp. $698,000 $24,00
0
$34,000 $425,00
0
$90,000 $125,00
0
Service Dept. Expenses
Advertising
Dept.
Sales (24,00
0)
13,200 5,280 5,520
Computations for allocations of service dept. costs to operating departments
Advertising: $24,000
Sales % of Total Cost
Books Dept. $495,000 55% $13,200
Purchase Orders % of Total Cost
Books Dept. 516 43% $14,620
QA_Edit:
Title: Exercise 24-6
QA_Ori:
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
Title: Exercise 24-7
QA_Ori:
1.
Location Net Income Average Assets
Return on
Investment (Assets)
2. The recommendation is to pursue Location B because its return on investment
This exercise should caution students to think beyond financial numbers alone.
Some students may discuss the need to look at the market growth potential of the two
Title: Exercise 24-8
QA_Ori:
(1)
Investment Center Net Income Average Assets
Return on
Investment (Assets)
Comment: The Electronics division is the superior investment center on the basis of the
investment center return on investment (assets).
(2)
Investment Center Electronics
Sporting Goods
Net income $2,880,000 $2,040,000
Comment: The Electronics division is the superior investment center on the basis of
Title: Exercise 24-9
QA_Ori:
Investment Center Net Income Sales Profit Margin
Investment Center Sales Average Assets
Investment Turnover
Comments: The Sporting goods division generates the most net income per dollar of
sales, as shown by its higher profit margin. The Electronics division however is more
efficient at generating sales from invested assets, based on its higher investment
turnover.
Title: Exercise 24-10
QA_Ori:
1. F
2. C
8. P
9. C
Title: Exercise 24-11
QA_Ori:
1. If the Trailer division is currently operating at full capacity, its manager will not accept
2. If the Trailer division is currently producing 20,000 trailers and the Assembly division
3. The Trailer division would prefer a transfer price of $140 per trailer, since it provides
a $60 ($140 – $80) contribution margin per trailer. At a transfer price of $80 the Trailer
Title: Exercise 24-12
QA_Ori:
Preliminary calculations
Lots Quantity Price Total
Allocated cost—value basis of allocation: $7,500,000
Market % of Allocated Average
Value Total Cost Lot Cost
Canyon section $24,750,000 60% $4,500,000 $10,000