Problem 24-5A (15 minutes)
Part 1
Process time ……………………………………………………………………
6.0 days
Inspection time ……………………………………………………………..…
0.8 days
Move time ……………………………………………………………………..…
3.2 days
Wait time …………………………………………………………………………
Manufacturing cycle time …………………………………………………
Part 2
Manufacturing cycle efficiency (6.0 days/ 15.0 days) …………
0.40
Part 3
To increase the manufacturing cycle efficiency to 0.75, Oakwood needs to
reduce the total manufacturing cycle time to 8 days without changing the
Fundamental Accounting Principles, 21st Edition
1446
PROBLEM SET B
Problem 24-1B (60 minutes)
Part 1
These costs are assigned to Style’s department as follows
Department
Square
Footage
Rate
Total
Part 2
Market rates are used to allocate occupancy costs for the building rent.
Lighting and cleaning costs are allocated to the departments on all three
floors at the average rate per square foot. Costs assigned to each class are:
Occupancy Costs
Total
Costs
Value-Based
Costs
Usage–Based
Costs
Building rent ………………………
$400,000
$400,000
Lighting expense ……………….
25,000
$25,000
Cleaning expense ………………
_______
Value-based costs are allocated in two steps
(i) Compute market value of each floor
Floor
Square
Footage
Value per
Sq. Ft.
Total
First floor ………………..…………
7,500
$40
$300,000
Second floor ………………………
7,500
20
150,000
Basement floor ………..…………
5,000
10
Total market value …..…………
Problem 24-1B (Continued)
(ii) Allocate the $400,000 to each floor based on its percent of market value
Floor
Market
Value
% of
Total
Allocated
Cost
Cost per
Sq. Ft.
First floor ………………..…………
$300,000
60%
$240,000
$32.00
Second floor ………………………
150,000
30
120,000
16.00
Basement floor ………..…………
Totals ……………………..……
100%
Total allocation rates for the departments on all three floors are
Floor
Value
Usage
Total
First floor …………………………
$32
$3.25
$35.25
These rates are applied to allocate occupancy costs to Style’s department
Department
Square
Footage
Rate
Total
Part 3
A basement manager would prefer the allocation based on market value. This
is a reasonable and logical approach to allocation of occupancy costs. With a
Problem 24-2B (70 minutes)
BONANZA ENTERTAINMENT
Forecasted Departmental Income Statements
For Year Ended December 31, 2014
Movies
Video
Games
Compact
Discs
Combined
Sales ………………………………………..
$648,000
$216,000
$300,000
$1,164,000
(1)
Cost of goods sold …………………...
453,600
166,320
195,000
814,920
(2)
Gross profit ……………………………...
194,400
49,680
105,000
349,080
Direct expenses
Sales salaries ………………………….
37,000
15,000
18,000
70,000
Advertising ……………………………..
12,500
6,000
10,000
Store supplies used ………………...
4,320
1,080
2,000
7,400
(3)
Depreciation of equipment ……...
4,500
1,200
Total direct expenses ……………...
58,320
25,080
31,200
114,600
Allocated expenses
Rent expense ………………………….
30,750
6,000
13,250
50,000
(4)
Utilities expense ……………………..
5,535
1,080
2,385
9,000
(4)
Share of office dept. expenses ...
(5)
Total allocated expenses ………...
83,630
37,565
Total expenses ………………………….
Net income ……………………………….
$ 52,450
$ 1,795
$ 36,235
Supporting Computations—coded (1) through (5) in statement above
Note 1 (Sales)
Movies
Video
Games
Compact
Discs
2013 sales ……………………………….
$600,000
$200,000
Growth rate (8% increase) ……….
x 108%
2014 sales ……………………………….
$648,000
$216,000
$300,000
Note 2 (Cost of Goods Sold)
Movies
Video
Games
Compact
Discs
2013 cost of goods sold …………..
$420,000
$154,000
2013 sales ……………………………….
$600,000
$200,000
2013 cost as % of sales ……………
70%
77%
2014 sales ………………………………
$648,000
$216,000
$300,000
2014 cost as % of sales …………..
x 70%
x 77%
2014 cost of goods sold …………..
$453,600
$166,320
$195,000
Problem 24-2B (Continued)
Note 3 (Store Supplies Used)
Movies
Video
Games
Compact
Discs
2013 store supplies used ………..
$ 4,000
$ 1,000
Growth rate (8% increase) ……….
x 108%
x 108%
2014 store supplies ………………..
$ 4,320
$ 1,080
$ 2,000
Note 4 (Rent and Utilities)
Movies
Video
Games
Compact
Discs
2013 rent ………………………………..
$41,000
$ 9,000
One-fourth from movies to
compact discs ……………………….
(10,250)
$10,250
One-third from video games
to compact discs …………………..
_______
(3,000)
3,000
2014 rent ………………………………..
$30,750
$ 6,000
$13,250
Percent of total ………………………
61.5%
12.0%
26.5%
2014 allocation of $9,000
total utilities …………………………
$ 5,535
$ 2,385
Note 5 (Office Department Expenses)
Movies
Video
Games
Compact
Discs
2014 sales ………………………………
$648,000
$216,000
$300,000
Percent of total sales* …………….
55.7%
18.5%†
25.8%
plus $10,000 increase) ……………
$ 47,345
$ 15,725
$ 21,930
Fundamental Accounting Principles, 21st Edition
1450
Problem 24-3B (50 minutes)
Part 1
a.
Responsibility Accounting Performance Report
Dept. Manager, Refrigerator Department
For the Month of April
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs
Raw materials ………………………..…
$400,000
$385,000
$(15,000)
Employee wages ………………………
170,000
174,700
4,700
Supplies used ………………………..…
Totals ………………………………………
$638,000
$626,700
$(11,300)
b.
Responsibility Accounting Performance Report
Dept. Manager, Dishwasher Department
For the Month of April
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs
Raw materials ………………………..…
$200,000
$202,000
$ 2,000
Employee wages …………………………
80,000
81,500
1,500
Totals …………………………………………
$326,000
$330,200
Problem 24-3B (Continued)
c.
Responsibility Accounting Performance Report
Plant Manager, Chicago Plant
For the Month of April
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs
Dept. manager salaries ………
$ 104,000
$ 101,500
$ (2,500)
Utilities ………………………………
48,000
55,200
7,200
Building rent ………………………
80,000
82,300
2,300
40,000
35,200
21,000
29,800
8,800
Refrigerator department ……..
Dishwasher department ……..
Totals ………………………………..
Part 2
The refrigerator department manager did a good job of controlling costs
and meeting the budget, spending $11,300 below budget. However, the
Fundamental Accounting Principles, 21st Edition
1452
Problem 24-4BB (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
No. 2 ……………….…………
500,000
34.7
242,900
No. 3 ……………….…………
Harvesting, sorting, and grading: $40,000
Grade
Sales
Value
Percent
of Total
Allocated
Cost
No. 1 ……………….…………
$ 900,000
62.5%
$ 25,000
No. 2 ……………….…………
500,000
34.7
13,880
No. 3 ……………….…………
$ 40,000
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] ..…………
___ _____
* No. 3 Grade delivery costs are separately identified by the company.
Problem 24-4B (Continued)
Part 2
RITA AND RICK REDDING
Income Statement
For Year Ended December 31, 2013
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,
700,000
Net income (loss) …………………….…
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