Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
Exercise 22-14 (15 minutes)
Geographic segment
Operating
income
Sales
Profit margin
Americas …………………..
$30,684
$96,600
31.8%
38.0%
Exercise 22-15 (20 minutes)
1. Return on investment = $1,000,000/$12,500,000 = 8%
2. Profit margin = $1,000,000/$5,000,000 = 20%
Exercise 22-16 (20 minutes)
1. F 8. P
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
1340
Exercise 22-17 (15 minutes)
1. P 6. P
Exercise 22-18 (15 minutes)
($ millions)
Current year:
Days’ sales in accounts receivable = $18,685 x 365 = 31 days
$220,000
Prior year:
Days’ sales in accounts receivable = $15,726 x 365 = 28 days
$205,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
Exercise 22-19 (10 minutes)
($ millions)
Days’ sales in accounts receivable = $17,874 x 365 = 28 days
$229,234
Exercise 22–20B (15 minutes)
1. If the Trailer division is currently operating at full capacity, its manager
2. If the Trailer division is currently producing 20,000 trailers and the
Assembly division will order 15,000 more trailers, the Trailer division will
have excess capacity. In this case the range of acceptable transfer
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
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Exercise 22–21C (20 minutes)
Preliminary calculations
Lots
Quantity
Price
Total
Canyon …………………………………..
450
$ 55,000
$24,750,000
Hilltop …………………………………….
150
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
Totals ………………………….
$41,250,000
$7,500,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
Exercise 22–22C (25 minutes)
Lobster cost (2,400 lbs. x $4.50) ………………….
Labor cost ………………………………………………….
Parts
Quantity*
Price
Total
Lobster tails ……………………..
1,248 lbs.
$21
$26,208
Lobster flakes …………………..
7,392
Total market value …………….
$33,600
Allocated cost—value basis allocation: $12,600
Market
% of
Allocated
Cost
Parts
Value
Total
Cost
per lb.
Lobster tails ………………..
$26,208
78.0%
$9,828
$7.875
Lobster flakes ……………..
(1) Cost of goods sold
Parts
Quantity (given)
Cost
Total
Lobster tails ……………………….
1,096 lbs.
$7.875
$ 8,631
Lobster flakes…………………….
(2) Cost of ending inventory
Parts
Quantity
Cost
Total
Lobster tails ……………………….
152 lbs.*
$7.875
$ 1,197
Lobster flakes…………………….
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
Exercise 22-23 (20 minutes)
(1) Profit margin = Income/Sales
Division
Income*
Sales*
Profit margin
Professional products ……….
€ 552
€2,717
20.32%
17.55%
(2) Investment turnover = Sales/Average invested assets
Investment center
Sales*
Avg. assets*
Investment
turnover
Professional products ……….
€2,717
€2,570
1.06
1.17
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
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PROBLEM SET A
Problem 22-1A (50 minutes)
Part 1
a.
Responsibility Accounting Performance Report
Dept. Manager, Camper Department
For the Year
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs
Raw materials …………………………..
$195,000
$194,200
$ (800)
Supplies used …………………………..
Totals …………………………………………
$392,000
$392,500
b.
Responsibility Accounting Performance Report
Dept. Manager, Trailer Department
For the Year
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs
Raw materials …………………………..
$275,000
$273,200
$(1,800)
Supplies used …………………………..
Totals ………………………………………..
$695,000
$696,200
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Problem 22-1A (Continued)
c.
Responsibility Accounting Performance Report
Plant Manager, Indiana Plant
For the Year
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs
Dept. manager salaries …………….
$ 95,000
$ 97,500
$ 2,500
Camper department ………………….
Part 2
The plant manager did a better job of controlling costs and meeting the
budget. She came in under budget for the plant even though she paid the
1347
Problem 22-2A (60 minutes)
Part 1
Average occupancy cost = $66,000 / 8,000 sq. ft. = $8.25 per sq. ft.
These costs are assigned to the two departments as follows
Department
Square Footage
Rate
Total
Linder’s Dept. ……………
1,000
$8.25
$ 8,250
Part 2
Market rates are used to allocate occupancy costs for depreciation,
interest, and taxes. Heating, lighting, and maintenance costs are allocated
to the departments on both floors at the average rate per square foot.
These costs are separately assigned to each class as follows:
Total
Costs
Value-Based
Costs
Usage–Based
Costs
Depreciation—Building ……………….
$18,000
$18,000
Taxes—Building and land ……………
3
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1348
Problem 22-2A (Continued)
Value-based costs are allocated to departments in two steps
(i) Compute market value of each floor
Floor
Square
Footage
Value per
Sq. Ft.
Total
First floor …………………………..
4,000
$30
$120,000
4,000
Total market value ……………..
(ii) Allocate $54,000 to each floor based on its percent of market value
Floor
Market
Value
% of
Total
Allocated
Cost
Cost per
Sq. Ft.
First floor …………………………..
$120,000
60%
$32,400
$8.10
Totals …………………………..
$200,000
$54,000
Usage-based costs allocation rate = $12,000 / 8,000 sq. ft.
= $1.50 per sq. ft.
We can then compute total allocation rates for the floors
Floor
Value
Usage
Total
First floor …………………………..
$1.50
These rates are applied to allocate occupancy costs to departments
Department
Square
Footage
Rate
Total
Part 3
A second-floor manager would prefer allocation based on market value. This is a
reasonable and logical approach to allocation of occupancy costs. The current
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
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Problem 22-3A (70 minutes)
Williams Company
Forecasted Departmental Income Statements
For Year Ended December 31, 2020
Clock
Mirror
Paintings
Combined
Sales ………………………………………..
$140,400
$59,400
$50,000
$249,800
(1)
Cost of goods sold ……………………
68,796
36,828
22,500
128,124
(2)
Gross profit ………………………………
71,604
22,572
27,500
121,676
Direct expenses
Sales salaries ………………………….
20,000
7,000
8,000
35,000
Advertising ……………………………..
Depreciation of equipment ………
1,500
300
200
2,000
Total direct expenses ………………
23,672
41,404
Allocated expenses
Rent expense ………………………….
5,616
2,835
10,800
(4)
(4)
Share of office dept. expenses …
12,364
5,236
4,400
22,000
(5)
Total allocated expenses …………
20,060
9,119
7,621
36,800
Total expenses ………………………….
43,732
17,351
17,121
78,204
Net income ……………………………….
$ 27,872
$ 5,221
$10,379
$ 43,472
Supporting Computations—coded (1) through (5) in statement above
Note 1 (Sales)
Clock
Mirror
Paintings
2019 sales …………………………..………
$130,000
$ 55,000
Growth rate (8% increase) ……………
x 108%
x 108%
Note 2 (Cost of Goods Sold)
Clock
Mirror
Paintings
2019 cost of goods sold ……………….
$ 63,700
$ 34,100
$ 50,000
Growth rate (8% increase) ……………
x 108%
x 108%
x 45%*
2019 cost of goods sold ……………….
$ 63,700
$ 34,100
2019 sales …………………………..………
$130,000
$ 55,000
2019 cost as % of sales………………..
2020 sales ………………………………….
$140,400
$ 59,400
2020 cost as % of sales ……………….
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Problem 22-3A (Continued)
Note 3 (Store Supplies Used)
Clock
Mirror
Paintings
2019 store supplies used ………………..
$ 900
$ 400
Growth rate (8% increase) ……………….
x 108%
Note 4 (Rent and Utilities)
Clock
Mirror
Paintings
2019 rent ………………………………………..
$ 7,020
$ 3,780
One-fifth from clock to paintings ……..
(1,404)
$ 1,404
paintings …………………………………………
Percent of total * …………………………..
Note 5 (Office Department Expenses)
Clock
Mirror
Paintings
2019 sales ………………………………………
$140,400
$ 59,400
$ 50,000
Percent of total sales * …………………….
56.2%
23.8%
20.0%
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
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Problem 22-4A (45 minutes)
Part 1
VORTEX COMPANY
Departmental Contribution Statements
Dept. A
Dept. B
Sales ………………………………….
$800,000
$450,000
Cost of goods sold …………….
497,000
291,000
Gross profit ……………………….
303,000
159,000
Direct expenses
Salaries ……………………………..
125,000
Depreciation. ……………………..
Maintenance ………………………
Departmental contributions to
overhead ………………………….
Allocated indirect expenses
106,000
30,000
Salaries* …………………………….
23,040
12,960
Insurance** ………………………..
Depreciation*** …………………..
Total indirect expenses ………
*
Salaries allocation:
Sales
%
Amount
Allocated
Department A
$ 800,000
64%
$36,000
$23,040
Department B
Total
$1,250,000
100%
$36,000
**
Department A
$6,000
Department B
Total
100%
1352
Problem 22-4A (Concluded)
***
Depreciation allocation:
Sq. ft.
%
Amount
Allocated
Department A
28,000
70%
$15,000
$10,500
Department B
12,000
Total
40,000
100%
$15,000
Part 2
Although Department B has a negative departmental income, it is
contributing $30,000 to overhead. If none of the indirect expenses can be
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1353
P
Problem 22-5AC (60 minutes)
Part 1
Allocations of joint costs on the basis of sales values
Tree pruning and care: $405,000
Grade
Sales
Value
Percent
of Total
Allocated
Cost
No. 1 ………………………….
$450,000
48.0%
$194,400
No. 2 ………………………….
32.0
$937,500
$405,000
Picking, sorting, and grading: $202,500
Grade
Sales
Value
Percent
of Total
Allocated
Cost
No. 1 ………………………….
$450,000
48.0%
$ 97,200
No. 2 ………………………….
32.0
$937,500
$202,500
Delivery: $30,000 to Grade Nos. 1 & 2
Grade
Sales
Value
Percent
of Total
Allocated
Cost
No. 1 ………………………….
$450,000
60.0%
$18,000
No. 2 ………………………….
40.0
$750,000
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
1354
Problem 22-5AC (Continued)
Part 2
GEORGIA ORCHARDS
Income Statement
For Year Ended December 31, 2019
No. 1
No. 2
No. 3
Combined
Sales (by grade)
No. 1: 300,000 lbs. @ $1.50 …………
$450,000
$300,000
Total sales …………………………………
Costs
Tree pruning and care ………………..
194,400
129,600
81,000
405,000
Picking, sorting & grading ………….
97,200
64,800
40,500
202,500
Delivery ……………………………………..
Total costs …………………………………
Part 3
Delivery costs include both crating and hauling costs. Georgia is able to
identify the portion of the cost directly related to the No. 3 peaches,
presumably because the No. 3s are going to a different destination than the
Wild and Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 22
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PROBLEM SET B
Problem 22-1B (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)
b.
Responsibility Accounting Performance Report
Dept. Manager, Dishwasher Department
For the Month of April
Budgeted
Actual
Over (Under)
Amount
Amount
Budget
Controllable Costs