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EXERCISE 24-18B
Jets:
ROI = Controllable margin ÷ Average operating assets
15% = Controllable margin ÷ $25,000,000
Controllable margin = $25,000,000 X 15%
= $3,750,000
Helicopters:
ROI
=
Controllable margin
÷
Average operating assets
10%
=
$95,000
÷
Average operating assets
Average operating assets
=
$95,000 ÷ 10%
=
$950,000
EXERCISE 24-18B (Continued)
Satellites:
ROI = Controllable margin ÷ Average operating assets
= $255,000 ÷ $1,500,000
= 17%
Controllable margin
=
Contribution margin
–
Controllable fixed costs
SOLUTIONS TO PROBLEMS—SET C
PROBLEM 24-1C
(a) DUNES COMPANY
Flexible Monthly Manufacturing Overhead Budget
Assembly Department
For the Year 2017
Activity level
Direct labor hours
Variable costs
Indirect labor ($.30)
Indirect materials ($.20)
18,000
$ 5,400
3,600
20,000
$ 6,000
4,000
22,000
$ 6,600
4,400
24,000
$ 7,200
4,800
PROBLEM 24-1C (Continued)
(b) DUNES COMPANY
Manufacturing Overhead Budget Report (Flexible)
Assembly Department
For the Month Ended January 31, 2017
Difference
Direct labor hours (DLH)
Variable costs
Indirect labor
Indirect materials
Repairs
Budget at
20,000 DLH
$ 6,000
4,000
3,000
Actual Costs
20,000 DLH
$ 6,300
3,800
2,700
Favorable F
Unfavorable U
$300 U
200 F
300 F
PROBLEM 24-2C
(a) WILLARD MANUFACTURING COMPANY
Flexible Monthly Manufacturing Overhead Budget
Assembly Department
For the Year 2017
Activity level
Direct labor hours
Variable costs
Indirect labor ($1.10)
Indirect materials ($.60)
22,500
$24,750
13,500
25,000
$27,500
15,000
27,500
$30,250
16,500
30,000
$ 33,000
18,000
PROBLEM 24-2C (Continued)
(b) WILLARD MANUFACTURING COMPANY
Assembly Department
Manufacturing Overhead Budget Report (Flexible)
For the Month Ended July 31, 2017
Difference
Direct labor hours (DLH)
Variable costs
Indirect labor
Indirect materials
Utilities
Budget at
27,500 DLH
$30,250
16,500
13,750
Actual Costs
27,500 DLH
$29,000
14,000
13,900
Favorable F
Unfavorable U
$1,250 F
2,500 F
150 U
PROBLEM 24-2C (Continued)
(e)
$100
Total
Budgeted
Cost Line
90
80
PROBLEM 24-3C
(a) The formula is fixed costs $22,000 plus total variable costs of $2.50 per
unit ($125,000 ÷ 50,000 units).
(b) ANSON COMPANY
Packaging Department
Budget Report (Flexible)
For the Month Ended May 31, 2017
Difference
Units
Variable costs*
Direct materials ($.75 X 55,000)
Direct labor ($.90 X 55,000)
Indirect materials ($.30 X 55,000)
Indirect labor ($.25 X 55,000)
Budget at
55,000 Units
$ 41,250
49,500
16,500
13,750
Actual Costs
55,000 Units
$ 38,000
47,000
15,200
13,000
Favorable F
Unfavorable U
$3,250 F
2,500 F
1,300 F
750 F
PROBLEM 24-3C (Continued)
(c) ANSON COMPANY
Packaging Department
Budget Report (Flexible)
For the Month Ended June 30, 2017
Difference
Units
Variable costs
Direct materials ($.75 X 40,000)
Direct labor ($.90 X 40,000)
Indirect materials ($.30 X 40,000)
Indirect labor ($.25 X 40,000)
Budget at
40,000 Units
$ 30,000
36,000
12,000
10,000
Actual Costs
40,000 Units
$ 30,400*
37,600
12,160
10,400
Favorable F
Unfavorable U
$ 400 U
1,600 U
160 U
400 U
*Note that the actual variable costs in June was 20% less than the actual
costs in May. Therefore to find the actual costs in June, the actual variable
costs in May are multiplied by 80% as follows.
May
(actual)
June
(actual)
Direct materials
$ 38,000 X 80%
=
$ 30,400
PROBLEM 24-4C
(a) ARLEN MANUFACTURING INC.
Electronics Division
Responsibility Report
For the Year Ended December 31, 2017
Difference
Budget
Actual
Favorable F
Unfavorable U
Sales
Variable costs
Cost of goods sold
$2,400,000
1,200,000
$2,200,000
1,260,000
$200,000 U
60,000 U
(b) The manager did not effectively control revenues and costs. Contribution
margin was $252,000 unfavorable and controllable margin was $246,000
unfavorable. Contribution margin was unfavorable primarily because
PROBLEM 24-5C
(a) MARX MANUFACTURING COMPANY
Weedeater Division
Responsibility Performance Report
For the Year Ended December 31, 2016
(in thousands of dollars)
Difference
Budget
Actual
Favorable F
Unfavorable U
Sales
Variable costs
Cost of goods sold
Selling and administrative
$3,020
1,310
350
$2,900
1,400
290
$120 U
90 U
60 F
PROBLEM 24-5C (Continued)
(b) The performance of the manager of the Weedeater Division was below
budget expectations for the year. The item that top management should
likely investigate first is the reason why sales were $120,000 below
PROBLEM 24-6C
(a) No. 1
To Cutting Department Manager—New York Division Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
Indirect labor
Indirect materials
$ 90,000
61,000
$ 95,000
62,500
$ 5,000 U
1,500 U
No. 2
To Division Production Manager—New York Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
New York Division
Departments:
Cutting
$ 70,000
224,000
$ 73,100
240,100
$ 3,100 U
16,100 U
No. 3
To Vice-President—Production Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
V-P Production
Divisions:
$ 70,000
$ 73,000
$ 3,000 U
PROBLEM 24-6C (Continued)
No. 4
To President Month: January
Controllable Costs:
Budget
Actual
Fav/Unfav
President
Vice-Presidents:
Production
Marketing
$ 91,300
2,252,000
160,000
$ 96,200
2,307,200
167,200
$ 4,900 U
55,200 U
7,200 U
