Exam 11: Reporting for Control

More Company has two divisions: L and M.During July,the contribution margin in Division L was $60,000.The contribution margin ratio in Division M was 40%,and its sales were $250,000.Division M's segment margin was $60,000.The common fixed expenses were $50,000,and the company operating income was $20,000.What was the segment margin for Division L?

The following information is available on Company A: Sales \ 900,000 Operating Income \ 36,000 Shareholders' Equity \ 100,000 Average Operating Assets \ 180,000 Minimum Required Rate of Return 15\% -What is the turnover for Company A?

Faust Company's quality cost report is to be based on the following data: Quality engineering \ 68,000 Quality circles \ 35,000 Supervision of testing and inspection activities \ 72,000 Net cost of scrap \ 76,000 Test and inspection of in-process goods \ 6,000 Liability arising from defective products \ 3,000 Warranty repairs and replacements \ 56,000 Debugging software errors \ 68,000 Rework labour and overhead \ 19,000 - What will be the total internal failure cost appearing on the quality cost report?

The Baily Division recorded operating data as follows for the past two years: Year 1 Year 2 Sales ? \ 1,200,000 Shareholders' Equity \ 540,000 \ 720,000 Average Operating Assets \ 600,000 ? Margin 15\% ? Return on Investment 22.5\% 18\% $\text { Baily Division's turnover was exactly the same in both Year } 1 \text { and Year } 2 .$ -What was the operating income in Year 1?

The Northern Division of the Gordon Company reported the following data for last year: Sales \ 900,000 Shareholders' Equity \ 320,000 Operating Expenses \ 700,000 Average Operating Assets \ 500,000 Interest Expense \ 50,000 Tax Expense \ 60,000 Minimum Required Rate of Return 15\% -What was the residual income for the Northern Division last year?

Which of the following would be classified as an internal failure cost on a quality cost report?

Reed Company reported total sales of $150,000 last year and a return on investment (ROI)of 12%.If the company's turnover was 3,what was the company's operating income for the year?

The Post Division of the M.T. Woodhead Company produces basic posts that can be sold t outside customers or sold to the Lamp Division of the M.T. Woodhead Company. Last year the Lamp Division bought all of its 25,000 posts from the Post Division at $\$ 1.50$ each. The following data are available for last year's activities of the Post Division: Capacity in Units 300,000 posts Selling Price per Post to Outside Customers \ 1.75 Variable Costs per Post \ 0.90 Fixed Costs, Total \ 150,000 $\text { The total fixed costs would be the same for all the alternatives considered below. }$ - Suppose the transfer of posts to the Lamp Division will cut into sales to outside customers by 15,000 units.What is the lowest transfer price that would not reduce the operating income of the Post Division?

How is a company's return on investment calculated?

Which of the following would be classified as an appraisal cost on a quality cost report?

Geneva Corporation has a Castings Division that does casting work of various types.The company's Machine Products Division has asked the Castings Division to provide it with 10,000 special castings each year on a continuing basis.The special castings would require $20 per unit in variable production costs.The Machine Products Division has a bid from an outside supplier of $30 per unit for the castings. In order to have time and space to produce the new casting,the Castings Division would have to cut back production of another casting: the NW2,which it presently is producing.The NW2 sells for $40 per unit,and requires $25 per unit in variable production costs.Boxing and shipping costs of the NW2 are $4 per unit.Boxing and shipping costs for the new special casting would be only $2 per unit.The company is now producing and selling 100,000 units of the NW2 each year.Production and sales of this casting would drop by 10% if the new casting were produced. Required: a)What is the range of transfer prices,if any,within which both the divisions' profits would increase as a result of agreeing to the transfer of 10,000 castings per year from the Castings Division to the Machine Products Division? b)Is it in the best interests of Geneva Corporation for this transfer to take place? Explain.

Anderson Company has two Service Departments and two Producing Departments. The costs of the Personnel Department are allocated to other departments on the basis of the number of employees in the departments. Departments and number of employees are as follows: Employees Personnel Department 30 Engineering Department 90 Producing Department No. 1 590 Producing Department No. 2 Total Employees - Total costs in the Personnel Department are $900,000 per year.Under the step-down method,the costs of the Personnel Department are allocated before the costs of the Engineering Department are allocated.What would be the amount of Personnel Department cost that would be allocated to Producing Department 2 under the step method,rounded to the nearest dollar?

Faast Company's quality cost report is to be based on the following data: Quality engineering \ 86,000 Quality circles \ 53,000 Supervision of testing and inspection activities \ 92,000 Net cost of scrap \ 96,000 Test and inspection of in-process goods \ 16,000 Liability arising from defective products \ 13,000 Warranty repairs and replacements \ 62,000 Debugging software errors \ 86,000 Rework labour and overhead \ 29,000 - What will be the total internal failure cost appearing on the quality cost report?

Appraisal costs are incurred to identify defective products before they are shipped to customers.

Which of the following would be classified as a prevention cost on a quality cost report?

The Baily Division recorded operating data as follows for the past two years: Year 1 Year 2 Sales ? \ 1,200,000 Shareholders' Equity \ 540,000 \ 720,000 Average Operating Assets \ 600,000 ? Margin 15\% ? Return on Investment 22.5\% 18\% $\text { Baily Division's turnover was exactly the same in both Year } 1 \text { and Year } 2 .$ -What were the sales in Year 1? (Round your intermediate calculations to one decimal place.)

The Northern Division of the Smith Company had average total operating assets of $150,000 last year.Its minimum required rate of return was 12%.The division reported operating income of $20,000.What was the residual income for the Northern Division last year?

Sales and average operating assets for Company P and Company Q are given below: Sales Average Operating Assets Company P \ 20,000 \ 8,000 Company Q \ 50,000 \ 10,000 What is the margin that each company (Company P and Company Q,respectively)will have to earn in order to generate a return on investment of 20%?

$\text { Estes Company has assembled the following data for its divisions for the past year: }$ Division A Division B Average Operating Assets \ 500,000 ? Sales ? \ 520,000 Operating Income \ 100,000 \ 20,300 Turnover 1.25 4 Margin ? 3.9\% Minimum Required Rate of Return 14\% ? Residual Income ? \ 6,000 -What were Division B's average operating assets rounded to the nearest dollars?

Financial Services Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: Building \& Grounds Personnel Operating A Operating B Departmental costs \ 64,000 \ 200,000 \ 650,000 \ 800,000 Square Metres Occupied 1,000 3,000 12,000 18,000 Number of Employees 10 5 45 55 Professional Hours 76,000 92,000 The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of professional hours. - Assume that the company uses the direct method of allocating Service Department costs to Operating Departments.How much Building & Grounds cost would be allocated to Operating Department A?