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?

(Appendix 11A)Which of the following would be classified as an internal failure cost on a quality cost report?

(Appendix 11A)What is the maximum price per wheel that Walsh should be willing to pay Vega?

(Appendix 11A)Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into its sales to outside customers.From the point of view of Division A,any sales to Division B should be priced no lower than which of the following?

(Appendix 11A)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?

(Appendix 11A)Appraisal costs are incurred to identify defective products before they are shipped to customers.

Which of the following is the numerator in the calculation of the turnover component of ROI?

What was the residual income for the Northern Division last year?

Financial data for Bingham Company for last year appear below: The "Investment in Carr Company" on the statement of financial position represents an investment in the stock of another company. Required: a)Compute the company's margin,turnover,and return on investment for last year. b)The Board of Directors of Beaker Company have set a minimum required return of 15%.What was the company's residual income last year?

(Appendix 11A)Which of the following would be classified as an appraisal cost on a quality cost report?

Granting subordinates autonomy and profit responsibility almost invariably also grants them the right to make mistakes.

(Appendix 11A)Hancock Company has two Service Departments-Factory Administration and Maintenance-and two Producing Departments.Selected information relating to these departments follow: The company allocates Service Department costs using the step-down method.Costs of Factory Administration are allocated on the basis of the number of employees.Costs of Maintenance are allocated on the basis of labour hours.Allocation begins with the Factory Administration Department. Required: Prepare a schedule showing the allocation of Service Department costs to the other departments.

(Appendix 11A)Division X makes a part that it sells to customers outside of the company.Data concerning this part appear below: Division Y of the same company would like to use the part manufactured by Division X in one of its products.Division Y currently purchases a similar part made by an outside company for $49 per unit and would substitute the part made by Division X.Division Y requires 5,000 units of the part each period.Division X has ample excess capacity to handle all of Division Y's needs without any increase in fixed costs and without cutting into outside sales.According to the transfer pricing formula,what is the lower limit on the transfer price?

For the past year,what was the margin?

Leis Retail Company has two stores: M and N.During March,Store N had sales of $180,000,a segment margin of 30%,and traceable fixed expenses of $26,000.The company as a whole had a contribution margin ratio of 25% and $120,000 in total contribution margin.Based on this information,what were the total variable expenses in Store M for the month?

What were the total sales in Store J?

(Appendix 11A)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.

(Appendix 11A)Delta Manufacturing Company has two Service Departments-Custodial Services and Maintenance-and three Production Departments-Cutting,Milling,and Assembly.Delta allocates the cost of Custodial Services on the basis of square metres and Maintenance on the basis of labour hours.Budgeted operating data for the year just completed follow: Required: a)Prepare a schedule to allocate Service Department costs to the Production Departments by the direct method,rounding all dollar amounts to the nearest whole dollar. b)Prepare a schedule to allocate Service Department costs to the Production Departments by the step-down method,allocating Custodial Services first,and rounding all amounts to the nearest whole dollar.

(Appendix 11A)Suppose that Division A is operating at capacity and can sell all of its output to outside customers at its usual selling price.If Division A sells the parts to Division B at $24 per unit (Division B's outside price),what will be the effect on the operating income of company as a whole?

What was the residual income?