The inspection department of a chemical packaging plant

Reference no: EM131146709

Exercises
Exercise A The following information refers to the inspection department of a chemical packaging plant for September:

	Amount	Over or (Under) Budget
Supplies	$ 54,000	$ (10,800)
Repairs and maintenance	270,000	21,600
Overtime paid to inspectors	108,000	10,800
Salary of inspection department	32,400	(5,400)
manager
Salary of plant manager	43,200	-0-
Allocation of company accounting	32,400	10,800
costs
Allocation of building depreciation to	21,600	(5,400)

Using this information, prepare a responsibility report for the manager of the inspection department for September. Include those items for which you think the inspection department manager would be held responsible.

Exercise B Present the following information for the Hardware Division of ABC Computer Company,

Sales	$ 1,400,000
Variable selling and administrative	100,000
expenses
Fixed direct manufacturing expenses	35,000
Fixed indirect manufacturing expenses	56,000
Variable manufacturing expenses	400,000
Fixed direct selling and administrative	175,000
expenses
Fixed indirect selling and administrative	28,000
expenses

Exercise C Given the following data, prepare a schedule that shows contribution margin, contribution to indirect expenses, and net income of the Sharks Division of Hockey, Inc.:

Direct fixed expenses	$ 324,000
Indirect fixed expenses	259,200
Sales	2,100,000
Variable expenses	1,500,000

What would be the effect on the company income if the segment were eliminated?

Exercise D Three segments (A, B, and C) of Trump Enterprises have net sales of USD 300,000, USD 150,000, and USD 50,000, respectively. A decision is made to allocate the pool of USD 25,000 of administrative overhead expenses of the home office to the segments, using net sales as the basis for allocation.
a. How much of the USD 25,000 should be allocated to each segment?
b. If Segment C is eliminated, how much of the USD 25,000 will be allocated to A and B?

Exercise E Two segments (Mountain Bike and Road Bike) showed the following data for the most recent year

	Mountain	Road bike
	bike
Contribution to indirect expenses	$ 840,000	$ 504,000
Assets directly used by and identified	2,520,000	2,184,000
with the segment
Sales	3,360,000	6,720,000

a. Calculate return on investment for each segment in the most direct manner.

b. Calculate return on investment using the margin and turnover components.

Exercise F Calculate the new margin, turnover, and return on investment of the Mountain Bike segment for each of the following changes. Consider each change independently of the others.

a. Calculate return on investment for each segment in the most direct manner.
b. Calculate return on investment using the margin and turnover components.
Exercise F Calculate the new margin, turnover, and return on investment of the Mountain Bike segment for each of the following changes. Consider each change independently of the others.

Net income of the segment	$ 50,000
Contribution to indirect expenses	40,000
Controllable income by manager	48,000
Assets directly used by the manager	360,000
Assets under the control of the segment	240,000
manager

Determine the return on investment for evaluating (a) the income performance of the manager of Segment A and (b) the rate of income contribution of the segment.

Exercise H Travel Company has three segments: Air, Land, and Sea. Data concerning income and investment follow:

Air Land Sea

Contribution to indirect expenses $ 43,200 $ 86,400 $ 115,200

Assets directly used by and identified 288,000 576,000 1,296,000

with the segment

Assuming that the cost of capital on investment is 12 per cent, calculate the residual income of each of the segments. Do the results indicate that any of the segments should be eliminated?

Reference no: EM131146709

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