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    Flexible Budgets, ROI & Residual Income

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    1. Barrick Company has established a flexible budget for manufacturing overhead based on direct labor-hours. Total budgeted costs at 200,000 direct labor-hours are as follows:
    Variable costs (total):
    Packing supplies $120,000
    Indirect labor $180,000
    Fixed costs (total):
    Utilities $100,000
    Rent $ 40,000
    Insurance $ 20,000

    At an activity level of 190,000 direct labor-hours, the flexible budget for indirect labor costs would be:


    2. The North Division of the Lyman Company reported the following data for last year:
    Sales $900,000
    Operating expenses 700,000
    Interest expense 50,000
    Tax expense 60,000
    Stockholders' equity 250,000
    Average operating assets 500,000
    Minimum required rate of return 14%

    The return on investment last year for the North Division was:

    3. The residual income for the North Division last year was:

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    Solution Summary

    Solution attaches a Word document showing how to answer 3 questions on labor costs, ROI and residual income.