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    Cost accounting problems

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    E10-4 (a,b)

    Raney Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows.
    Indirect labor $1.00
    Indirect materials 0.50
    Utilities 0.40
    Fixed overhead costs per month are: Supervision $4,000, Depreciation $1,500, and Property Taxes $800. Assume that in July 2008, Raney Company incurs the following manufacturing overhead costs.
    Variable Costs Fixed Costs
    Indirect labor $8,700 Supervision $4,000
    Indirect materials 4,300 Depreciation 1,500
    Utilities 3,200 Property taxes 800

    Prepare a flexible budget performance report, assuming that the company worked 9,000 direct labor hours during the month. (If answer is zero, please enter 0. Do not leave any fields blank.)
    RANEY COMPANY
    Manufacturing Overhead Flexible Budget Report
    For the Month Ended July 31, 2008
    Difference
    Budget Actual Costs Favorable F
    Direct labor hours 9,000 DLH 9,000 DLH Unfavorable U
    Variable costs
    Indirect labor $
    $
    $

    Indirect materials

    Utilities

    Total variable costs

    Fixed costs
    Supervision

    Depreciation

    Property taxes

    Total fixed costs

    Total costs $
    $
    $

    Prepare a flexible budget performance report, assuming that the company worked 8,500 direct labor hours during the month.
    RANEY COMPANY
    Manufacturing Overhead Flexible Budget Report
    For the Month Ended July 31, 2008
    Difference
    Budget Actual Costs Favorable F
    Direct labor hours 8,500 DLH 8,500 DLH Unfavorable U
    Variable costs
    Indirect labor $
    $
    $

    Indirect materials

    Utilities

    Total variable costs

    Fixed costs
    Supervision

    Depreciation

    Property taxes

    Total fixed costs

    Total costs $
    $
    $

    E10-7

    Pletcher Company's manufacturing overhead budget for the first quarter of 2008 contained the following data.
    Variable Costs Fixed Costs
    Indirect materials $12,000 Supervisory salaries $36,000
    Indirect labor 10,000 Depreciation 7,000
    Utilities 8,000 Property taxes and insurance 8,000
    Maintenance 6,000 Maintenance 5,000
    Actual variable costs were: indirect materials $13,800, indirect labor $9,600, utilities $8,700, and maintenance $4,900. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,200. The actual activity level equaled the budgeted level.
    All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.

    Prepare a flexible manufacturing overhead budget report for the first quarter. (If answer is zero, please enter 0. Do not leave any fields blank.)
    PLETCHER COMPANY
    Manufacturing Overhead Flexible Budget Report
    For the Quarter Ended March 31, 2008
    Difference
    Favorable F
    Budget Actual Unfavorable U
    Variable costs
    Indirect materials $
    $
    $

    Indirect labor

    Utilities

    Maintenance

    Total variable costs

    Fixed costs
    Supervisory salaries

    Depreciation

    Prop. taxes & ins.

    Maintenance

    Total fixed costs

    Total costs $
    $
    $

    Prepare a responsibility report for the first quarter. (If answer is zero, please enter 0. Do not leave any fields blank.)
    PLETCHER COMPANY
    Manufacturing Overhead Responsibility Report
    For the Quarter Ended March 31, 2008
    Difference
    Favorable F
    Controllable Costs Budget Actual Unfavorable U
    Indirect materials $
    $
    $

    Indirect labor

    Utilities

    Maintenance

    Supervisory salaries

    Total costs $
    $
    $

    E10-9 (a)

    Pronto Plumbing Company is a newly formed company specializing in plumbing services for home and business. The owner, Paul Pronto, had divided the company into two segments: Home Plumbing Services and Business Plumbing Services. Each segment is run by its own supervisor, while basic selling and administrative services are shared by both segments.
    Paul has asked you to help him create a performance reporting system that will allow him to measure each segment's performance in terms of its profitability. To that end, the following information has been collected on the Home Plumbing Services segment for the first quarter of 2008.
    Budgeted Actual
    Service revenue $25,000 $26,000
    Allocated portion of:
    Building depreciation 11,000 11,000
    Advertising 5,000 4,200
    Billing 3,500 3,000
    Property taxes 1,200 1,000
    Material and supplies 1,500 1,200
    Supervisory salaries 9,000 9,400
    Insurance 4,000 3,500
    Wages 3,000 3,300
    Gas and oil 2,700 3,400
    Equipment depreciation 1,600 1,300
    Prepare a responsibility report for the first quarter of 2008 for the Home Plumbing Services segment. (List budget amounts from largest to smallest eg 10, 5, 3, 2.)
    PRONTO PLUMBING COMPANY
    Home Plumbing Services Segment
    Responsibility Report
    For the Quarter Ended March 31, 2008
    Difference
    Favorable F
    Budget Actual Unfavorable U

    $
    $
    $

    Variable costs:

    Total variable costs

    Contribution margin

    Controllable fixed costs:

    Tot. controll. fixed costs

    Controllable margin $
    $
    $

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    E10-14

    The Sports Equipment Division of Brandon McCarthy Company is operated as a profit center. Sales for the division were budgeted for 2008 at $900,000. The only variable costs budgeted for the division were cost of goods sold ($440,000) and selling and administrative ($60,000). Fixed costs were budgeted at $100,000 for cost of goods sold, $90,000 for selling and administrative and $70,000 for noncontrollable fixed costs. Actual results for these items were:
    Sales $880,000
    Cost of goods sold
    Variable 409,000
    Fixed 105,000
    Selling and administrative
    Variable 61,000
    Fixed 67,000
    Noncontrollable fixed 80,000

    Prepare a responsibility report for the Sports Equipment Division for 2008.
    BRANDON McCARTHY COMPANY
    Sports Equipment Division
    Responsibility Report
    2008
    Budget Actual Difference
    Sales $
    $
    $

    Variable costs
    Cost of goods sold

    Selling and administrative

    Total

    Contribution margin

    Controllable fixed costs
    Cost of goods sold

    Selling and administrative

    Total

    Controllable margin $
    $
    $

    Assume the division is an investment center, and average operating assets were $1,000,000. Compute ROI. (Round answer to 1 decimal place, e.g. 10.5.)
    %

    P10-3A

    Zelmer Company uses budgets in controlling costs. The August 2008 budget report for the company's Assembling Department is as follows.
    ZELMER COMPANY
    Budget Report
    Assembling Department
    For the Month Ended August 31, 2008
    Difference
    Favorable F
    Manufacturing Costs Budget Actual Unfavorable U
    Variable costs
    Direct materials $ 48,000 $ 47,000 $1,000 F
    Direct labor 54,000 51,300 2,700 F
    Indirect materials 24,000 24,200 200 U
    Indirect labor 18,000 17,500 500 F
    Utilities 15,000 14,900 100 F
    Maintenance 9,000 9,200 200 U
    Total variable 168,000 164,100 3,900 F
    Fixed costs
    Rent 12,000 12,000 -0-
    Supervision 17,000 17,000 -0-
    Depreciation 7,000 7,000 -0-
    Total fixed 36,000 36,000 -0-
    Total costs $204,000 $200,100 $3,900 F
    The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August, because only 58,000 units were produced.

    State the total monthly budgeted cost formula.
    The formula is fixed costs $ plus variable costs of $ per unit.

    Prepare a budget report for August using flexible budget data. (If answer is zero, please enter 0. Do not leave any fields blank.)
    ZELMER COMPANY
    Assembling Department
    Flexible Budget Report
    For the Month Ended August 31, 2008
    Difference
    Budget Actual Costs Favorable F
    Units

    Unfavorable U
    Variable costs
    Direct materials $
    $
    $

    Direct labor

    Indirect materials

    Indirect labor

    Utilities

    Maintenance

    Tot. variable costs

    Fixed costs
    Rent

    Supervision

    Depreciation

    Tot. fixed costs

    Total costs $
    $
    $

    In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.
    ZELMER COMPANY
    Assembling Department
    Flexible Budget Report
    For the Month Ended September 30, 2008
    Difference
    Budget Actual Costs Favorable F
    Units

    Unfavorable U
    Variable costs
    Direct materials $
    $
    $

    Direct labor

    Indirect materials

    Indirect labor

    Utilities

    Maintenance

    Tot. variable costs

    Fixed costs
    Rent

    Supervision

    Depreciation

    Tot. fixed costs

    Total costs $
    $
    $

    P10-5A (a,c)

    Dinkle Manufacturing Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2008, and relevant budget data are as follows.
    Actual Comparison
    with Budget
    Sales $1,500,000 $100,000 favorable
    Variable cost of goods sold 700,000 60,000 unfavorable
    Variable selling and administrative expenses 125,000 25,000 unfavorable
    Controllable fixed cost of goods sold 170,000 On target
    Controllable fixed selling and administrative expenses 80,000 On target
    Average operating assets for the year for the Home Division were $2,500,000 which was also the budgeted amount.

    Prepare a responsibility report for the Home Division. (If answer is zero, please enter 0. Do not leave any fields blank.)
    DINKLE MANUFACTURING COMPANY
    Home Division
    Responsibility Report
    For the Year Ended December 31, 2008
    Difference
    Favorable F
    Budget Actual Unfavorable U
    Sales $
    $
    $

    Variable costs
    Cost of goods sold

    Selling & admin.

    Tot. variable costs

    Contribution margin

    Contr. direct fixed costs
    Cost of goods sold

    Selling & admin.

    Tot. fixed costs

    Controllable margin $
    $
    $

    ROI %
    %
    %

    Compute the expected ROI in 2009 for the Home Division, assuming the following independent changes to actual data. (Round answers to 1 decimal place, e.g. 10.5.)
    1. Variable cost of goods sold is decreased by 6%.
    2. Average operating assets are decreased by 10%.
    3. Sales are increased by $200,000, and this increase is expected to increase contribution margin by $90,000.
    1. %

    2 %

    3. %

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    Solution Summary

    The solution answer Cost accounting problems E10-4 (a,b);E10-7;E10-9 (a);E10-14;P10-3A,

    $2.19