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# Homegoods ROI; Brown Co material & labor Variance

The 2007 income statement for the east division of the Homegoods Company is as follows:

Sales \$2,000,000
Operating expenses 1,250,000
Net operating income 750,000
Interest expense 150,000
Earnings before taxes 600,000
Tax expense (40%) 240,000
Net Income \$360,000

If this division's invested capital is \$3,000,000 then its return on investment is:

20%.
15%.
17%.
12%.

Brown Company produces fine leather footballs. The standard cost for each football is:
Direct material 2 feet of leather at \$4.00/foot \$8.00
Direct labor 1.5 hours at \$12.00/hour \$18.00

During February, 1,200 footballs were produced. 2,600 feet of leather were purchased at \$4.25 per foot. Of this, 2,300 feet were used in production. Direct labor cost incurred was \$20,930 for 1,820 hours.
Reference: Ref 11-2

What is the direct labor efficiency variance?

\$20 unfavorable
\$240 unfavorable
\$360 unfavorable
\$360 favorable

Brown Company produces fine leather footballs. The standard cost for each football is:
Direct material 2 feet of leather at \$4.00/foot \$8.00
Direct labor 1.5 hours at \$12.00/hour \$18.00

During February, 1,200 footballs were produced. 2,600 feet of leather were purchased at \$4.25 per foot. Of this, 2,300 feet were used in production. Direct labor cost incurred was \$20,930 for 1,820 hours.
Reference: Ref 11-2

What is the direct labor rate variance?

\$900 favorable
\$900 unfavorable
\$910 favorable
\$910 unfavorable

Brown Company produces fine leather footballs. The standard cost for each football is:
Direct material 2 feet of leather at \$4.00/foot \$8.00
Direct labor 1.5 hours at \$12.00/hour \$18.00

During February, 1,200 footballs were produced. 2,600 feet of leather were purchased at \$4.25 per foot. Of this, 2,300 feet were used in production. Direct labor cost incurred was \$20,930 for 1,820 hours.
Reference: Ref 11-2

What is the direct material usage variance?

\$100 unfavorable
\$400 favorable
\$800 favorable
\$800 unfavorable

#### Solution Preview

Homegoods Company

Return on Investment = (Net Income / Invested Capital) * 100

Return on Investment = (360000/3000000) * 100 = 12%

Brown Company

Direct Labor Rate Variance(DLRV)

DLRV = (Standard Rate - Actual Rate) * Actual direct labor ...

#### Solution Summary

The solution computes Homegoods return on investment; Brown Co material and labor variances.

\$2.19