5 Accounting
ques - Data for December concerning Dinnocenzo Corporation’s two major business
segments-Fibers and Feedstocks-appear below
1 (TCO D)
Data for December concerning Dinnocenzo Corporation’s two major business
segments-Fibers and Feedstocks-appear below:
Sales
revenues, Fibers $870,000
Sales
revenues, Feedstocks $820,000
Variable
expenses, Fibers $426,000
Variable
expenses, Feedstocks $344,000
Traceable
fixed expenses, Fibers $148,000
Traceable
fixed expenses, Feedstocks S156,000
Common
fixed expenses totaled $314,000 and were allocated as follows: $129,000 to the
Fibers business segment and $185,000 to the Feedstocks business segment.
Required
Prepare a
segmented income statement in the contribution format for the company. Omit
percentages; show only dollar amounts.
2.(TCO D)
Eber Wares is a division of a major corporation. The following data are for the
latest year of operations.
Sales $30,000,000
Net
Operating income $1,170,000
Average
operating assets $8,000,000
The
company’s minimum required rate of return 18%
Required:
i. What
is the division’s margin?
ii. What
is the division’s turnover?
iii. What
is the division’s ROI?
iv. What
is the division’s residual income? (Points : 15)
3. (TCOD)
The management of Thews Corporation is considering dropping product E28I. Data
from the company’s accounting system appear below.
Sales $480,000
Variable
Expenses $202,000
Fixed
Manufacturing Expenses $158,000
Fixed
Selling and Administrative Expenses $130,000
All fixed
expenses of the company are fully allocated to products in the company’s
accounting system. Further investigation has revealed that $86,000 of the fixed
manufacturing expenses and $67,000 of the fixed selling and administrative
expenses are avoidable if product E28I is discontinued.
ii. What would be the effect on the
company's overall net operating income of dropping product E28I? Should the
product be dropped? Show your work! (Points : 15)
4.(TCO D)
Fouch Company makes 30,000 units per year of a part it uses in the products it
manufactures. The unit product cost of this part is computed as follows.
Direct
Materials $15.70
Direct Labor
$17.50
Variable
Manufacturing Overhead $4.50
Fixed
Manufacturing Overhead $14.60
Unit
Product Cost $52.30
An
outside supplier has offered to sell the company all of these parts it needs
for $51.90 a unit. If the company accepts this offer, the facilities now being
used to make the part could be used to make more units of a product that is in
high demand. The additional contribution margin on this other product would be
$219,000 per year.
If the
part were purchased from the outside supplier, all of the direct labor cost of
the part would be avoided. However, $6.20 of the fixed manufacturing overhead
cost being applied to the part would continue even if the part were purchased
from the outside supplier. This fixed manufacturing overhead cost would be applied
to the company’s remaining products.
Required:
i. How much of the unit
product cost of $52.30 is relevant in the decision of whether to make or buy the
part?
ii. What is the net
total dollar advantage (disadvantage) of purchasing the part rather than making
it?
iii. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 30,000 units required each year? (Points : 15)
iii. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 30,000 units required each year? (Points : 15)
5 (TCO D)
A customer has asked Clougherty Corporation to supply 4,000 units of product M97,
with some modifications, for $40.10 each. The normal selling price of this
product is $48.00 each. The normal unit product cost of product M97 is computed
as follows.
Direct
Materials $18.50
Direct
Labor $1.20
Variable
manufacturing overhead $8.40
Fixed
manufacturing overhead $3.90
Unit
product cost $32.00
Direct
labor is a variable cost. The special order would have no effect on the
company’s total fixed manufacturing overhead costs. The customer would like
some modifications made to product M97 that would increase the variable costs
by $5.70 per unit and that would require a one-time investment of $31,000 in
special molds that would have no salvage value. This special order would have
no effect on the company’s other sales. The company has ample spare capacity
for producing the special order.
Required
Determine
the effect on the company’s total net operating income of accepting the special
order. Show your work! (Points : 15)
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