Reference no: EM13182376
1. Using the data from the Koko Company, determine the divisional income from operations for the A and B regions.
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A Region
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B Region
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Sales
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$600,000
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$900,000
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Cost of goods sold
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200,000
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350,000
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Selling expenses
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150,000
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275,000
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Service department expenses
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Purchasing
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$80,000
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Payroll accounting
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40,000
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Allocate service department expenses proportional to the sales of each region.
2. The sales, income from operations, and invested assets for each division of Winston Company are as follows:
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Sales
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Income from
Operations
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Invested
Assets
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Division C
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$5,000,000
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$630,000
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$3,900,000
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Division D
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6,800,000
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760,000
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4,300,000
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Division E
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3,750,000
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750,000
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7,250,000
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Management has established a minimum rate of return for invested assets of 8%.
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(a)
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Determine the residual income for each division.
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(b)
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Based on residual income, which of the divisions is the most profitable?
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3. Pnok Company has been purchasing a component, Part Q, for $18.90 a unit. Pnok is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by absorption costing methods, is estimated as follows:
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Direct materials
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$11.25
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Direct labor
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4.50
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Variable factory overhead
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1.12
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Fixed factory overhead
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3.15
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Total
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$20.02
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Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.
4. FDE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra-large quantity of inventory on hand, it expects to produce only 30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3 per unit at normal plant capacity) and variable costs and expenses are $8.25 per unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units at $9.90 per unit to an exporter who plans to market the product under its own brand name in a foreign market. The additional business is therefore not expected to affect the regular selling price or quantity of sales of FDE Manufacturing Company.
Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price.
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: Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price and prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.
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