Reference no: EM13341736
Problem 1
Profit sharing. Peterborough Medical Devices makes devices and equipment that it sells to hospitals, The organization has a profit-sharing plan that is worded as follows:
The company will make available a profit-sharing pool that will be the lower of the follow two items:
1. 40% of income before taxes in excess of the targe profit level, which is 18% of net assets, or
2. $7 million.
The individual employee is paid a share of the profit-sharing pool equal to the ratio of that employee's salary to the total salary paid to all employees.
Required:
a) If the company earned $45 million of earnings before taxes and had net assets of $100 million, what would be the amount available for distribution from the profit-sharing pool?
b) Suppose that Marg Watson's salary was $68,000 and that total salaries paid in the company were $25 million. What would Marg's profit share be?
c) What do you like about this profit-sharing plan?
d) What do you dislike about this profit-sharing plan?
Problem 2
Variance analysis. The Sudbury, South Carolina, plant of Saldanha Sports Company has the following standards for its soccer ball production:
Standards:
Material (leather) per soccer ball 0.25 yard
Material price per yard $16
Direct labor hours per soccer ball $0.20 hours
Wage rate per direct labor hour $10 per hour
Variable support cost rate $15 per direct labor hour
Actual results for October:
Used 13,000 yards of raw material, purchased for $205, 150
Paid for 8,240 direct labor hours at $9.50 per hour
Incurred $131,840 of variable support costs
Manufactured 40,000 soccer balls
Required:
Determine the following variances for October:
a) Total direct material cost variance
b) Total direct labor cost variance
c) Total variable support cost variance
d) Direct materials price variance
e) Direct materials quantity variance
f) Direct labor rate variance
g) Direct labor efficiency variance
h) Variable support rate variance
i) Variable support efficiency variance