03 Jun Question 1. Jim’s Landscaping is in the business of maintaining and im
Question
1. Jim’s Landscaping is in the business of maintaining and improving yards in surrounding areas. The company bases its overhead cost budgets on the following data:
Variable overhead costs:
Supplies $4 per yard
Machine maintenance $2 per yard
Chemicals $6 per yard
Fixed overhead costs:
Salaries and wages $2,300 per month
Depreciation $800 per month
Utilities $400 per month
Rent $1,100 per month
In June, the following actual costs were incurred for 83 yards:
Supplies $320
Machine maintenance $180
Chemicals $500
Salaries and wages $2,500
Depreciation $800
Utilities $450
Rent $1,100
Construct a flexible budget performance report using the data provided. Show computations.
2. Banner Inc. bases its variable overhead performance report on the actual direct labor hours of the period. Data concerning the most recent year that ended on December 31 are as follows:
Budgeted direct labor hours 12,000
Actual direct labor hours 13,500
Standard direct labor hours allowed 13,000
Cost formula (per direct labor hour):
Indirect labor $0.85
Supplies $0.30
Electricity $0.15
Actual costs incurred:
Indirect labor $11,600
Supplies $4,000
Electricity $2,050
Management would like to compute the spending and efficiency variances for variable overhead in the company’s variable overhead performance report. Prepare a variable overhead performance report with both the variable overhead spending and efficiency variances. Show computations and details.
3. Photos Inc. has a standard cost system in which it applies overhead to products based on the standard direct labor hours allowed for the actual output of the period. Data concerning the most recent year appear below:
Total budgeted fixed overhead cost for the year $250,000
Actual fixed overhead cost for the year $265,000
Budgeted standard direct labor hours 40,000
Actual direct labor hours 41,000
Standard direct labor hours allowed for actual output 40,800
a. Compute the fixed portion of the predetermined overhead rate for the year. Show computations.
b. Compute the fixed overhead budget and volume variances. Show computations.
4. Grater Inc. sells product A and product B. Revenue and cost information relating to the products follow:
Product A Product B
Selling price per unit $48.00 $65.00
Variable expenses per unit $24.50 $29.20
Traceable fixed expenses per year $144,000 $101,500
Common fixed expenses in the company total $390,000 annually. Last year the company produced and sold 10,000 of Product A and 15,000 of Product B.
Prepare a contribution format income statement for the year segmented by product lines. Show details clearly.
5. Selected sales and operating data for three divisions of three different companies are given below:
Division X Division Y Division Z
Sales $900,000 $750,000 $600,000
Average operating assets $600,000 $150,000 $200,000
Net operating income $54,000 $30,000 $10,000
Minimum required rate of return 10% 16% 8%
a. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. Show computations.
b. Compute the residual income for each division. Show computations.
c. Under which of these methods would they accept an opportunity with a 15 percent return. Show computations and details.
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