# what would be the effect on the company s overall net operating income if product u5 240365

CHAPTER 8

1 Wartenberg Corporation uses customers served as its measure of activity. The company bases its budgets on the following information. Revenue should be S3.80 per customer served. Wages and salaries should be \$38.800 per month plus S1.00 per customer served. Supplies should be \$0.60 per customer served. Insurance should be \$7,100 per month. Miscellaneous expenses should be S5,100 per month plus \$0.30 per customer served.

The company reported the following actual results for January:

Customers served 30.000 Revenue \$115.500 Wages and salaries \$66.900 Supplies \$15.900 Insurance \$6.800 Nliscellaneous ……. \$15.500

Required: Prepare a report showing the company’s revenue and spending variances for January. Label each variance as favorable (F) or unfavorable (U).

2. Blomdahl Corporation makes a product with the following standard costs:

Standard Quantity or Inputs Hours Direct materials 5.2 kilos Direct labor 0.3 hours Variable overhead 0.3 hours

Standard Price or Rate \$6.00 per kilo \$22.00 per hour \$2.00 per hour

The company reported the following results concerning this product in October.

Actual output 8,100 Raw materials used in production -13,130 Actual direct labor-hours 2,570 Purchases of raw materials -16,700 Actual price of raw materials \$5.70 Actual direct labor rate \$23.70 Actual variable overhead rate \$1.80

units kilos hours kilos per kilo per hour per hour

The materials price variance is recognized when materials are purchased. Variable overhead is applied on the basis of direct labor-hours.

Required:

a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the labor efficiency variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficiency variance. f. Compute the variable overhead rate variance.

CHAPTER 9 3. Durkee Corporation keeps careful track of the time required to fill orders. The times required for a particular order appear below:

I fours Wait time 10,7 Process time …… 0.9 Inspection time 0.4 Move time Queue time 4.5

Required: a. Determine the throughput time. Show your work! b. Determine the manufacturing cycle efficiency (MCE), Show your work! c. Determine the delivery cycle lime. Show your work!

4. Eckels Wares is a division of a major corporation. The following data are for the latest year of operations:

Sales \$24.900.000 Net operating income \$1.319.700 Average operating assets \$6.000.000 The company’s minimum required rate of return po

Required.

a. What is the division’s margin? b. What is the division’s turnover? c. What is the division’s return on investment (R01)? d. What is the division’s residual income?

CHAPTER 10 5 Marcell Corporation is considering two alternatives that are code-named M and N. Costs associated with the alternatives are listed below:

Alternative NI Alternative N Supplies costs \$33.000 \$33,000 Assembly costs \$48.000 \$5L000 Power costs \$32.000 \$22,000 Inspection costs \$11.000 \$27.000

Required:

a. Which costs are relevant and which are not relevant in the choice between these two alternatives? b. What is the differential cost between the two alternatives?

6. The management of Therriault Corporation is considering dropping product U51Y. Data from the company’s accounting system appear below:

Sales \$980.000 Variable expenses \$568,000 Fixed manufacturing expenses \$314000 Fixed selling and administrative expenses \$196.000

All fixed expenses of the company are fully allocated to products in the company’s accounting system. Further investigation has revealed that \$280,000 of the fixed manufacturing expenses and \$140,000 of the fixed selling and administrative expenses are avoidable if product U51Y is discontinued.

Required:

What would be the effect on the company’s overall net operating income if product U51Y were dropped? Should the product be dropped? Show your work!

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