Susan Hansen is the manager of American Autos. American Autos provides three types of services, Sales, Repairs, and Rebuilds, Susan needs to provide a profit analysis to the CEO at the end of the current fiscal year so the pricing and marketing strategies can be adjusted as needed. She has gathered the following information for the company. Cost # of employees Maint Hours HR Hours Revenue Marketing $219,000 Sales $992,000 5 50 100 Support Departments Maintenance. $320,000 Repairs $1,302,000 7 300 25 HR $49,000 Rebuilds $2,108,000 2 25 180 Operating Units Repairs $364,000 $870,000 Sales 12 800 1,200 16 1,900 850 Rebuilds $1,098,000 6 2,600 800

McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 35 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost.   Manufacturing overhead for year 1 totaled $1,071,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following.     Chairs Desks Sales revenue $1,580,800 $2,786,000 Direct materials 595,000 910,000 Direct labor 230,000 400,000   Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.  a-2. Which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $760,000. The revenue and costs for desks are expected to be the same as last year. What is the…

Ethics and the Manager, Understanding the Impact of Percentage Completion on Profit—Weighted-Average Method Gary Stevens and Mary James are production managers in the Consumer Electronics Division of General Electronics Company, which has several dozen plants scattered in locations throughout the world. Mary manages the plant located in Des Moines, Iowa, while Gary manages the plant in El Segundo, California. Production managers are paid a salary and gel an additional bonus equal to 5% of their base salary if the entire division meets or exceeds its target profits for the year. The bonus is determined in March after the company’s annual report has been prepared and issued to stockholders. Shortly after the beginning of the new year, Mary received a phone call from Gary that went like this: The final processing department in Mary’s production facility began the year with no work in process inventory. During the year, 210,000 units were transferred in from the prior processing department…

Regular Company produces audio equipment, specifically headphones and speakers. A new CEO has just been hired and announces a new policy that if a product cannot earn a markup of at least 25 percent, it will be dropped. The markup is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $996,000. Overhead is allocated to products based on direct materials cost. Data for year 1 show the following:   Headphones Speakers Sales revenue $ 2,247,640 $ 2,141,940 Direct materials 730,000 930,000 Direct labor 492,000 252,000 Required: a-1. Calculate the markup for both headphones and speakers. a-2. Based on the CFO's new policy, which of the two products should be dropped? b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the speakers from the product line. The company cost analyst estimates that overhead without the speaker line will be $630,000. The revenue and costs for…

Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two operating departments using different allocation bases. The following information is available for the current period:  Office Expenses Total Allocation Base Salaries $ 30,000 Number of employees Depreciation 20,000 Cost of goods sold Advertising 40,000 Percentage of total sales   Department Number of employees Sales Cost of goods sold Drilling 1,000 $ 325,000 $ 75,000 Grinding 1,500 475,000 125,000 Total 2,500 $ 800,000 $ 200,000 The amount of salaries that should be allocated to Grinding for the current period is:

ABC Corporation has three service department with the following costs and activity base: Service Department Cost Activity Base for Allocation Graphics Production $200,000 Number of Copies Accounting 500,000 Number of invoices processed Personnel Department 400,000 Number of employees ABC has three operating divisions (organized as profit centers), mirco, macro, and super. Their revenue, cost and activity information are-as follows: Mirco Macro Super Direct Revenues $700,000 $850,000 $650,000 Direct operating expenses 50,000 70,000 100,000 Number of copies 20,000 30,000 50,000 Number of invoices 700 800 500 processed Number of employees 130 145 125 How much of the $500,000 total cost from the accounting department would be allocated to the super division?

Financial information for BDS Enterprises for the year-ended December 31, 20xx, was gathered from an accounting intern, who has asked for your guidance on how to prepare an income statement format that will be distributed to management. Subtotals and totals are included in the information, but you will need to calculate the values. Pretax income? Gross profit? Allocated costs (uncontrollable) $2,035 Labor expense 41,580 Sales 188,000 Research and development (uncontrollable) 310 Depreciation expense17,000 Net income/(loss) ? Cost of goods sold 118,440 Selling expense 1,240 Total expenses ? Marketing costs (uncontrollable) 800 Administrative expense 690 Income tax expense (21% of pretax income) ? Other expenses 310

You have been recently promoted to the divisional manager of Hadi Ltd (“the Company”), a company with 25 branches around the country. As a profit center, your division performance, is assessed by the head office on a monthly basis. The head office expects the controllable profit of your division to be at least 35% of sales. The following figures are related to your division for the month of June 2021:   Direct materials                                                         £50,000 Direct labour                                                             £40,000 Variable overheads                                                   £30,000 Sales                                                                       £200,000 Depreciation                                                              £14,000 Fixed overheads excluding depreciation                  £25,000 Head office cost allocation                                       £16,000                   Your division has no control…

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Naper Inc. manufactures power equipment. Naper has two primary products-generators and air compressors. The following report was prepared by the controller for Naper's senior marketing management for the year ended December 31: Generators Air Compressors Total $ 4,200,000 (2,940,000) $ 1,260,000 $ 3,000,000 $ 7,200,000 (5,040,000) $ 2,160,000 (610,000) $ 1,550,000 Revenue Cost of goods sold Gross profit Selling and administrative expenses Operating income (2,100,000) $ 900,000 The marketing management team was concerned that the selling and administrative expenses were not traced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense than did other products. To verify this, the controller was asked to prepare a complete product profitability report, using activity-based costing. The controller determined that selling and administrative expenses consisted of two activities: sales order processing and post-sale…