A department of Company X attains sale of 50,00,000 at 75 percent of its normal capacity and its expenses are given below: Administration costs: (*) Office Salaries 900,000 General expenses 3 per cent of sales Depreciation 75,000 Rates and Taxes 90000 Selling Costs Salaries 9 per cent of sales Travelling expenses 6 per cent of sales Sales office expenses 3 per cent of sales General expenses 3 per cent of sales Distribution Costs Wages 150,000 Rent 1.5 per cent of sales Other expenses 4.5 per cent of sales PREPARE flexible administration, selling and distribution costs budget, operating at 100 per cent and 120 per cent of normal capacity.

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:     Year 1   Year 2 Sales (@ $25 per unit) $ 1,000,000   $ 1,250,000 Cost of goods sold (@ $18 per unit)   720,000     900,000 Gross margin   280,000     350,000 Selling and administrative expenses*   210,000     230,000 Net operating income $ 70,000   $ 120,000   *$2 per unit variable; $130,000 fixed each year.   The company’s $18 unit product cost is computed as follows:         Direct materials $ 4 Direct labor   7 Variable manufacturing overhead   1 Fixed manufacturing overhead ($270,000 ÷ 45,000 units)   6 Absorption costing unit product cost $ 18     Production and cost data for the first two years of operations are:     Year 1 Year 2 Units produced 45,000 45,000 Units sold 40,000 50,000     Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net…

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:   Year 1   Year 2 Sales (@ $25 per unit) $ 1,000,000   $ 1,250,000 Cost of goods sold (@ $18 per unit)   720,000     900,000 Gross margin   280,000     350,000 Selling and administrative expenses*   210,000     230,000 Net operating income $ 70,000   $ 120,000   *$2 per unit variable; $130,000 fixed each year. The company’s $18 unit product cost is computed as follows: Direct materials $ 4 Direct labor   7 Variable manufacturing overhead   1 Fixed manufacturing overhead ($270,000 ÷ 45,000 units)   6 Absorption costing unit product cost $ 18 Forty percent of fixed manufacturing overhead consists of wages and salaries; the remainder consists of depreciation charges on production equipment and buildings. Production and cost data for the first two years of operations are:   Year 1 Year 2 Units produced 45,000 45,000 Units sold…

Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Total Department A Department B Sales $ 800,000 $ 350,000 $ 450,000 Variable expenses 320,000 120,000 200,000 Contribution margin 480,000 230,000 250,000 Fixed expenses 400,000 140,000 260,000 Net operating income (loss) $ 80,000 $ 90,000 $ (10,000) The company says that $120,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B?

During Heaton Company’s first two years of operations, it reported absorption costing net operating income as follows:     Year 1 Year 2 Sales (@ $61 per unit) $ 1,098,000 $ 1,708,000 Cost of goods sold (@ $36 per unit) 648,000 1,008,000 Gross margin 450,000 700,000 Selling and administrative expenses* 305,000 335,000 Net operating income $ 145,000 $ 365,000   * $3 per unit variable; $251,000 fixed each year.   The company’s $36 unit product cost is computed as follows:   Direct materials $ 7 Direct labor 9 Variable manufacturing overhead 2 Fixed manufacturing overhead ($414,000 ÷ 23,000 units) 18 Absorption costing unit product cost $ 36   Production and cost data for the first two years of operations are:     Year 1 Year 2 Units produced 23,000 23,000 Units sold 18,000 28,000   Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 2? 3.…

Perry Company has three divisions: R,S, and T. Division R's income statement shows the following for the year ended December 31: Sales $1,000,000; Cost of Goods Sold $(800,000); Gross Profit $$200,000; Selling expenses $100,000; Administrative Expenses $250,000; Net Loss $(150,000) Cost of Goods sold is at 75 percent variable and 25 percent fixed. Of the fixed costs, 60 percent are avoidable if the division is closed. All of the selling expenses related to the division would be eliminated if Division R were eliminated. Of the administrative expenses, 90 percent are applied from corporate costs. If Division R were eliminated, Perry's income would: a) increase by $150,000; b) decrease by $75,000; c) decrease by $155,000; d) decrease by $215,000

During Denton Company’s first two years of operations, the company reported absorption costing net operating income as follows:Year 1 Year 2Sales (@ $63 per unit) year 1$ 1,260,000 year 2 $ 1,890,000 Cost of goods sold (@ $35 per unit)  year 1. $700,000  year 2.$1,050,000 Gross margin year 1$560,000 year 2 $840,000 Selling and administrative expenses*year 1 $312,000 year 2 $342,000 Net operating incomeyear 1$ 248,000  year 2$ 498,000 $3 per unit variable; $252,000 fixed each year.The company’s $35 unit product cost is computed as follows:Direct materials $ 7 Direct labor $8 Variable manufacturing overhead $3 Fixed manufacturing overhead ($425,000 ÷ 25,000 units) $17 Absorption costing unit product cost $ 35 Production and cost data for the two years are given below:                             Year 1 Year 2Units produced $25,000 $25,000Units sold.          $20,000 $30,000 Prepare a variable costing contribution format income statement for each year. Reconcile the absorption costing and…

The following information is available for Wade Corp.: Sales                                     $550,000                  Total fixed expenses               $150,000 Cost of goods sold                 390,000                  Total variable expenses            360,000 A CVP income statement would report   gross profit of $160,000. contribution margin of $400,000. gross profit of $190,000. contribution margin of $190,000.

6. .Using the algebraic method, department B's cost allocated to department C is: а. Р 7,794 b. P13,192 c. P14,021 d. P29,021

Mitsu Division has the following results for the year:        Revenues            $1,080,000Variable expenses      440,000Fixed expenses         400,000Total divisional assets are $1,600,000.  The company's minimum required rate of return is 14 percent. What is the residual income for Scottso?