Bundle: Financial & Managerial Accounting, 13th + CengageNOWv2, 2 terms (12 months) Printed Access Card
13th Edition
ISBN: 9781305618909
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 26, Problem 26.18EX
(a)
To determine
Activity-based costing (ABC) method: The costing method which allocates overheads to the products based on factory overhead rate for each activity or cost object, according to the cost pooled for the cost drivers (allocation base).
To compute: The activity-cost of generators and air compressors for the two activities
(b)
To determine
To draft: Product profitability report of Incorporation VG for the year ended December 31
(c)
To determine
To discuss: The inferences from the product profitability report.
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Construct and interpret a product profitability report, allocating selling and administrative expenses
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:
Line Item Description
Generators
Air Compressors
Total
Revenue
$4,200,000
$3,000,000
$7,200,000
Cost of goods sold
(2,940,000)
(2,100,000)
(5,040,000)
Gross profit
$1,260,000
$900,000
$2,160,000
Selling and administrative expenses
(610,000)
Operating income
$1,550,000
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…
Construct and Interpret a Product Profitability Report, Allocating Selling and Administrative Expenses
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:
Air
Generators Compressors
Total
Revenue
$1,431,000
$2,094,800
$3,525,800
Cost of goods sold
1,073,250
1,571,100
2,644,350
Gross profit
$357,750
$523,700
$881,450
Selling and administrative expenses
189,650
Income from operations
$691,800
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…
Assume you are the department B manager for Marley's Manufacturing. Marley's operates under a cost-based transfer structure. Assume you receive the majority of your raw
materials from department A, which sells only to department B (they have no outside sales).
The income statement for Marley's Manufacturing is shown below:
Marley's Manufacturing
Income Statement
Month Ending August 31, 2018
Dept. A
Dept. B
Sales
$23,000
$52,000
Cost of goods sold
11,040
27,560
Gross profit
$11,960
$24,440
Utility expenses
1,380
3,640
Wages expense
5,980
10,920
Costs allocated from corporate
2,530
15,080
Total expenses
$9,890
$29,640
Operating income/(loss) in dollars
$2,070
-$5,200
Operating income/(loss) in percentage
9 %
-10 %
Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley's Manufacturing.
Determine the operating income for department B, assuming department A "sold" department B 1,000 units during the month and…
Chapter 26 Solutions
Bundle: Financial & Managerial Accounting, 13th + CengageNOWv2, 2 terms (12 months) Printed Access Card
Ch. 26 - Why would management be concerned about the...Ch. 26 - Why would a manufacturing company with multiple...Ch. 26 - How do the multiple production department and the...Ch. 26 - Under what two conditions would the multiple...Ch. 26 - Prob. 5DQCh. 26 - Prob. 6DQCh. 26 - Prob. 7DQCh. 26 - Under what circumstances might the activity-based...Ch. 26 - Prob. 9DQCh. 26 - Prob. 10DQ
Ch. 26 - Single plantwide factory overhead rate The total...Ch. 26 - Single plantwide factory overhead rate The total...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity based costing: factory overhead costs The...Ch. 26 - Activity-based costing: factory overhead costs The...Ch. 26 - Activity-based costing: selling and administrative...Ch. 26 - Activity-based costing: selling and administrative...Ch. 26 - Activity-based costing for a service business...Ch. 26 - Activity-based costing for a service business...Ch. 26 - Single plantwide factory overhead rate Nixon...Ch. 26 - Single plantwide factory overhead rate Matts Music...Ch. 26 - Single plantwide factory overhead rate Sally...Ch. 26 - Prob. 26.4EXCh. 26 - Multiple production department factory overhead...Ch. 26 - Single plantwide and multiple production...Ch. 26 - Single plantwide and multiple production...Ch. 26 - Identifying activity bases in an activity-based...Ch. 26 - Product costs using activity rates Nozama.com Inc....Ch. 26 - Prob. 26.10EXCh. 26 - Prob. 26.11EXCh. 26 - Activity cost pools, activity rates, and product...Ch. 26 - Activity-based costing and product cost distortion...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity-based costing and product cost distortion...Ch. 26 - Single plantwide rate and activity-based costing...Ch. 26 - Evaluating selling and administrative cost...Ch. 26 - Prob. 26.18EXCh. 26 - Prob. 26.19EXCh. 26 - Activity-based costing for a service company...Ch. 26 - Activity-based costing for a service company...Ch. 26 - Single plantwide factory overhead rate Orange...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity-based and department rate product costing...Ch. 26 - Prob. 26.4APRCh. 26 - Prob. 26.5APRCh. 26 - Product costing and decision analysis for a...Ch. 26 - Single plantwide factory overhead rate Spoiled Cow...Ch. 26 - Multiple production department factory overhead...Ch. 26 - Activity-based department rate product costing and...Ch. 26 - Activity-based product costing Sweet Sugar Company...Ch. 26 - Allocating selling and administrative expenses...Ch. 26 - Product costing and decision analysis for a...Ch. 26 - Prob. 26.1CPCh. 26 - Prob. 26.2CPCh. 26 - Activity-based costing for a service company Wells...Ch. 26 - Using a product profitability report to guide...Ch. 26 - Prob. 26.5CPCh. 26 - Prob. 26.6CP
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