1.
Introduction:
Step-down method: The overhead costs of supporting incurred by the supporting department are allocated to other supporting departments and also the operating department based on the allocation base.
Allocation of the service department’s cost to the consuming department and the predetermined overhead rates in the operating department
2.
Introduction:
Direct method: Under the direct method, the overhead costs incurred by the supporting department are directly allocated to the operating department.
Allocation of the service department’s cost to the consuming department using the direct method and the predetermined overhead rate.
3.
a.
Step-down method: The overhead costs of supporting incurred by the supporting department are allocated to other supporting departments and also the operating department based on the allocation base.
The amount of overhead cost for the job using overhead rates computed in parts 1 and 2.
3.
b.
Step-down method: The overhead costs of supporting incurred by the supporting department are allocated to other supporting departments and also the operating department based on the allocation base.
The reason the step-down method is a better base for computing the predetermined rates than the direct method.
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MANAGERIAL ACCOUNTING >CUSTOM<W/AC SM21
- Territory and Product Profitability Analysis Pipeline Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $250 $200 Variable cost of goods sold per unit (93) (92) Manufacturing margin per unit $157 $108 Variable selling expense per unit (112) (52) Contribution margin per unit $45 $56 The sales unit volume for the sales territories and products for the period is as follows: Atlantic Wave Pacific Pounder East Coast West Coast 2,860 0 1,430 1,430 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory. Round contribution margin ratio answers to two decimal places. Pipeline Surfboards Inc. Contribution Margin by Territory Line Item Description Sales ▾✔ Variable cost of goods sold Manufacturing margin Variable selling…arrow_forwardTerritory and Product Profitability Analysis Pipeline Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price Variable cost of goods sold per unit Manufacturing margin per unit Variable selling expense per unit Contribution margin per unit $250 $200 (93) (92) $157 $108 (112) $45 (52) $56 The sales unit volume for the sales territories and products for the period is as follows: East Coast West Coast Atlantic Wave Pacific Pounder 2,860 0 1,430 1,430 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory. Round contribution margin ratio answers to two decimal places. Pipeline Surfboards Inc. Contribution Margin by Territory Line Item Description Sales East Coast West Coast 715,000 Variable cost of goods sold Manufacturing…arrow_forwardCVP Analysis of Multiple Products Alo Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Alo expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Sales Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Operating income Regular Model $14,400,000 8,640,000 $5,760,000 1,200,000 $4,560,000 Deluxe Model $12,240,000 7,344,000 $4,896,000 960,000 $3,936,000 Total $26,640,000 15,984,000 $10,656,000 2,160,000 $8,496,000 1,510,400 $6,985,600arrow_forward
- CVP Analysis of Multiple Products Alo Company produces commercial printers. One is the regular model, a basic model that is designed to copy and print in black and white. Another model, the deluxe model, is a color printer-scanner-copier. For the coming year, Alo expects to sell 90,000 regular models and 18,000 deluxe models. A segmented income statement for the two products is as follows: Sales Less: Variable costs Contribution margin Less: Direct fixed costs Segment margin Less: Common fixed costs Operating income Required: Regular Model $14,400,000 8,640,000 $5,760,000 1,200,000 $4,560,000 Show Transcribed Text units Deluxe Model units $12,240,000 7,344,000 $4,896,000 960,000 $3,936,000 Total $26,640,000 15,984,000 $10,656,000 2,160,000 $8,496,000 1,628,800 $6,867,200 V 1. Compute the number of regular models and deluxe models that must be sold to break even. Round your answers to the nearest whole unit. Regular models Deluxe models C 2. Using information only from the total column…arrow_forwardRequired information SB (Static) Truball Incorporated which manufactures sports.... [The following information applies to the questions displayed below] Truball Incorporated which manufactures sports equipment, consists of several operating divisions. Division A has decided to go outside the company to buy materials because division B plans to increase its selling price for the same materials to $200. Information for division A and division B follows: Outside price for materials Division A's annual purchases Division B's variable costs per unit Division B's fixed costs, per year Division It's capacity utilization $150 10,000 $140 $1,250,000 Net benefit to the firm as a whole from buying outside 100% units Exercise 19-33 (Static) Transfer Pricing; Decision Making [LO 19-4] Required: 1-0. Assume that division B can sell 10,000 units outside the company for $215 per unit with variable marketing costs of $10. What will be the net benefit/cost to the firm as a whole if Division B sells…arrow_forwardPROBLEM S-20 CVP Applications: Break Even Analysis; Cost Structure: Target Safes LOS-1, LOS-3. LOS-4, LOS-S, LOS-6, LOS-8 Northwood Company manufactures basketballs. The company has a ball that sells for $25. Al present, the ball is manufactured in a small plant that relies heavily on direct labor workers. T, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last the company sold 30,000 of these balls, with the following results: year, $750,000 450,000 Sales (30,000 balls) Variable expenses. 300,000 210.000 Contribution margin Fixed expenses $ 90.000 Net operating income. Required: 1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of oper ating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3 per ball. If this change takes place and the selling price per ball remains constant at $25, what will be next year's…arrow_forward
- ABC and CVP Analysis: Multiple Products Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data concerning the two products follow: Expected sales (in cases) Selling price per case Direct labor hours. Machine hours Receiving orders Packing orders Direct labor benefits. Machine costs Receiving department Machine costs Receiving department Packing department Total costs *All depreciation Break-even cases of Rose Fixed $ Break-even cases of Violet Break-even cases of Rose Material cost per case Direct labor cost per case The company uses a conventional costing system and assigns overhead costs to products using direct labor hours. Annual overhea costs follow. They are classified as fixed or variable with respect to direct labor hours. Rose 242,000 135,500 Break-even cases of Violet 58,000 11,600 $103 33,650 9,400 214,500 242,000 52 99 $53 Violet $12 5,750 $81 2,750 $592,000 $394,000 214,500* 193,060 27 49 $40 Variable $8 $200,940 Required: 1. Using…arrow_forwardExercise 7-5 (Algo) Product and Customer Profitability Analysis [LO7-4, LO7-5] Thermal Rising, Incorporated, makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Order processing Custom design processing Customer service Management would like an analysis of the profitability of a particular customer, Big Sky Outfitters, which has ordered the following products over the last 12 months: Number of gliders Number of orders Number of custom designs Direct labor-hours per glider Activity Rate $ 18 per direct labor-hour $190 per order $ 262 per custom design $ 422 per customer Selling price per glider Direct materials cost per glider The company's direct labor rate is $22 per hour. Customer margin Standard Model 10 2 0 29.50 $ 1,875 $…arrow_forwardTerritory and Product Profitability Analysis Pipeline Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Line Item Description Atlantic Wave Pacific Pounder Sales price $400 $350 Variable cost of goods sold per unit (148) (165) Manufacturing margin per unit $252 $185 Variable selling expense per unit (180) (101) Contribution margin per unit $72 $84 The sales unit volume for the sales territories and products for the period is as follows: Product East Coast West Coast Atlantic Wave 2,460 1,230 Pacific Pounder 0 1,230 Question Content Area a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory. Round contribution margin ratio answers to two decimal places.arrow_forward
- 1 Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] 2:47:54 ook int Fences Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Estimated total manufacturing overhead Estimated total direct labor-hours Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Activities and Activity Measures Supporting direct labor (direct labor-hours) The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Required 1 Required 2 Required 3 $116.00 $ 64.00 $ 12.00 Product margin Xtreme 1.5 DLHS 29,000 units Required:…arrow_forwardpoint that you computed in requirement 27 PROBLEM S-20 CVP Applications Break Even Analysie Cost Structure; Target Sales LOS-1, LOS-3, LOS-4, LOS-, LOS-6, LOS-8 Northwood Company manufactures baskethalls. The company has a ball that sells for 525. Al present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Th, variable expenses are high, totaling $15 per ball, of which 60% is direct labor cost. Last year, the company sold 30,000 of these balls, with the following results: Sales (30,000 balls) Variable expenses. $750,000 450,000 Contribution margin Fixed expenses.. 300,000 210.000 $ 90.000 Net operating income. Reguired: Compute (a n a pon ext year Refer to the original data. The company is discussing the construction of a new, automated 5. manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company's new CM ratio and new…arrow_forwardProblem 4 (JIT Purchasing, Relevant Benefits, Relevant Costs) The Josefina Corporation is an automotive supplier that uses automatic turning machines to manufacture precision parts from steel bars. Josefina's inventory of raw steel averages P600,000. JC Tan, president of Josefina, and Patrick Argante, Josefina's controller, are concerned about the costs of carrying inventory. The steel supplier is willing to supply steel in smaller lots at no additional charge. Patrick Argante identified the following effects of adopting a JIT inventory program to virtually eliminate steel inventory: Without scheduling any overtime, lost sales due to stockouts would increase by 35,000 units per year. However, by incurring overtime premiums of P40,000 per year, the increase in lost sales could be reduced to 20,000 units. This would be the maximum amount of overtime that would be feasible for Josefina. Two warehouses presently used for steel bar storage would no longer be needed. Josefina rents one…arrow_forward
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