EX. 24-9 (p,1083)

 

Outdoor Athletic Equipment Co. operates two divisions the Winter Sports Division and the Summer Sports Division. The following income and expense accounts were provided from the trial balance as of June 30, 2008, the end of the current fiscal year, after all adjustments, including those for inventories, were records and posted:

 

 

Sales Winter Sports Div 950,000

Sales Summers Sports Div 1,437,500

Cost of Goods Winter Sports Div 512,500

Cost of Goods Summer Sports Div 687,500

Sales Expense Winter Sports Div 150,000

Sales Expense Summer Sports Div 205,000

Admin Expense Winter Sports Div 97,000

Admin Expense Summer Sports Div 128,000

Advertising Expense 64,500

Transportation Expense 100,700

Accounts Receivable Collection Expense 58,100

Warehouse Expense 120,000

 

A. Advertising expense incurred at headquarters, charged back to divisions of the basis of usage: Winter sports divisions, 28,000, Summer sports divisions 36,500.

 

B. Transportation expense charged back to divisions at a transfer price of 7.60 per bill of lading: Winter sports division 6,000 bills of lading, Summer sports division 7,250 bills of lading.

 

C. Accounts receivable collection expense incurred at headquarters, charged back to divisions at a transfer price of 5.60 per invoice: Winter sports division 4,500 sales invoices, Summer Sports division, 5,875 sales invoices.

 

D. Warehouse expense charged back to divisions of the basis of floor space used in storing division products: Winter sports division, 25,000 sq ft, Summer sports division 12,500 sq ft.

 

Prepare a divisional income statement with two column headings: Winter sports division and Summer sports division. Provide supporting schedules for determining service department charges.

 

EX. 24-21 (p. 1086)

 

Based on Crow Manufacturing's data in Exercise 24-20, assume that a transfer price of $110 has been established and that 40,000 units of materials are transferred, with no reduction in the Materials Division's current sales.

 

(EX 24-20: Materials used by the Industrial Division of Crow Manufacturing are currently purchased from outside suppliers at a cost of $120 per unit. However, the same materials are available from the Materials Division. The Materials Division has unused capacity and can produce the materials needed by the Industrial Division at a variable cost of $95/unit)

 

a. How much would Crow Manufacturing's total income from operations increase?

b. How much would the Industrial Division's income from operations increase?

c. How much would the Materials Division's income from operations increase?

d. If the negotiated price approach is used, what would be the range of acceptable transfer prices and why?

 

PR 24-5A (p. 1089)

 

The vice president of operations of 14 Computers Inc. is evaluation the performance of two divisions organized as investment centers. Invested assets and condensed income statement data for the past year for each division are as follows:

 

Personal Computing Division:

Sales - $800,000

COGS - $460,000

Operating expenses - $180,000

Invested assets - $500,000

 

Business Computing Division

Sales - $1,200,000

COGS - $780,000

Operating expenses - $156,000

Invested assets - $2,000,000

 

1. Prepared condensed divisional income statements for the year ended December 31, 2008, assuming that there were no service department charges.

2. Using the DuPont formula rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment for each division.

3. If management's minimum acceptable rate of return is 15%, determine the residual income for each division.

4. Discuss the evaluation of the two divisions, using the performance measures determined in parts 1, 2 and 3.

 

 

 

 

 

 

 

    • 9 years ago
    Accounting 100% Correct Guaanteed
    NOT RATED

    Purchase the answer to view it

    blurred-text
    • attachment
      selena_1.xls