Exam 11: Reporting for Control

Eade Company's quality cost report is to be based on the following data: -What will be the total prevention cost appearing on the quality cost report?

Which of the following would be classified as a prevention cost on a quality cost report?

An increase in appraisal costs will usually result in an increase in internal failure costs.

Thais Company's quality cost report is to be based on the following data: -What will be the total internal failure cost appearing on the quality cost report?

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K. -What were Ieso Company's total fixed expenses for the year?

Financial data for Beaker Company for last year appear below: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Beaker Company $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Statements of Financial Position Beginning Ending Balance Balance Assets: Cash \ 50,000 \ 70,000 Accounts receivable 20,000 25,000 Inventory 30,000 35,000 Plant and equipment (net) 120,000 110,000 Investment in Cedar Company 80,000 100,000 Land (undeveloped) Total assets \ 470,000 \ 510,000 Liabilities and owners' equity: Accounts payable \ 70,000 \ 90,000 Long-term debt 250,000 250,000 Owners' equity Total liabilities and owners' equity \ 470,000 \ 510,000 Beaker Company Income Statement Sales \ 414,000 Less operating expenses 351,900 Net operating income 62,100 Less interest and taxes: Interest expense \ 30.000 Tax expense 10.000 40,000 Operating Income \ 22,100 The company paid dividends of $2,100 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company. Required: a) Compute the company's margin, turnover, and return on investment for last year. b) The Board of Directors of Beaker Company have set a minimum required return of 20%. What was the company's residual income last year?

Eacker Company's quality cost report is to be based on the following data: -What will be the total external failure cost appearing on the quality cost report?

The IT Corporation produces and markets two types of electronic calculators: Model 11 and Model 12.The following data were gathered on activities last month: Sales in units Selling price per unit Variable production costs per unit Traceable fixed production costs Variable selling expenses per unit Traceable fixed selling expenses Allocated division administrative expenses Model11 Model 12 5,000 3,000 \ 50 \ 100 \ 10 \ 26 \ 100,000 \ 150,000 \ 5 \ 6 \ 5,000 \ 7,500 \ 50,000 \ 60,000 Required: a. Prepare a segmented income statement in the contribution format for last month, showing both "Amount" and "Percent" columns for the company as a whole and for each model. b. Why might it be very difficult to calculate separate break-even sales for each model? c. Refer to the original data and, if necessary, the results of the segmented income statement prepared in part (a) above. Calculate the total break-even sales (in both units AND dollars) for last month, assuming that none of the fixed production costs and fixed selling expenses is traceable. Allocate the total break-even sales between the two models. d. Again, refer to the original data and, if necessary, the results of the segmented income statement prepared in part (a) above. Calculate the total break-even sales (in both units AND dollars) for last month, assuming that the "allocated" amounts of the company's administrative expenses are actually traceable. Allocate the total break-even sales between the two models. e. How reasonable are the total break-even sales numbers calculated in parts (c) and (d) given the actual results for last month?

How is a company's return on investment calculated?

The Baily Division recorded operating data as follows for the past two years: Baily Division's turnover was exactly the same in both Year 1 and Year 2. -What was the operating income in Year 1?

Harstin Corporation has provided the following data: -What was the margin for the past year?

Division X makes a part that it sells to customers outside of the company.Data concerning this part appear below: Selling Price to Outside Customers \ 75 Variable Cost per Unit \ 50 Total Fixed Costs \ 400,000 Capacity in Units 25,000 Division Y of the same company would like to use the part manufactured by Division X in one of its products.Division Y currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division X.Division Y requires 5,000 units of the part each period.Division X can already sell all of the units it can produce on the outside market.What should be the lowest acceptable transfer price from the perspective of Division X?

(Appendix 11A)A favourable sales volume variance for a substitute product in a multiple-product firm does NOT necessarily imply a favourable sales mix variance for that substitute product.

Division A produces a part with the following characteristics: Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $28 per unit. If Division A sells to Division B, $1 in variable costs can be avoided. -Suppose that Division A has ample idle capacity to handle all of Division B's needs without any increase in fixed costs and without cutting into its sales to outside customers.From the point of view of Division A,any sales to Division B should be priced no lower than which of the following?

Eade Company's quality cost report is to be based on the following data: -What will be the total appraisal cost appearing on the quality cost report?

The following data have been extracted from the year-end reports of two companies: Company X and Company Y: Company X Company Y Sales \ 800,000 ? Operating income \ 56,000 ? Average operating assets ? \ 125,000 Margin ? 4\% Turnover ? 6 Return on investment 14\% ? Required: Fill in the missing data on the above table.

To minimize its total quality costs,a company should usually try to redistribute its quality costs more toward prevention and appraisal.

The Holmes Division recorded operating data as follows for the past year: -For the past year,what was the margin?

Rigoletto Company's quality cost report is to be based on the following data: Lost sales due to poor quality \ 24,000 Test and inspection of incoming materials \ 94,000 Rework labour and overhead \ 55,000 Test and inspection of in-process goods \ 32,000 Product recalls \ 47,000 Quality data gathering, analysis, and reporting \ 15,000 Disposal of defective products \ 88,000 Maintenance of test equipment \ 58,000 Quality engineering \ 98,000 Required: Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.

(Appendix 11A)If two products are poor substitutes,the calculation of a separate market volume variance and a separate market share variance for each product is NOT useful.