Liberty ACCT 212 Chapter 9 Homework Answers Complete Solutions

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Question 1

Arctica manufactures snowmobiles and ATVs. These products are made in different departments, and each department has its own manager. Each responsibility performance report only includes those costs that the particular department manager can control: raw materials, wages, supplies used, and equipment depreciation.

Prepare a responsibility accounting report for the ATV department. (Under budget amounts should be indicated by a minus sign.)

Question 2

Advertising department expenses of $54,100 and purchasing department expenses of $33,800 of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.

Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments.

Question 3

Jessica Porter works in both the jewelry department and the cosmetics department of a retail store. She assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates her $27,100 annual wages between the two departments based on the time worked in the two departments in each two-week pay period. On average, Jessica reports the following hours and activities spent in the two departments.

Question 4

Woh Che Co. has four departments: Materials, Personnel, Manufacturing, and Packaging. In a recent month, the four departments incurred three shared indirect expenses. The amounts of these indirect expenses and the bases used to allocate them follow.

Departmental data for the company’s recent reporting period follow.

1. Use this information to allocate each of the three indirect expenses across the four departments.

2. Prepare a summary table that reports the indirect expenses assigned to each of the four departments.

Question 5

Below are departmental income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect.

1. Prepare a departmental contribution report that shows each department’s contribution to overhead.

Question 6

Jansen Company reports the following for its ski department for the year 2019. All of its costs are direct, except as noted.

1. Prepare a departmental income statement for 2019.

2. & 3. Prepare a departmental contribution to overhead report for 2019. Based on these two performance reports, should Jansen eliminate the ski department?

Question 7

You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $38,000.

Compute the return on investment for each Fast & Great Burgers alternative. Using return on investment as your only criterion, which location (A or B) should the company open? (The chain currently generates an 19% return on total assets.)