Keith Company is a two-division firm

Question # 00004786 Posted By: expert-mustang Updated on: 12/06/2013 10:44 AM Due on: 12/06/2013
Subject Accounting Topic Accounting Tutorials:
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29. Keith Company is a two-division firm and has the following information available for this year:

Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 800,000
Sales revenue ofDivision B 1,200,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000

What is Division A's contribution margin?
A) $840,000
B) $440,000
C) $560,000
D) $(240,000)

Exhibit 1: The Testa Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of$100,000, they can be sold for a total of$160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.

I. Refer to Exhibit 1. The sunk cost in this situation is:

2. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

3. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

Exhibit 2: The Wright Company has established standard cost for its single product as follows:

Direct material ................................ 2 gallons at $3 per gallon Direct labor .................................... 0.5 hours at $8 per hour Variable overhead ............................. 0.5 hours at $2 per hour
During May, the company made 4,000 units and incurred the following costs: Direct materials purchased: 8,100 gallons at $3.I 0 per gallon
Direct material used: 7,600 gallons
Direct labor used: 2,200 hours at $8.25 per hour
Actual Variable overhead cost:$4,175

4. Refer to Exhibit 2. The materials price variance is:

5. Refer to Exhibit 2. The materials quantity variance is:

6. Refer to Exhibit 2. The labor rate variance is:

on, showing your calculation, and overall company's net operating income or loss, before and after eliminating Northern Division.

6. United Corporation manufactures laser printers. United currently manufactures the 32,000 imaging drums that it uses in its printers. The annual costs to manufacture these 32,000 drums are as follows:

Cost of drum

Total cost

Variable manufacturing cost ............... $23 $736,000
Fixed manufacturing cost .................... $2.080.000
Total cost $88 $2.816.000

Hardware Solutions Inc. has offered to provide United with all of its imaging drum needs for $72 per drum. If United accepts this offer, 70% of the fixed manufacturing cost above could be totally eliminated. Also, United will be able to use the freed up space to generate $240,000 of income each year in the production of alternative products.

Based on the information presented, would United be better off to make the drums or buy the drums and by bow much?

7. Apex Company had the following data for the current fiscal period:

Units in process at the beginning of the month 6,000
Units in process at the end of the month 4,000
Units started during the month 20,000

Materials are added at the beginning of the process. Beginning work-in-process was 40 percent complete as to conversion. Ending work-in-process was 70 percent complete as to conversion.
Calculate the number of units completed and transferred out during the period?

a. Weighted Average method:
b. FIFO method:

8. Speedy Delivery Services has the collected the following information about operating expenditures for its delivery truck
fleet for the past five years:

Year Miles Ooerating Costs
2007 110,000 $390,000
2008 140,000 $420,000
2009 100,000 $360,000
2010 130,000 $410,000
2011 150,000 $440,000

a. Using the high-low method, what is the cost estimate for variable costs for 2012?

b. Using the high-low method, what is the cost estimate forfzxed costs for 2012?

c. What is the best estimate of total operating expenses for 2012 using the high-low method based on total expected miles of 120,000?

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