Question :
156.Riu Corporation has a Parts Division that does work for : 1258706
156.Riu Corporation has a Parts Division that does work for other Divisions in the company as well as for outside customers. The company’s Repair Division has asked the Parts Division to provide it with 2,000 special parts each year. The special parts would require $17.00 per unit in variable production costs. The Repair Division has a bid from an outside supplier for the special parts at $28.00 per unit. In order to have time and space to produce the special part, the Parts Division would have to cut back production of another part-the B83 that it presently is producing. The B83 sells for $34.00 per unit, and requires $22.00 per unit in variable production costs. Packaging and shipping costs of the B83 are $4.00 per unit. Packaging and shipping costs for the new special part would be only $0.50 per unit. The Parts Division is now producing and selling 10,000 units of the B83 each year. Production and sales of the B83 would drop by 10% if the new special part is produced for the Repair Division.
Required:
a. What is the range of transfer prices within which both the Divisions’ profits would increase as a result of agreeing to the transfer of 2,000 special parts per year from the Parts Division to the Repair Division?
b. Is it in the best interests of Riu Corporation for this transfer to take place? Explain.
157.Regal Furniture Company allocates its indirect salaries of $22,500 on the basis of sales. Determine the indirect salaries allocated to Departments 1 and 2 using the following information.
Dept.1Dept.2Combined
Revenues from sales$182,000$78,000$260,000
Direct Salaries42,25022,75065,000
Salaries allocated to Dept. 1 _______________
Salaries allocated to Dept. 2 _______________
158.A company rents a small building with 10,000 square feet of space for $100,000 per year. The rent is allocated to the company’s three departments on the basis of the value of the space occupied by each. Department One occupies 1,500 square feet of ground-floor space, Department Two occupies 3,500 square feet of ground-floor space, and Department Three occupies 5,000 square feet of second-floor space. If rent for comparable floor space in the neighborhood averages $15.00 per sq. ft. for ground-floor space and $10.00 per sq. ft. for second-floor space, what annual rent expense should be charged to each department?
159.A retail store has three departments, A, B, and C, each of which has four full-time employees. The store does general advertising that benefits all departments. Advertising expense totaled $90,000 for the current year, and departmental sales were:
Department A$308,000
Department B644,000
Department C 448,000
Total sales$1,400,000
Calculate the amount of advertising expense that should be allocated to each department?
Percentage of total sales:
Department A $308,000/$1,400,000 = 22%
Department B $644,000/$1,400,000 = 46%
Department C $448,000/$1,400,000 = 32%
160.A company produces two joint products (called 301 and 302) in a single operation that uses one raw material called Fruge. Four hundred gallons of Fruge were purchased at a cost of $800 and were used to produce 150 gallons of Product 301, selling for $5 per gallon, and 75 gallons of Product 302, selling for $15 per gallon. How much of the $800 cost should be allocated to each product, assuming that the company allocates cost based on sales revenue?
161.A company produces two products, XX and YY, from a single raw material called Zub. Zub is purchased in 55-gallon drums, and the contents of one drum are sufficient to produce 30 gallons of XX and 15 gallons of YY. XX sells for $10.00 per gallon and YY sells for $30.00 per gallon. During the current period, the company used 400 drums of Zub to produce XX and YY. The cost of Zub was $90 per drum.
Required:
(1) If the cost of Zub is allocated to the XX and YY products on the basis of the number of gallons produced, how much of the total cost of the 400 drums should be charged to each product?
(2) If the cost of Zub is allocated to the XX and YY products in proportion to their market values, how much of the total cost of the 400 drums should be charged to each product?
(3) Which basis of allocating the cost is most likely to be used by the company?
162.Karl and Grady are managers of two product lines for Brewster Company. One of them is a candidate for promotion based on performance. Using the data below, determine who had the better performance using performance measures such as net income, profit margin, and return on investment. Show your calculations and support your answer.
KarlGrady
Revenue$412,000$450,000
Costs380,000411,000
Average Assets400,000600,000
