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Exam 11: Reporting for Control

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Question 1

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(Appendix 11A)Yukon Company expressed the total expenses (Y)component of its master budget for March with the cost formula Y = $100,000 + $40*X,where X represents the expected number of units of its only product to be manufactured and sold.The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units based on an estimated industry volume of 50,000 units.Reported actual results for February were as follows: $\begin{array} { l r } \text { Sales } & \underline { 5,400 \text { units* } } \\\text { Sales revenue } & \$ 324,000 \\\text { Less variable costs } & \underline { 194.400 } \\\text { Contribution margin } & \$ 129,600 \\\text { Less fixed expenses } & \underline { 102.000 } \\\text { Operating income } & \$ 27.600 \\\end{array}$ *Actual industry sales volume was 60,000 units. Required: a) Calculate the flexible budget variance and analyze it into sales price variance and cost/expense variance(s). b) Calculate the sales volume variance and analyze it into market-size (industry volume) variance and market-share variance. c) On the basis of your analysis in parts (a) and (b), would you recommend a bonus be paid to the sales manager? Why or why not?

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a) Flexible budget variance
Per unit amo...

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Question 2

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(Appendix 11A) Kyekyeku Company retails two models of a product: Model X and Model Y. It considers both products to be close substitutes. The following data relate to the company's operations for last year: -(Appendix 11A) What were the sales quantity variances for Model X and Model Y,respectively,for last year?

A) $200 favourable and $3,496 favourable.
B) $240 favourable and $3,680 favourable.
C) $1,250 favourable and $1,900 favourable.
D) $1,500 favourable and $2,000 favourable.

E) B) and D)
F) A) and B)

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Question 3

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Assuming that a segment has both variable expenses and traceable fixed expenses,an increase in sales should increase operating income by an amount equal to the sales multiplied by the segment margin ratio.

Leis Retail Company has two stores: M and N.During March,Store N had sales of $180,000,a segment margin of 30%,and traceable fixed expenses of $26,000.The company as a whole had a contribution margin ratio of 25% and $120,000 in total contribution margin.Based on this information,what were the total variable expenses in Store M for the month?

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

The Vega Division of Ace Company makes wheels that can either be sold to outside customers or transferred to the Walsh Division of Ace Company. Last month, the Walsh Division bought all 4,000 of its wheels from the Vega Division for $42 each. The following data are available from last month's operations for the Vega Division: If the Vega Division sells wheels to the Walsh Division, Vega can avoid $2 per wheel in sales commissions. An outside supplier has offered to supply wheels to the Walsh Division for $41 each. -Suppose that the Vega Division has ample idle capacity so that transfers to the Walsh Division would not cut into its sales to outside customers.What should be the lowest acceptable transfer price from the perspective of the Vega Division?

(Appendix 11A) Kyekyeku Company retails two models of a product: Model X and Model Y. It considers both products to be close substitutes. The following data relate to the company's operations for last year: -(Appendix 11A) What were the sales mix variances for Model X and Model Y,respectively,for last year?

(Appendix 11A) What is the sum of the sales mix variance and the sales quantity variance?

Fabri 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?

A balanced scorecard should contain every performance measure that can be expected to influence a company's profits.

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 were the sales in Year 1?

The Vega Division of Ace Company makes wheels that can either be sold to outside customers or transferred to the Walsh Division of Ace Company. Last month, the Walsh Division bought all 4,000 of its wheels from the Vega Division for $42 each. The following data are available from last month's operations for the Vega Division: If the Vega Division sells wheels to the Walsh Division, Vega can avoid $2 per wheel in sales commissions. An outside supplier has offered to supply wheels to the Walsh Division for $41 each. -What is the maximum price per wheel that Walsh should be willing to pay Vega?

Which of the following would be classified as an external failure cost on a quality cost report?

Fabri 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?

Division A makes a part with the following characteristics: Division B, another division of the same company, would like to purchase 5,000 units of the part each period from Division A. Division B is now purchasing these parts from an outside supplier at a price of $24 each. -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 sales to outside customers.If Division B continues to purchase parts from an outside supplier rather than from Division A,what will be the effect on the operating income of the company as a whole?

(Appendix 11A) The sales quantity variance is calculated by holding constant which of the following?

The Millard Division's operating data for the past two years are provided below: Millard Division's margin in Year 2 was 150% of the margin in Year 1. -What were the average operating assets for Year 2?

Faast 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?

(Appendix 11A) Kyekyeku Company retails two models of a product: Model X and Model Y. It considers both products to be close substitutes. The following data relate to the company's operations for last year: -(Appendix 11A) What was the market share variance for last year?

Galben Company's quality cost report is to be based on the following data: $\begin{array}{ll}\text { Quality data gathering, analysis, and reporting } & \$ 38,000 \\\text { Supervision of testing and inspection activities } & \$ 45,000 \\\text { Liability arising from defective products } & \$ 30,000 \\\text { Technical support provided to suppliers } & \$ 39,000 \\\text { Disposal of defective products } & \$ 72,000 \\\text { Amortization of test equipment } & \$ 55,000 \\\text { Downtime caused by quality problems } & \$ 96,000 \\\text { Test and inspection of in-process goods } & \$ 69,000 \\\text { Cost of field servicing and handling complaints } & \$ 52,000\end{array}$ Required: Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.