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27/06/2009 :
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Answer the following Questions:
Question One: (7.5 Mark)
Faculty of commerce has two service departments and two operating
departments. Selected data on the four departments are presented below:-
Service Depts. Operating Depts.
Computer
Administration Accounting Finance
services
Departmental costs
$180,000 $90,000 $190,000 $900,000
before allocations
Number of
15 5 20 80
employees
Number of PCs 12 20 18 102
The Faculty of Commerce allocates service department costs by the step
method in the following order : Administration ( number of employees)
and Computer Services (number of personal computers PCs ). The
Faculty makes no distinction between fixed and variable service
department costs.
Required : Using the Step Method , allocate the service department costs to
the operating department.
Required:
1. Perform the first-stage allocation of overhead costs to the activity cost
pools.
2. Compute activity rates for the activity cost pools.
3. OM is one of Sea Corporation's customers. Last year, OM ordered
filing cabinets four different times. OM ordered a total of 80 filing
cabinets during the year. Construct a table showing the overhead costs
attributable to OM.
Question Six: (7.5 Mark)
MB Corporation manufactures and sells a seasonal product that has peak
sales in the third quarter. The following information concerns operations for
Year 2-the coming year-and for the first two quarters of Year 3:
a. The company's single product sells for $8 per unit. Budgeted sales in
units for the next six quarters are as follows (all sales are on credit):
Year 3
Year 2 Quarter
Quarter
1 2 3 4 1 2
b. Sales are collected in the following pattern: 75% in the quarter the sales
are made, and the remaining 25% in the following quarter. On January 1,
Year 2, the company's balance sheet showed $65,000 in accounts
receivable, all of which will be collected in the first quarter of the year.
Bad debts are negligible and can be ignored.
c. The company desires an ending finished goods inventory at the end of
each quarter equal to 30% of the budgeted unit sales for the next quarter. On
December 31, Year 1, the company had 12,000 units on hand.
Required:
Prepare the following budgets and schedules for the year, showing both
quarterly and total figures.
1. A sales budget and a schedule of expected cash collections.
2. A production budget.
During June, 2,000 units were produced. The costs associated with June's
operations were as follows:
Material purchased: 18,000 ounces at $0.60 per ounce $10,800
Material used in production: 14,000 ounces. . . . . . . . . . . . . .
Direct labor: 4,000 hours at $9.75 per hour. . . . . . . . . . . . . . . $39,000
Variable manufacturing overhead costs incurred . . . . . . . . . . . . $20,800
Required:
Compute the direct materials, direct labor, and variable manufacturing
overhead variances.
Required:
1. Compute the MI Division's margin, turnover, and ROI.
2. Top management of Medical Diagnostics, Inc., has set a minimum
required rate of return on average operating assets of 25%. What is the MI
Division's residual income for the year?
Good Luck