9--41

April
1a.
Revenue: (12,000x6.00)
Cost of goods sold
Beginning inventory
Variable manufacturing costs (1.7x12,200)
Allocated fixed manufacturing costs (1.0x12,200)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+1.0)x200)
Adjustment for production-volume variance
Cost of goods sold
Gross Margin
Operating costs
Fixed Administrative costs
Total operating costs
Operating income

72,000
0
20740
12200
32940
540
7800 U
40200
31,800
28,000
28,000
3,800

1b.
Revenue: (12,000x6.00)
Cost of goods sold
Beginning inventory
Variable manufacturing costs (1.7x12,200)
Allocated fixed manufacturing costs (.75x12,200)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+.75)x200)
Adjustment for production-volume variance
Cost of goods sold
Gross Margin
Operating costs
Variable delivering costs (12,000x.40)
Fixed Administrative costs
Total operating costs
Operating income

72,000
0
20740
9150
29890
490
5850 U
35250
36,750
4800
28,000
32,800
3,950

May
Revenue: (12,500x6.00)
Cost of goods sold
Beginning inventory
Variable manufacturing costs (1.7x18,000)
Allocated fixed manufacturing costs (1.0x18,000)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+1.0)x5700)
Adjustment for production-volume variance
Cost of goods sold
Gross Margin
Operating costs
Fixed Administrative costs
Total operating costs
Operating income

75,000
540
30600
18000
49140
15390
2000 U
35750
39,250
28,000
28,000
11,250

Revenue: (12,500x6.00)
Cost of goods sold
Beginning inventory
Variable manufacturing costs (1.7x18,000)
Allocated fixed manufacturing costs (.75x18,000)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+.75)x5700)
Adjustment for production-volume variance
Cost of goods sold
Gross Margin
Operating costs
Variable delivering costs (12,500x.40)
Fixed Administrative costs
Total operating costs
Operating income

75,000
490
30600
13500
44590
13965
1500 U
32125
42,875
5000
28,000
33,000
9,875

June
Revenue: (13,000x6.00)
Cost of goods sold
Beginning inventory
Variable manufacturing costs (1.7x9,000)
Allocated fixed manufacturing costs (1.0x9,000)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+1.0)x1700)
Adjustment for production-volume variance
Cost of goods sold
Gross Margin
Operating costs
Fixed Administrative costs
Total operating costs
Operating income

78,000
15390
15300
9000
39690
4590
11000 U
46100
31,900
28,000
28,000
3,900

Revenue: (13,000x6.00)
Cost of goods sold
Beginning inventory
Variable manufacturing costs (1.7x9,000)
Allocated fixed manufacturing costs (.75x9,000)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+.75)x1700)
Adjustment for production-volume variance
Cost of goods sold
Gross Margin
Operating costs
Variable delivering costs (13,000x.40)
Fixed Administrative costs
Total operating costs
Operating income

78,000
13965
15300
6750
36015
4165
8250 U
40100
37,900
5200
28,000
33,200
4,700

9--41
April
2a.
Revenue: (12,000x6.00)
Variable costs
Beginning inventory
Variable manufacturing costs (1.7x12,200)
Cost of goods available for sale
Deduct: Ending inventory (1.7x200)
Variable cost of goods sold
Total variable costs
Contribution Margin
Fixed costs
Fixed manufacturing costs
Fixed administrative costs
Fixed delivering costs
Total fixed costs
Operating income

72,000
0
20740
20740
340
20400
20400
51,600
15,000
28,000
5000
48,000
3,600

2b.
Revenue: (12,000x6.00)
Variable costs
Beginning inventory
Variable manufacturing costs (1.7x12,200)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+.4)x200)
Variable cost of goods sold
Variable delivering costs (12,200x.40)
Total variable costs
Contribution Margin
Fixed costs
Fixed manufacturing costs
Fixed Administrative costs
Total fixed costs
Operating income

72,000
0
20740
20740
420
20320
4880
25200
46,800
15,000
28,000
43,000
3,800

May
Revenue: (12,500x6.00)
Variable costs
Beginning inventory
Variable manufacturing costs (1.7x18,000)
Cost of goods available for sale
Deduct: Ending inventory (1.7x5700)
Variable cost of goods sold
Total variable costs
Contribution Margin
Fixed costs
Fixed manufacturing costs
Fixed administrative costs
Fixed delivering costs
Total fixed costs
Operating income

75,000
340
30600
30940
9690
21250
21250
53,750
15,000
28,000
5000
48,000
5,750

Revenue: (12,500x6.00)
Variable costs
Beginning inventory
Variable manufacturing costs (1.7x18,000)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+.4)x5700)
Variable cost of goods sold
Variable delivering costs (18,000x.40)
Total variable costs
Contribution Margin
Fixed costs
Fixed manufacturing costs
Fixed Administrative costs
Total fixed costs
Operating income

75,000
420
30600
31020
11970
19050
7200
26250
48,750
15,000
28,000
43,000
5,750

June
Revenue: (13,000x6.00)
Variable costs
Beginning inventory
Variable manufacturing costs (1.7x9,000)
Cost of goods available for sale
Deduct: Ending inventory (1.7x1700)
Variable cost of goods sold
Total variable costs
Contribution Margin
Fixed costs
Fixed manufacturing costs
Fixed administrative costs
Fixed delivering costs
Total fixed costs
Operating income

78,000
9690
15300
24990
2890
22100
22100
55,900
15,000
28,000
5000
48,000
7,900

Revenue: (13,000x6.00)
Variable costs
Beginning inventory
Variable manufacturing costs (1.7)x9,000)
Cost of goods available for sale
Deduct: Ending inventory ((1.7+.4)x1700)
Variable delivering costs (9,000x.40)
Total variable costs
Contribution Margin
Fixed costs
Fixed manufacturing costs
Fixed Administrative costs
Total fixed costs
Operating income

78,000
11970
15300
27270
3570
23700
3600
27300
50,700
15,000
28,000
43,000
7,700

9--41
April
3a.
Revenue: (12,000x6.00)
Direct material cost of goods sold
Beginning inventory
Direct materials (1.2x12,200)
Cost of goods available for sale
Deduct: Ending inventory (1.2x200)
Direct material cost of goods sold
Throughput Margin
Manufaturing costs
Delivering cost
Administrative costs
Total costs
Operating income

72,000
0
14640
14640
240
14400
57,600
21100
5000
28,000
54,100
3,500

3b.
Revenue: (12,000x6.00)
Direct material cost of goods sold
Beginning inventory
Direct materials (1.2x12,200)
Cost of goods available for sale
Deduct: Ending inventory (1.2x200)
Direct material cost of goods sold
Throughput Margin
Manufaturing costs
Delivering cost
Administrative costs
Total costs
Operating income

72,000
0
14640
14640
240
14400
57,600
21100
4880
28,000
53,980
3,620

May
Revenue: (12,500x6.00)
Direct material cost of goods sold
Beginning inventory
Direct materials (1.2x18,000)
Cost of goods available for sale
Deduct: Ending inventory (1.2x5700)
Direct material cost of goods sold
Throughput Margin
Manufaturing costs
Delivering cost
Administrative costs
Total costs
Operating income

75,000
240
21600
21840
6840
15000
60,000
24000
5000
28,000
57,000
3,000

Revenue: (12,500x6.00)
Direct material cost of goods sold
Beginning inventory
Direct materials (1.2x18,000)
Cost of goods available for sale
Deduct: Ending inventory (1.2x5700)
Direct material cost of goods sold
Throughput Margin
Manufaturing costs
Delivering cost
Administrative costs
Total costs
Operating income

75,000
240
21600
21840
6840
15000
60,000
24000
7200
28,000
59,200
800

June
Revenue: (13,000x6.00)
Direct material cost of goods sold
Beginning inventory
Direct materials (1.2x9,000)
Cost of goods available for sale
Deduct: Ending inventory (1.2x1700)
Direct material cost of goods sold
Throughput Margin
Manufaturing costs
Delivering cost
Administrative costs
Total costs
Operating income

4. Variable costing is the best method because it is

the most realistic portrayal of the managers
performance .
5. leased truck and salaried driver because it is
more afordable after sales exceed 12,500 and the
company plans to increase sales over the the
13,000 from June.

78,000
6840
10800
17640
2040
15600
62,400
19500
5000
28,000
52,500
9,900

Revenue: (13,000x6.00)
Direct material cost of goods sold
Beginning inventory
Direct materials (1.2x9,000)
Cost of goods available for sale
Deduct: Ending inventory (1.2x1700)
Direct material cost of goods sold
Throughput Margin
Manufaturing costs
Delivering cost
Administrative costs
Total costs
Operating income

78,000
6840
10800
17640
2040
15600
62,400
19500
3600
28,000
51,100
11,300

22-36
#1.
super chip
(80-65)/3= $5 cm/dlh
they should sell 15000 super-chips
Super-chip
Revenue (15000x80)
Costs
Direct materials (5x15000)
Direct manufactoring (60x15000)
Total costs
Contribution margin

ok chip
26-22=$4 cm/dlh

1200000
75000
900000
975000
225000

#2.
Yes 5000 should be tranferred.
Process-control unit with circuit board
Revenue (132x5000)
Costs
Direct materials (70x5000)
Direct manufactoring (45x5000)
Total costs
Contribution margin
Contribution margin (super-chip)
Contribution margin (overall)
#3.
$80-83. $80 as no buyer or seller can
affect the market price and due to the fact
that the mark-up change creates a
problem for hybrid costing. $83 because
$70+13 equals the most the process
control division would pay.

#4. No because you still can only make

15000 super chips and the process control
unit only uses the super-chips.

660000
350000
225000
575000
85000
225,000
310,000

Process-controll unit with super-chip

Revenue (145x5000)
Costs
Direct materials (65x5000)
Direct manufactoring (45x5000)
Total costs
Contribution margin
Contribution margin (with super-chip)
Contribution margin (overall)

725000
325000
225000
550000
175000
150000
325000

23-37
#1. part a
Residual income
Ft. Meyers Spa
1,220,000- (6,155,000X.11) = 542950
part b
Ft. Meyers Spa
1,242,000- (6,380,000X.11) = 540200
#1a. The project would decrease RI by
2750

Scottsdale Spas
1,190,000- (6,312,000X.11) = 495680

Monterey Spa
1,295,000- (7,435,000X.11) = 477150

#1b. The manager should reject the

project because the residual income
of the spa is decreasing, The manager
would only accept the project if the RI
was positive.

#1c. No, because the required rate of

return is the same for all the other
managers which means the RI will be
the same (-2750) for everyone.
#2.

Renewel Resorts might want to use

EVA instead of RI because EVA allows
for managers to to incorporate the
cost of capital into decision in the
division level.
#3.
WACC:
((5.2%x15,300,000)+(17%x7,650,000))/
(15,300,000+7,650,000)=0.091333
#4.
Using Net book value of assets
Ft. Meyers Spa

Scottsdale Spas

Monterey Spa

(1,220,000x.65)-((.091333)(6,155,000330,000)) = 260985.3

(1,190,000x.65)-((.091333)(6,312,000265,000)) = 221209.349

(1,295,000x.65)-((.091333)(7,435,00084,000)) = 170361.1

Using Gross book value of assets

Ft. Meyers Spa

Scottsdale Spas

Monterey Spa

(1,220,000x.65)-((.091333)(8,355,000330,000)) = 60052.68

(1,190,000x.65)-((.091333)(7,822,000265,000)) = 83296.519

(1,295,000x.65)-((.091333)(7,655,00084,000)) = 150267.9