DUE WEDNESDAY 71817 at 1230 NAME ACC 203 SUMMER 2018 EXAM CH

DUE WEDNESDAY 7/18/17 at 12:30 NAME ACC 203 SUMMER 2018 EXAM CHAPTERS 22-24 1. (10 Points) 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. 412,000 80,000 00,000600,000 50,000 11,000 Revenue Average Assets..

Solution

ANS

1) KARL GRADY

NET INCOME (REVENUE - COSTS) $32000 $39000  

PROFIT MARGIN (PROFIT / REVENUE)*100 7.76% 8.67%

RETURN ON ASSETS (NET INCOME/AVERAGE ASEETS)*100 8% 6.5%

GRADY HAS A HIGHER NET INCOME AND SALES BUT LOWER RETURN ON ASSETS. THIS MEANS KARL HAS PERFORMED BETTER GIVEN THE AVAILABLE RESOURCES.

2) TOTAL BATH BEDDING

SALES $1600000 $1000000 $600000

COGS ($90000) ($500000) ($400000)

GROSS PROFIT $700000 $500000 $200000

DIRECT EXPENSES ($300000) ($200000) ($100000)

ALLOCATED EXPENSES ($295000) ($160000) ($135000) ($100000 + $60000) ($75000 + $60000)

NET INCOME / (LOSS) $105000 $140000 ($35000)

YES, THE KITCHEN DEPARTMENT SHOULD BE ELIMINATED BECAUSE ELIMINATING IT WILL INCREASE THE NET INCOME BY $10000 ($105000 - $90000) . HENCE IT SHOULD BE ELIMINATED.

3) $ $

SALES (15000 UNITS * $36 ) + $4500000 $5040000

LESS: COSTS AND EXPENSES

DIRECT MATERIALS ($16/UNIT) $1840000

DIRECT LABOR ($9/UNIT) $1035000

VARIABLE OVERHEAD ($3/UNIT) $345000

FIXED OVERHEAD $870000

VARIABLE ADMINISTRATIVE ($4.50/UNIT) $517500

FIXED ADMINISTRATIVE $400000

TOTAL COSTS AND EXPENSES ($5007500)

OPERATING INCOME / LOSS $32500

HENCE THE ORDER SHOULD NOT BE ACCEPTED AS THE OPERATING INCOME HAS REDUCED FROM $40000 TO $32500.