# Acc561 Introduction to Management Accounting: Week 5 Problems

Acc561 Introduction to Management Accounting Week 5 Problems 1) The CEO of Jane’s Peanut Brittle has decided that she wants to see the financial statements of her two product divisions presented in a way that allows her to add them up to the total financial statement of the company.  In order to accomplish that, the CFO must allocate the expenses of the company’s two support departments to the two product divisions.  The CFO knows that there are two approaches that he could use. One is the direct method and the other is the step down method.  He has asked you to prepare an Excel spreadsheet that demonstrates the result of the allocation under each approach.  The Data for the involved divisions is as follows: Personnel Headquarters Peanut Brittle Cookies Direct Department Costs \$200,000 \$1,500,000 \$2,000,000 \$500,000 Employees 7 20 50 30 All agree that Personnel Division costs should be allocated on the basis of employee headcount.  The Headquarters costs are to be allocated on the basis direct department costs. The question is whether Personnel should be allocated to Headquarters too, as is accomplished in the step down method.   Prepare a spreadsheet that illustrates the two allocation methods and the results for the CFO.  You can find instructions for preparation of a spreadsheet with problem 12-59 in the text. Remember that these instructions are for the 2003 version of Excel.  Exhibit 12-4 on page 532 illustrates the types of calculations that are used for allocating costs using the direct method and the step down method.
2)  Consider the following information pertaining to a year’s operation of Jerry’s Furniture:
Units Sold 3,000 Units Produced 3,500 Direct Labor 9,500 Direct Materials Used 9,250 Fixed Manufacturing Overhead 3,500 Variable Manufacturing Overhead 500 Selling and Administrative Exp. (All Fixed) 1,500 Beginning Inventories -   Contribution Margin 11,000 Direct-Material Inventory, end 1,600 There are no work-in-process inventories. a.  What is the ending finished-goods inventory under absorption costing? b.  What is the ending finished-goods inventory under variable costing? 3) Sasha’s Frozen Pizza data for 20x8 follow: Sales: 25,000 units at \$8.50 each. Actual production 30,000 units Expected Production 36,000 units Manufacturing Costs Incurred       Variable \$125,000       Fixed \$65,000 Nonmanufacturing Costs Incurred       Variable \$23,000       Fixed \$17,000 a. Determine operating income for 20x8, assuming the firm uses the variable-costing approach to product costing. (You are not required to prepare a statement, but you may if you prefer.) b. Assume that there was no inventory at the beginning of 20x8, no variances are allocated to inventory and the firm uses a “full absorption” approach to product costing. Compute (1) the cost assigned to the December 31, 20x8 inventory; and (2) the operating income for the year ended December 31, 20x8. (You are not required to prepare a statement, but you may if you prefer.)
4) Consider the following data for Said’s Toothbrush Company: Factory Overhead Fixed  Variable Actual Costs Incurred 28,000 26,500 Flex Budget for Standard Inputs    and Actual Outputs 25,000 22,500 Costs Applied to Product 23,200 22,500 Flex Budget for Actual Inputs 25,000 22,300 From the above information, fill in the blanks below.  Be sure to mark your variances F for favorable and U for Unfavorable. 5) Study Appendix 13 (At the end of Chapter 13).  Consider the following data regarding factory overhead:  Variable Fixed Flex Budget for Actual Inputs 90,000 140,000 Costs Applied to Product 80,000 128,000 Flex Budget for Standard Inputs & Actual Outputs 80,000 140,000 Actual Costs Incurred 96,500 137,000 Using the data above, fill in the following blanks with the variance amounts.  Use F for favorable or U for unfavorable for each variance.