Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 34,800 units. Fabrication ($000) $5,220 4,176 $1,044 800 $244 Revenues Variable costs Contribution margin Fixed costs Divisional profit Assume there is no special order pending. Required: Distribution ($000) $8,700 6,438 $2,262 1,462 $800
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- Columbia Products Inc. has two divisions, Salem and Seaside. For the month ended March 31, Salem had sales and variable costs of 500,000 and 225,000, respectively, and Seaside had sales and variable costs of 800,000 and 475,000, respectively. Salem had direct fixed production and administrative expenses of 60,000 and 35,000, respectively, and Seaside had direct fixed production and administrative expenses of 80,000 and 45,000, respectively. Fixed costs that were common to both divisions and couldnt be allocated to the divisions in any meaningful way were selling, 33,000, and administration, 27,000. Prepare a segmented income statement by division for March.A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.Rocky Mountain Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared: The support department allocation rates for the support department costs were based on revenues. Because the revenues of the two divisions were the same, the support department allocations to each division were also the same. The following additional information is available: a.Does the operating income (loss) for the two divisions accurately measure performance? Explain. b.Correct the divisional income statements, using appropriate support department cost drivers.
- A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow. Manufacturing Marketing 1,020,000 %24 Capacity (units) sales price variable costs Fixed costs 502,000 1,500 4,650 $4 580 1,720 $10,200, 000 $7,220, 000 a. For Manufacturing, this is the price to third partles. For Marketing, this does not include the transfer price paid to Manufacturing. Suppose Manufacturing is located in Country X with a tax rate of 70 percent and Marketing in Country Y with a tax rate of 30 percent. All other facts remain the same, Requlred: a. Current production levels in Manufacturing are 520,000 units. Marketing requests an additional 120.000 units to produce a speclal order. What transfer price would youu recommend? b. Suppose Manufacturing…Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 32,000 units. Fabrication ($000) $ 4,800 3,840 Distribution ($000) $ 8,000 5,920 $ 2,080 1,280 $ 960 800 $ 160 $ 800 Revenues Variable costs Contribution margin Fixed costs Divisional profit Assume there is no special order pending. Required: a. What transfer price would you recommend for Hamlet Industries? b. Using your recommended transfer price, what will be the income of the two divisions, assuming monthly production and sales of 32,000 units? c. The manager of the Fabrication Division complains…
- Hamlet Industries is organized into two divisions, Fabrication and Finishing. Both divisions are considered to be profit centers, and the two division managers are evaluated in large part on divisional income. The company makes a single product. It is manufactured in Fabrication and then packaged and sold in Distribution. There is no intermediate market for the product. The monthly income statements, in thousands of dollars, for the two divisions follow. Production and sales amounted to 32,000 units. Fabrication ($000) Distribution ($000) Revenues $ 4,800 $ 8,000 Variable costs 3,840 5,920 Contribution margin $ 960 $ 2,080 Fixed costs 800 1,280 Divisional profit $ 160 $ 800 The company has just received an offer to buy 3,200 units of the product this month at a price of $200 per unit. The Distribution Division manager suggests that for the special order only, the transfer price be set at 50 percent of the sales price, or $100 per unit. Required: What is the…Cost allocation and decision making. Reidland Manufacturing has four divisions: Acme, Dune, Stark, and Brothers. Corporate headquarters is in Minnesota. Reidland corporate headquarters incurs costs of $16,800,000 per period, which is an indirect cost of the divisions. Corporate headquarters currently allocates this cost to the divisions based on the revenues of each division. The CEO has asked each division manager to suggest an allocation base for the indirect headquarters costs from among revenues, segment margin, direct costs, and number of employees. The following is relevant information about each division:Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin operations follows: Personnel 120 10,800 $ 300,000 5,400 $ 1,200,000 $ 160,000 Baldwin Enterprises estimates that the cost structure in its operations is as follows: Employees Hours Department direct costs Variable costs Fixed costs Total costs Avoidable fixed costs Personnel $200,000 250,000 $ 450,000 $ 65,000 Required A Required B Required C Legal Maximum amount 40 0 Legal $ 56,000 134,000 $ 190,000 $ 35,000 Eastern Complete this question by entering your answers in the tabs below. Western $575,000 245,000 $ 820,000 $300,000
- The Riverbed Brokerage firm is organized into two major sales divisions: institutional clients and retail clients. The firm also has two support departments: research and administration. The research department’s costs are allocated to the other departments based on a log of hours spent on tasks for each user. The administration department’s costs are allocated based on the number of employees in each department. Records are available for last period as follows: Support departments Operating departments Research Administration Institutional RetailPayroll costs $ 338,400 $ 289,700 $ 366,600 $ 585,200Other costs $ 231,370 $ 163,800 $ 112,830 $ 238,870Research hours 100 200 500 300Number of employees 7 10…Tenet Engineering, Inc. operates two user divisions as separate cost objects. To determine the costs of each division, the company allocates common costs to the divisions. During the past month, the following common costs were incurred: Computer services (85% fixed) Building occupancy 347,000 674,000 Personnel costs 174,000 Total common costs $1,195,000 The following information is available concerning various activity measures and service usages by each of the divisions: Division A Division B Area occupied (square feet) 26,900 53,800 Рayroll $436,000 $236,000 Computer time (hours) Computer storage (megabytes) 280 300 4,400 -0- Equipment value Operating profit (pre-allocations) $205,000 $255,000 $767,500 $707,500 If common computer service costs are allocated using computer time as the allocation basis, what is the computer cost allocated to Division B (rounded to the nearest whole dollar)? Multiple Choice $216,625. $187,736. $180,939. $179,483.Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows. Manufacturing costs (per unit based on expected activity of 31,000 units or 52,700 direct labor hours): Direct materials (2.5 pounds at $18) $ 45.00 Direct labor (1.7 hours at $70) 119.00 Variable overhead (1.7 hours at $20) 34.00 Fixed overhead (1.7 hours at $30) 51.00 Standard cost per unit $ 249.00 Budgeted selling and administrative costs: Variable $ 8 per unit Fixed $ 1,600,000 Expected sales activity: 27,000 units at $380 per unit Desired ending inventories: 18% of sales Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following…