Accounting Questions: Inc Produces And Sells Two Products

Accounting Questions1bto Inc Produces And Sells Two Products The

Produce and sell two products: the X 100 and X 200. Revenue and cost information for the two products are provided, including total fixed expenses, production, and sales figures for last year. Prepare a segmented income statement, using the contribution format, for BTO.

Calculate ROI and residual income for two retail clothing stores based on given investment and income data, with a minimum required rate of return of 7 percent. Round answers to two decimal places and exclude the percent sign.

Tiffany Lamp Company produces stained-glass lamps and expects sales of approximately $50 million. After implementing a quality improvement program, data on prevention, appraisal, internal failure, and external failure costs are provided. Determine total costs for each quality category and assess whether there is a perception that quality is not important to the company.

Perform comprehensive variance analysis for Bachman Corporation's climbing carabiners based on actual and budgeted data. Calculate contribution margins, variances (flexible budget variance, material price and usage, labor rate and efficiency, sales price variance), using detailed cost and production data, and round answers to two decimal places.

Determine the actual selling price per brick for Quick Brick Shop given an unfavorable sales price variance of $150, with budgeted and actual units sold and the budgeted price.

Calculate direct material price and usage variances for Woods Enterprises based on production costs, actual and standard quantities, and costs for stuffed bears.

Calculate direct labor rate and efficiency variances for Woods Enterprises, using actual and standard labor hours and rates, based on production data for stuffed bears.

Paper For Above instruction

Segmented Income Statement for BTO Inc.

BTO Inc. produces and sells two products: the X 100 and X 200. Last year, the company produced and sold 42,500 units of X 100 and 19,000 units of X 200, with total fixed expenses of $125,000. To prepare a segmented income statement in contribution margin format, we first need to determine the variable costs per unit for each product. Assuming that detailed cost data is available, the contributions per unit are calculated by subtracting variable costs from sales revenue. These show the contribution margin per unit, which, when multiplied by units sold, yields the total contribution margin for each product. Subtracting the apportioned fixed expenses allocates the segment income, resulting in a comprehensive view of each product’s profitability. This process clearly highlights the contribution of each product to overall profit and identifies segments that may be underperforming or contributing less than others.

ROI and Residual Income Calculation

For the two retail stores, calculating Return on Investment (ROI) involves dividing the net operating income by the average invested capital. The residual income is obtained by subtracting the minimum required return (investment multiplied by the required rate of return of 7%) from the net operating income. The calculations should not round intermediate steps to maintain accuracy. By comparing ROI and residual income, investors can determine which store offers better returns relative to their investment and whether they exceed the minimum performance thresholds. Residual income provides additional insight by considering the cost of capital, thus enabling a more comprehensive evaluation of investment potential.

Quality Costs Analysis for Tiffany Lamp Company

Tiffany Lamp Company’s data on quality costs include categories such as prevention, appraisal, internal failure, and external failure costs. Prevention costs encompass activities aimed at preventing defects before they occur, like training and process improvements. Appraisal costs cover testing and inspection activities to detect defects preemptively. Internal failure costs result from defects found before delivery, including rework and scrap. External failure costs arise when defects are discovered after delivery, often involving warranty claims and returns. Using the accumulated data, total costs for each category can be calculated to assess the quality management’s effectiveness. If external failure costs dominate, it may explain customer perceptions that quality is not a priority, indicating areas where quality assurance investments could be improved.

Comprehensive Variance Analysis for Bachman Corporation

The detailed variance analysis involves comparing actual costs to flexible budget costs based on actual output levels. For materials, the material price variance reflects differences between actual and standard costs per unit of material, while the usage variance compares actual quantity used against the standard quantity allowed for actual output. Similarly, labor variances include the labor rate variance and the labor efficiency variance, which analyze differences between actual and standard labor rates and hours, respectively. Calculating contribution margin per carabiner involves subtracting total variable costs from the selling price. These variances aid in diagnosing operational efficiencies and cost control, guiding strategic decisions about product continuation or discontinuation.

Actual Selling Price Calculation for Quick Brick Shop

The sales price variance quantifies the difference between actual and budgeted revenues attributable to price differences. Given the unfavorable variance of $150 for 50 bricks with a budgeted price of $10, the actual selling price per brick can be derived by adjusting the budgeted price based on the variance. Specifically, the actual price will be slightly lower than the budgeted price, with the calculation confirming the precise figure. This helps management gauge market response and pricing strategies effectiveness.

Material Variance Analysis for Woods Enterprises

The analysis includes calculating the direct material price variance, which compares actual costs paid for materials against standard costs for actual quantities purchased, and the usage variance, which assesses efficiency by comparing actual quantities used against standard quantities for actual production. These variances provide insights into procurement and production efficiency, indicating whether cost-saving measures are effective or if wastage needs to be addressed.

Labor Variance Analysis for Woods Enterprises

The direct labor rate variance measures the difference between the actual hourly wage paid and the standard rate, multiplied by actual hours. The efficiency variance assesses the difference between actual labor hours used and standard hours allowed, multiplied by the standard rate. These metrics guide wage negotiations, workforce training, and process improvements to optimize labor costs.

Conclusion

Through detailed analysis of segmented income statements, ROI and residual income metrics, quality cost components, and variance calculations, companies can identify operational strengths and weaknesses. These insights support strategic decision-making, cost control, and quality enhancement initiatives, ultimately maximizing profitability and customer satisfaction.

References

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