Project #5832 - acct 202 quiz multiple choice

PROBLEM #1: NO GOOD DEED GOES UNPUNISHED

Larry Simmons manages the Sporting Goods division of All-Sports Inc. All Sports Inc. tracks the return on investment of each division.  All Sports Inc. rewards its managers with a $3,000 bonus for each percentage point their return on investment exceeds a target rate of 8%. The Sporting Goods division reported the following departmental income last year:

            Sales                                    $8,490,000

            Cost of goods sold              4,250,000

            Gross profit                          4,240,000

            Operating expenses              3,040,000

            Net income                        $1,200,000

 

The average invested assets for the Sporting Goods division are $8,000,000.

 

Due to Larry’s outstanding performance, the top management of All-Sports Inc. has decided Larry should also manage a new division, Sportswear. The Sportswear division will require average invested assets of $2,000,000, and is projected to earn net income of $100,000.

 

Required:

1.     Compute Larry’s bonus from managing the Sporting Goods division.

2.     Compute Larry’s bonus if he manages both the Sporting Goods and Sportswear divisions.

3.     3. How do you think Larry will react when assigned the Sportswear division, after computing his expected bonus from managing both the Sporting Goods and Sportswear divisions?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROBLEM #2: THE CASE OF THE WEASELY PLANT MANAGER

Santini Corporation’s budget for the first quarter of the year includes the following:

Planned Unit Sales                                                              10,000                       

 

Sales                                                                                    $1,000,000

 

Fixed manufacturing costs:

Salaries                                                $95,000

Utilities                                                    7,500

Factory Rent                                                    45,000

Maintenance/other                                          9,500

Total fixed manufacturing costs                                    $157,000                                   

 

Variable manufacturing costs:

Direct materials                                    $300,000

Direct labor                                                    250,000

Other                                                                 100,000

Total variable manufacturing costs                                    $650,000

Actual results for the first quarter were as follows:

 

Actual Unit Sales                                                               8,000                       

 

Sales                                                                                    $800,000

 

Fixed manufacturing costs:

Salaries                                                $95,000

Utilities                                                    7,500

Factory Rent                                                    45,000

Maintenance/other                                          9,500

Total fixed manufacturing costs                                    $157,000                                   

 

Variable manufacturing costs:

Direct materials                                    $250,000

Direct labor                                                    232,500

Other                                                                  95,000

Total variable manufacturing costs                                    $577,500

 

The plant manager believes he is due a bonus, as actual variable manufacturing costs were much lower than the budget.

 

Required:

1.     Prepare a flexible budget for sales at actual levels.

2.     Respond to the plant manager’s request in a memo.

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Due By (Pacific Time) 05/08/2013 03:00 pm
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