Question

Exercise 10-9

Lowell Company’s manufacturing overhead budget for the firstquarter of 2014 contained the following data.

Variable Costs				Fixed Costs
Indirect materials		$11,749		Supervisory salaries		$36,825
Indirect labor		10,177		Depreciation		6,782
Utilities		7,296		Property taxes and insurance		7,225
Maintenance		5,613		Maintenance		4,034

Actual variable costs were: indirect materials $15,246, indirectlabor $9,315, utilities $9,022, and maintenance $4,987. Actualfixed costs equaled budgeted costs except for property taxes andinsurance, which were $8,665. The actual activity level equaled thebudgeted level.

All costs are considered controllable by the production departmentmanager except for depreciation, and property taxes andinsurance.

(a) Prepare a manufacturing overhead flexiblebudget report for the first quarter. (List variablecosts before fixed costs.)

LOWELL COMPANY Manufacturing Overhead Flexible Budget Report For the Quarter Ended March 31, 2014
			Difference
	Budget	Actual	Favorable F Unfavorable U Neither Favorable nor Unfavorable N
Fixed CostsDepreciationTotal CostsIndirect LaborTotal FixedCostsMaintenanceIndirect MaterialsProperty Taxes andInsuranceSupervisory SalariesTotal Variable CostsUtilitiesVariableCosts
Total Variable CostsIndirect MaterialsSupervisorySalariesUtilitiesVariable CostsFixed CostsMaintenanceIndirectLaborProperty Taxes and InsuranceDepreciationTotal CostsTotal FixedCosts	$	$	$	FUN
Indirect LaborTotal Variable CostsTotalCostsDepreciationIndirect MaterialsTotal FixedCostsMaintenanceProperty Taxes and InsuranceUtilitiesSupervisorySalariesVariable CostsFixed Costs				FUN
MaintenanceSupervisory SalariesTotal CostsIndirect LaborTotalVariable CostsTotal Fixed CostsIndirect MaterialsUtilitiesPropertyTaxes and InsuranceVariable CostsDepreciationFixed Costs				FUN
Supervisory SalariesTotal CostsVariable CostsTotal VariableCostsIndirect MaterialsMaintenanceUtilitiesDepreciationPropertyTaxes and InsuranceTotal Fixed CostsFixed CostsIndirect Labor				FUN
Supervisory SalariesIndirect MaterialsIndirectLaborMaintenanceDepreciationTotal Fixed CostsVariable CostsTotalVariable CostsProperty Taxes and InsuranceFixed CostsUtilitiesTotalCosts				FUN
UtilitiesIndirect MaterialsTotal Fixed CostsMaintenanceTotalVariable CostsDepreciationProperty Taxes and InsuranceSupervisorySalariesVariable CostsFixed CostsIndirect LaborTotal Costs
Total Fixed CostsTotal Variable CostsProperty Taxes andInsuranceMaintenanceSupervisory SalariesIndirect MaterialsTotalCostsVariable CostsUtilitiesDepreciationIndirect LaborFixedCosts				FUN
MaintenanceIndirect LaborUtilitiesVariable CostsIndirectMaterialsTotal Variable CostsProperty Taxes and InsuranceTotalFixed CostsFixed CostsSupervisory SalariesDepreciationTotalCosts				FUN
UtilitiesTotal CostsTotal Fixed CostsSupervisory SalariesTotalVariable CostsVariable CostsIndirect LaborDepreciationFixedCostsIndirect MaterialsMaintenanceProperty Taxes and Insurance				FUN
UtilitiesSupervisory SalariesVariable CostsProperty Taxes andInsuranceTotal Fixed CostsDepreciationTotal CostsTotal VariableCostsFixed CostsIndirect LaborIndirect MaterialsMaintenance				FUN
Total Variable CostsSupervisory SalariesTotalCostsUtilitiesIndirect MaterialsVariable CostsIndirect LaborTotalFixed CostsMaintenanceProperty Taxes and InsuranceDepreciationFixedCosts				FUN
Total Variable CostsDepreciationFixedCostsMaintenanceSupervisory SalariesTotal CostsProperty Taxes andInsuranceUtilitiesVariable CostsTotal Fixed CostsIndirectLaborIndirect Materials	$	$	$	FUN

(b) Prepare a responsibility report for the firstquarter.

LOWELL COMPANY Manufacturing Overhead Responsibility Report For the Quarter Ended March 31, 2014
			Difference
Controllable Costs	Budget	Actual	Favorable F Unfavorable U Neither Favorable nor Unfavorable N
DepreciationIndirect LaborUtilitiesMaintenanceSupervisorySalariesIndirect MaterialsProperty Taxes and Insurance	$	$	$	FUN
Indirect LaborMaintenanceProperty Taxes andInsuranceDepreciationSupervisory SalariesUtilitiesIndirectMaterials				FUN
UtilitiesIndirect LaborMaintenanceIndirect MaterialsSupervisorySalariesProperty Taxes and InsuranceDepreciation				FUN
Property Taxes and InsuranceIndirectLaborUtilitiesDepreciationSupervisory SalariesIndirectMaterialsMaintenance				FUN
UtilitiesProperty Taxes and InsuranceDepreciationSupervisorySalariesMaintenanceIndirect MaterialsIndirect Labor				FUN
	$	$	$	FUN

Exercise 10-8

Rensing Groomers is in the dog-grooming business. Its operatingcosts are described by the following formulas:

Grooming supplies (variable)		y	=	$0 + $3x
Direct labor (variable)		y	=	$0 + $14x
Overhead (mixed)		y	=	$9,450 + $2x

Milo, the owner, has determined that direct labor is the costdriver for all three categories of costs.

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Prepare a flexible budget for activity levels of 526, 577, and674 direct labor hours. (List variable costs beforefixed costs.)

RENSING GROOMERS Flexible Budget
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs	$	$	$
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs
Activity LevelDirect LaborDirect Labor HoursFixed CostsGroomingSuppliesOverheadTotal CostsTotal Fixed CostsTotal VariableCostsVariable Costs	$	$	$

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(a) Calculate the total cost per direct laborhour at each of the activity levels specified in part (a).(Round answers to 2 decimal places, e.g.10.25.)

Activity level 1		$
Activity level 2		$
Activity level 3		$

(b) The groomers at Rensing normally work a totalof 616 direct labor hours during each month. Each grooming jobnormally takes a groomer 1.30 hours. Milo wants to earn a profitequal to 30% of the costs incurred. Determine what he should chargeeach pet owner for grooming. (Round answer to 2 decimalplaces, e.g. 10.25.)

Charge per client		$

Exercise 10-9

Lowell Company’s manufacturing overhead budget for the firstquarter of 2014 contained the following data.

Variable Costs				Fixed Costs
Indirect materials		$11,004		Supervisory salaries		$35,170
Indirect labor		10,758		Depreciation		6,084
Utilities		7,760		Property taxes and insurance		7,986
Maintenance		5,575		Maintenance		5,566

Actual variable costs were: indirect materials $15,083, indirectlabor $9,497, utilities $9,235, and maintenance $5,111. Actualfixed costs equaled budgeted costs except for property taxes andinsurance, which were $8,225. The actual activity level equaled thebudgeted level.

All costs are considered controllable by the production departmentmanager except for depreciation, and property taxes andinsurance.

(a) Prepare a manufacturing overhead flexiblebudget report for the first quarter. (List variablecosts before fixed costs.)

LOWELL COMPANY Manufacturing Overhead Flexible Budget Report For the Quarter Ended March 31, 2014
			Difference
	Budget	Actual	Favorable F Unfavorable U Neither Favorable nor Unfavorable N
MaintenanceProperty Taxes and InsuranceVariable CostsSupervisorySalariesTotal CostsTotal Fixed CostsTotal VariableCostsUtilitiesIndirect MaterialsDepreciationFixed CostsIndirectLabor
Total Fixed CostsTotal CostsMaintenanceSupervisorySalariesProperty Taxes and InsuranceIndirect LaborFixedCostsVariable CostsDepreciationUtilitiesTotal VariableCostsIndirect Materials	$	$	$	FUN
MaintenanceTotal Fixed CostsTotalCostsUtilitiesDepreciationSupervisory SalariesFixed CostsIndirectLaborProperty Taxes and InsuranceIndirect MaterialsTotal VariableCostsVariable Costs				FUN
Total Variable CostsUtilitiesVariable CostsMaintenanceTotalCostsProperty Taxes and InsuranceSupervisory SalariesTotal FixedCostsDepreciationFixed CostsIndirect LaborIndirect Materials				FUN
Indirect LaborProperty Taxes and InsuranceSupervisorySalariesTotal CostsTotal Fixed CostsUtilitiesIndirectMaterialsMaintenanceFixed CostsTotal Variable CostsVariableCostsDepreciation				FUN
Property Taxes and InsuranceVariable CostsSupervisorySalariesTotal CostsTotal Variable CostsUtilitiesIndirectMaterialsTotal Fixed CostsDepreciationMaintenanceIndirectLaborFixed Costs				FUN
Supervisory SalariesTotal CostsTotal Fixed CostsMaintenanceTotalVariable CostsUtilitiesProperty Taxes and InsuranceVariableCostsDepreciationFixed CostsIndirect LaborIndirect Materials
DepreciationTotal CostsSupervisory SalariesMaintenanceVariableCostsFixed CostsProperty Taxes and InsuranceUtilitiesIndirectLaborTotal Fixed CostsTotal Variable CostsIndirect Materials				FUN
MaintenanceTotal Variable CostsProperty Taxes andInsuranceSupervisory SalariesFixed CostsTotalCostsDepreciationTotal Fixed CostsIndirect LaborUtilitiesVariableCostsIndirect Materials				FUN
Property Taxes and InsuranceSupervisory SalariesIndirectMaterialsIndirect LaborTotal CostsUtilitiesTotal Fixed CostsFixedCostsMaintenanceVariable CostsDepreciationTotal Variable Costs				FUN
UtilitiesSupervisory SalariesMaintenanceVariable CostsIndirectLaborTotal Variable CostsTotal CostsProperty Taxes andInsuranceDepreciationFixed CostsIndirect MaterialsTotal FixedCosts				FUN
Variable CostsProperty Taxes and InsuranceDepreciationIndirectMaterialsFixed CostsIndirect LaborUtilitiesMaintenanceSupervisorySalariesTotal CostsTotal Fixed CostsTotal Variable Costs				FUN
Indirect MaterialsVariable CostsMaintenanceSupervisorySalariesIndirect LaborTotal Variable CostsDepreciationPropertyTaxes and InsuranceTotal CostsFixed CostsTotal FixedCostsUtilities	$	$	$	FUN

(b) Prepare a responsibility report for the firstquarter.

LOWELL COMPANY Manufacturing Overhead Responsibility Report For the Quarter Ended March 31, 2014
				Difference
Controllable Costs	Budget	Actual		Favorable F Unfavorable U Neither Favorable nor Unfavorable N
Indirect LaborIndirect MaterialsMaintenanceSupervisorySalariesUtilitiesProperty Taxes and InsuranceDepreciation	$	$		$		FUN
Supervisory SalariesMaintenanceUtilitiesIndirectMaterialsProperty Taxes and InsuranceDepreciationIndirect Labor						FUN
MaintenanceIndirect LaborIndirect MaterialsProperty Taxes andInsuranceSupervisory SalariesUtilitiesDepreciation						FUN
Property Taxes and InsuranceUtilitiesMaintenanceSupervisorySalariesDepreciationIndirect MaterialsIndirect Labor						FUN
MaintenanceSupervisory SalariesIndirect MaterialsProperty Taxesand InsuranceUtilitiesDepreciationIndirect Labor						FUN
	$	$		$		FUN
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Exercise 10-14

The Mixing Department manager of Malone Company is able tocontrol all overhead costs except rent, property taxes, andsalaries. Budgeted monthly overhead costs for the MixingDepartment, in alphabetical order, are:

Indirect labor		$12,870		Property taxes		$1,150
Indirect materials		7,980		Rent		1,840
Lubricants		2,600		Salaries		11,860
Maintenance		3,820		Utilities		6,550

Actual costs incurred for January 2014 are indirect labor $13,970;indirect materials $14,070; lubricants $2,070; maintenance $3,820;property taxes $2,050; rent $1,840; salaries $11,860; and utilities$6,540.

Prepare a responsibility report for January 2014.

MALONE COMPANY Mixing Department Responsibility Report For the Month Ended January 31, 2014
			Difference
Controllable Costs	Budget	Actual	Favorable F Unfavorable U Neither Favorable nor Unfavorable N
SalariesIndirect MaterialsLubricantsMaintenanceUtilitiesIndirectLaborProperty TaxesRent	$	$	$	FNU
SalariesProperty TaxesRentUtilitiesIndirect LaborIndirectMaterialsLubricantsMaintenance				NUF
Indirect MaterialsLubricantsRentUtilitiesPropertyTaxesSalariesMaintenanceIndirect Labor				NFU
RentLubricantsSalariesUtilitiesIndirect LaborPropertyTaxesIndirect MaterialsMaintenance				UFN
Indirect LaborRentUtilitiesIndirectMaterialsLubricantsMaintenanceProperty TaxesSalaries				FUN
	$	$	$	UFN

Exercise 10-15 Deitz Inc. has three divisions which are operated as profitcenters. Actual operating data for the divisions listedalphabetically are as follows.

Compute the missing amounts. Show computations.

Operating Data		Women’s Shoes			Men’s Shoes			Children’s Shoes
Contribution margin		$266,000			$	(3)		$191,520
Controllable fixed costs		106,400				(4)			(5)
Controllable margin			(1)		95,760			101,080
Sales		638,400			478,800				(6)
Variable costs			(2)		340,480			266,000

LINK TO TEXT

Prepare a responsibility report for the Women’s Shoes Divisionassuming (1) the data are for the month ended June 30, 2014, and(2) all data equal budget except variable costs which are $10,640over budget.

DEITZ INC. Women’s Shoe Division Responsibility Report For the Month Ended June 30, 2014
			Difference
	Budget	Actual	Favorable F Unfavorable U Neither Favorable nor Unfavorable N
Contribution MarginControllable MarginControllable FixedCostsFixed CostsGross ProfitNet Income/(Loss)SalesVariableCosts	$	$	$	FUN
Contribution MarginControllable MarginControllable FixedCostsFixed CostsGross ProfitNet Income/(Loss)SalesVariableCosts				FUN
Contribution MarginControllable MarginControllable FixedCostsFixed CostsGross ProfitNet Income/(Loss)SalesVariableCosts				FUN
Contribution MarginControllable MarginControllable FixedCostsFixed CostsGross ProfitNet Income/(Loss)SalesVariableCosts				FUN
Contribution MarginControllable MarginControllable FixedCostsFixed CostsGross ProfitNet Income/(Loss)SalesVariableCosts	$	$	$	FUN

Exercise 10-19

The Pletcher Transportation Company uses a responsibilityreporting system to measure the performance of its three investmentcenters: Planes, Taxis, and Limos. Segment performance is measuredusing a system of responsibility reports and return on investmentcalculations. The allocation of resources within the company andthe segment managers’ bonuses are based in part on the resultsshown in these reports.

Recently, the company was the victim of a computer virus thatdeleted portions of the company’s accounting records. This wasdiscovered when the current period’s responsibility reports werebeing prepared. The printout of the actual operating resultsappeared as follows.

Determine the missing pieces of information below.(Round intermediate calculations and final answer to 0decimal places, e.g. 1,255.)

		Planes			Taxis			Limos
Service revenue		$			$501,500			$
Variable costs		5,506,800						300,500
Contribution margin					246,200			515,892
Controllable fixed costs		1,499,800
Controllable margin					76,100			271,692
Average operating assets		24,952,000						1,509,400
Return on investment		13	%		8	%			%