2 QS 24-7 Allocating costs to departments LO P2 1.42 points Mervon Company has two operating departments: mixing and bottling. Mixing occupies 22,550 square feet. Bottling occupies 18,450 square feet. Indirect factory costs include maintenance costs of $248,000. If the maintenance costs are allocated to operating departments based on square footage occupied, determine the amount of maintenance costs allocated to each operating department. eBook Department Sq. Feet % of Total Maint. Exp. to Allocate Allocated Amount Hint Print Mixing Bottling Total 0 0.00% $ 0 3 QS 24-19C Joint cost allocation LO C3 1.42 points A company purchases a 8,280-square-foot commercial building for $350,000 and spends an additional $70,000 to divide the space into two separate rental units and prepare it for rent. Unit A, which has the desirable location on the corner and contains 1,080 square feet, will be rented for $2.50 per square foot. Unit B contains 7,200 square feet and will be rented for $1.50 per square foot. eBook How much of the joint cost should be assigned to Unit B using the value basis of allocation? Hint Market Value Percent of Market Value Joint Cost Apportioned Cost Print Numerator Denominator % of Mkt Value Unit A Unit B Totals 0.00% 4 Exercise 24-3 Service department expenses allocated to operating departments LO P2 1.42 points Advertising department expenses of $88,600 and purchasing department expenses of $44,300 of Cozy Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows. Department Books Magazines Newspapers Total Sales $ 202,400 123,200 114,400 $ 440,000 Purchase Orders 861 609 630 2,100 eBook Hint Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments. - Print Complete this question by entering your answers in the tabs below. Allocation of Exp Alloc of Serv Dept Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments. Allocation Base Cost to be Allocated Allocated Cost Percent of Allocation Base Numerator Denominator % of Total 0 Advertising Department Books Magazines Newspapers Totals 0 0 0 Allocation Base Cost to be Allocated Allocated Cost Percent of Allocation Base Numerator Denominator % of Total 0 Purchasing Department Books Magazines Newspapers Totals 0 0 0 5 Exercise 24.7 Departmental contribution report LO P3 1.42 points Below are departmental Income statements for a guitar manufacturer. The manufacturer is considering eliminating its electric guitar department since it has a net loss. The company classifies advertising, rent, and utilities expenses as indirect. eBook Electric $84,400 47.250 37,150 Hire WHOLESALE GUITARS Departmental Income Statements For Year Ended December 31, 2017 Acoustic Sales $101,6ee Cost of goods sold 45,175 Gross profit 56,425 Operating expenses Advertising expense 4,975 Depreciation expense-equipment 10,138 Salaries expense 19.6ee Supplies expense 1.960 Rent expense 7,645 Utilities expense 3,015 Total operating expenses 46,725 Net income (loss) $ 9,700 Print 4,320 8,510 17,000 1,730 6,038 2,620 40, 210 $(3,6) 1. Prepare a departmental contribution report that shows each department's contribution to overhead. WHOLESALE GUITARS Income Statement Showing Departmental Contribution to Overhead For Year Ended December 31, 2017 Acoustic Dept. Electric Dept. Combined Direct expenses Total direct expenses Departmental contributions to overhead Indirect expenses Total indirect expenses 2 Based on contribution to overhead, should the electric guitar department be eliminated? O No Yes 6 Part 1 of 2 Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). 1.42 points Investment Center Electronics Sporting goods Sales Income $41,000,000 $2,624,000 18,600,000 1,860,000 Average Invested Assets $16,400,000 12,400,000 eBook Hint Exercise 24-10 Computing return on investment and residual income; investing decision LO A1 Print 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? 3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? Return on Investment Choose Numerator: 1 Choose Denominator: = Return on Investment Return on Investment = Electronics Sporting Goods Which department is most efficient at using assets to generate returns for the company? Required 1 Required 2 > 7 ! Part 2 of 2 Required information Use the following information for the Exercises below. (The following information applies to the questions displayed below.] Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). 1.48 points Investment Center Electronics Sporting goods Sales Income $41,600,000 $2,624,000 18,600,000 1,860,000 Average Invested Assets $16,400,000 12,400,000 eBook Hint Exercise 24-11 Computing margin and turnover; department efficiency LO A2 Print Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets? Complete this question by entering your answers in the tabs below. Profit Margin Investment Turnover Compute profit margin for each department. Which department generates the most net income per dollar of sales? Profit Margin Profit Margin Profit Margin Choose Numerator: 1 Choose Denominator: Investment 1 Center Electronics 1 Sporting Goods Which department generates the most net income per dollar of sales?