5a.

Your Company reports the following:

	Division A	Division B
Margin	?	7%
Turnover	5.0	?
Average operating assets	?	$175,000
Net operating income	$42,000	?
Stockholders' equity	$300,000	$400,000
Sales	$750,000	$500,000
ROI	?	20%

Calculate residual income for Division B when expected return is 5%.

5b.

Your Company uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. Use the following information to determine the predetermined overhead rate for the current year:

	Direct labor-hours:
	Estimated for the year	24,000
	Actual hours worked	19,500
	Direct labor cost:
	Estimated for the year	$640,000
	Actual cost incurred	$660,000
	Manufacturing overhead:
	Estimated for the year	$768,000
	Actual cost incurred	$785,000

5b. Your Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company estimated that it would incur $510,000 in manufacturing overhead during the year and that it would work 100,000 machine-hours. The company actually worked 105,000 machine-hours and incurred $540,000 in manufacturing overhead costs. By how much was manufacturing overhead underapplied or overapplied for the year?

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