A manufacturer of industrial equipment has a standard costing system based on machine hours (MHs) as the measure of activity Data from the company's flexible budget for manufacturing overhead are given below Financial data for three different divisions of the same company, for last year, appear below Division A B C Company Total Sales $3,200,000 $3,500,000 $5,000,000 Variable Costs 1,450,000 1,750,000 2,750,000 Traceable Fixed Costs 1,250,000 1,350,000 1,450,000 Segment Margin Common Fixed Costs 1,500,000 PART I Complete the above table showing the Contribution Margin Ratio(CMR), and the segment margin for each of the segments Determine the CMR for the company as a whole If the company were to add a new division, what information from the above would you use to assist in the decision making Division A B C Company Total Average Operating Assets $4,000,000 $4,375,000 $4,000,000 AOA Segment Margin Turnover T O ROI Minimum Required Rate of Return MRROR for the industry MRROR 8 Residual Income RI Required Complete the above comparison and answer the questions that follow Here are the formulas for Margin OI Turnover Sales ROI Margin x Turnover Sales AOA RI OI (MRROR x AOA) Compute each divisions turnover and ROI for the reporting period Explain what is meant by turnover In the industry the average MRROR is 8 Determine the residual income (RI) for each division What is the sigfnificance of the MRROR Why is RI a better measure of performance than ROI If sales in the industry increased by 10 , without any increase in operating assets, which company would show the highest largest change in operating income Why If an expansion program that would require new investments of $1,000,000 in operating assets were undertaken, which division would you recommend in order to produce the highest return Why The following data pertain to operations for the most recent period Actual Hours 3,900 MHs Standard Hours Allowed for the Actual Output 3,952 MHs Actual Total Variable Overhead Cost $32,565 Actual Total Fixed Overhead Cost $60,675 QUESTIONS a What were the Predetermined OverHead Application Rates POHAR , each rounded to the nearest cent b Determine the fixed overhead variances c How much overhead (in total), was applied to products during the period Show the breakdown d) Explain the impact of the volume variance

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A manufacturer of industrial equipment has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the company's flexible

A manufacturer of industrial equipment has a standard costing system based on machine hours (MHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

Financial data for three different divisions of the same company, for last year, appear below:

Division A % B % C % Company Total %

Sales $3,200,000 $3,500,000 $5,000,000

Variable Costs 1,450,000 1,750,000 2,750,000

Traceable Fixed Costs 1,250,000 1,350,000 1,450,000

Segment Margin

Common Fixed Costs: 1,500,000

PART I: Complete the above table showing the Contribution Margin Ratio(CMR), and the segment margin for each of the segments. Determine the CMR for the company as a whole . If the company were to add a new division, what information from the above would you use to assist in the decision-making?

Division A B C Company Total

Average Operating Assets $4,000,000 $4,375,000 $4,000,000

[AOA]

Segment Margin

Turnover [T/O]

ROI

Minimum Required Rate of Return - MRROR for the industry

[MRROR] @ 8%

Residual Income [RI]

Required: Complete the above comparison and answer the questions that follow

Here are the formulas for:

Margin - > OI Turnover - > Sales ROI -> Margin x Turnover

Sales AOA

RI -> OI (MRROR x AOA)

Compute each divisions turnover and ROI for the reporting period. Explain what is meant by turnover
In the industry the average MRROR is 8%. Determine the residual income (RI) for each division. What is the sigfnificance of the MRROR? Why is RI a better measure of performance than ROI?
If sales in the industry increased by 10%, without any increase in operating assets, which company would show the highest largest change in operating income? Why?
If an expansion program that would require new investments of $1,000,000 in operating assets were undertaken, which division would you recommend in order to produce the highest return? Why?

The following data pertain to operations for the most recent period:

Actual Hours

3,900 MHs

Standard Hours Allowed for the Actual Output

3,952 MHs

Actual Total Variable Overhead Cost

$32,565

Actual Total Fixed Overhead Cost

$60,675

QUESTIONS:

a. What were the Predetermined OverHead Application Rates [POHAR], each rounded to the nearest cent? b. Determine the fixed overhead variances c. How much overhead (in total), was applied to products during the period? Show the breakdown.

d) Explain the impact of the volume variance.