Problem 1 Data concerning manufacturing overhead for Selene Company are presented below. The packaging department is a cost center. An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the packaging, however, only 40% of supervisory costs are controllable at the department level. The flexible budget formula and the cost and activity for the month of August while operating at 1,600 direct labor hours follows: Flexible Budget Actual August Activity Variable Indirect materials P2.00 P 3,000 Indirect labor 3.00 4,500 Factory supplies 0.50 750 Fixed Depreciation P7,000 P9,000 Supervision 20,000 7,600 Property taxes 2,000 2,000 Total costs P29,000 P18,600 Instructions a. b. Prepare the responsibility reports for the packaging department for August. Comment on the manager's performance in controlling costs during the two month period. Problem 2 Ms. Trixie Perlas, accountant for Southsea Co., Inc., has prepared the following product-line income data: TOTAL A PRODUCT B C SALES 100,000 50,000 20,000 30,000 VARIABLE COST 60,000 30,000 10,000 20,000 CONTRIBUTION MARGIN 40,000 20,000 10,000 10,000 FIXED EXPENSES RENT 5,000 2,500 1,000 1,500 DEPRECIATION 6,000 3,000 1,200 1,800 UTILITIES 4,000 2,000 500 1,500 SUPERVISOR'S Salary 5,000 1,500 500 3,000 MAINTENANCE 3,000 1,500 600 900 ADMINISTRATIVE EXP 10,000 3,000 2,000 5,000 TOTAL FIXED EXPENSES 33,000 13,500 5,800 13,700 NET OPERATING INCOME 7,000 6,500 4,200 (3,700) The following additional information is available: * The factory rent of P1,500 assigned to Product C is avoidable if the product were dropped. * The company's total depreciation would not be affected by dropping C. * Eliminating Product C will reduce the monthly utility bill from P1,500 to P800. * All supervisors' salaries are avoidable. * If Product C is discontinued, the maintenance department will be able to reduce monthly expenses from P3,000 to P2,000. * Elimination of Product C will make it possible to cut two persons from the administrative staff; their combined salaries total P3,000. Required: Prepare an analysis showing whether Product C should be eliminated by preparing the segmented income statements Problem 3 The Baily Division recorded operating data as follows for the past two years: Year 2 Sales Stockholders' Equity Average Operating Assets Margin Return on investment Year 1 P ? 540,000 600,000 15% 22.5% P 1,200,000 720,000 ? ? 18% Baily Division's turnover was exactly the same in both Year 1 and Year 2. Required: Compute for a. The net operating income in Year 1 b. Sales in Year 1 c. The margin in Year 2 d. Average operating asset in Year 2