Question 1

Russell Company uses Beltran Company and Southern Express Inc. to buy the electronic chip used in the manufacturing of its GPS device. Russell Co. has been using these two companies for several years and would like to cut down to only one supplier to purchase the 1,200,000 chips needed per year. In order to determine which supplier is the most cost effective Russell Co. compiled the following data:

Activity	Activity Cost
Testing	$800,000
Warranty work	$3,600,000

	Beltran Co.		Southern Express Inc.
Unit price	$60		$63
Units purchased	865,000		335,000
Testing hours	1,200		550
Warranty hours	5,000		1,400

Required:

If required, round your answers to the nearest cent. When required, use rounded amounts in subsequent computations.

A. Calculate the activity rate for each activity.

Testing	$
Warranty	$

B. Calculate the cost per chip for each supplier.

Beltran	$
Southern Express	$

C. Which supplier should Russell Company choose?

Question 2

Leather jackets			Suede jackets
Sales	450,000			542,000
Variable cost of goods sold	134,000			213,000
Direct fixed overhead	29,000			38,000

A sales commission of 2% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $32,000 for the leather jackets and $66,000 for the suede jackets. Common fixed overhead for the factory was estimated to be $83,000 and common selling and administrative expense was estimated to be $14,000.

Required:

Prepare a segmented income statement for Mario Co. for the coming year, using variable costing. Enter all amounts as positive numbers.

Mario Co.
Segmented Income Statement
For the Coming Year
	Leather Jackets	Suede Jackets	Total
Less direct fixed expenses:
Less common fixed expenses: