Terry Enterprises, Inc. has two divisionsthe Foods division and the Clothes division. Historically, Terry has used the divisions ROI as the performance measure for the bonus determinations. Terry Foods division has gross total assets of $1,000,000, accumulated depreciation of $350,000, current liabilities of $250,000, and sales of $2,000,000. Foods operating income is $200,000. Terry Clothes division has gross total assets of $5,000,000, accumulated depreciation of $2,100,000, current liabilities of $1,500,000, and sales of $8,000,000. Clothes operating income is $750,000.

Use the DuPont formula to compute ROI for each division and for Terry Enterprises as a whole. Use operating income and gross total assets as the measures of income and investment.

Hint: Calculate each of the ROIs for Terry Enterprises rounding answers to nearest whole percentage.

	ROI
Foods
Clothes
Terry Enterprises

A summary of Flaker Companys manufacturing variance report for June 2019 follows.

			Total Standard Costs (7,600 units)		Actual Costs (7,600 units)		Variances
Direct material			$66,880		$66,150		$730		F
Direct labor			77,520		81,420		3,900		U
Variable overhead			33,060		33,000		60		F
Fixed overhead			102,600		102,600		-
			$280,060		$283,170		$3,110		U

Standard materials cost per unit of product is 4 pounds at $2.20 per pound, and standard direct labor cost is 0.75 hour at $13.60 per hour. Total actual materials cost represents 31,500 pounds purchased at $2.10 per pound. Total actual labor cost represents 5,900 hours at $13.80 per hour. According to standards, variable overhead rate is applied at $5.80 per direct labor hour (based on a normal capacity of 6,000 direct labor hours or 8,000 units of product). Assume that all fixed overhead is applied to work-in-progress inventory.

a. Determine the following variances:

Do not use negative signs with any of your answers. Next to each variance answer, select either "F" for Favorable or "U" for Unfavorable.

Materials Variances
Actual cost:
Split cost:
Standard cost:
Materials price		FU
Materials efficiency		FU

Labor Variances
Actual cost:
Split cost:
Standard cost:
Labor rate		FU
Labor efficiency		FU

Variable Overhead Variances
Actual cost:
Split cost:
Standard cost:
Variable overhead spending		FU
Variable overhead efficiency		FU

b. Prepare general journal entries to record standard costs, actual costs, and related variances for material, labor, and overhead.

General Journal
Description		Debit	Credit
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Materials price variance
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To record the purchases of direct materials
Work in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To record the use of direct materials
Work in process inventory
Labor rate variance
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To record direct labor costs and related cost variances.
Work in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Manufactruing overhead
To apply variable overhead to work in progress and record related cost variances
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To apply fixed overhead to work in progress

c. Prepare journal entries to record the transfer of all completed units to Finished Goods Inventory and the subsequent sale of 6,400 units on account at $60 each (assume no beginning finished goods inventory).

General Journal
Description		Debit	Credit
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To record completion ofunits
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To record sale ofunits
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
Accounts payableAccounts receivableCost of goods soldFinished goods inventoryLabor efficiency varianceManufacturing overheadMaterials efficiency varianceMaterials inventoryMaterials price varianceSalesVariable overhead efficiency varianceVariable overhead spending varianceWages payableWork in process inventory
To record cost ofunits

d. Prepare a partial income statement (through gross profit on sales) showing gross profit based on standard costs, the incorporation of variances, and gross profit based on actual costs.

Do not use negative signs with any of your answers below.

Flaker Company Partial Income Statement For the Month Ended June 30, 2019
Sales
Cost of goods at standard cost
Gross profit at standard cost
Net cost variance
Material
Labor
Variable overhead
Gross profit at actual cost