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    FINAL Acctg7

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    Romcel Florendo

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    FINAL Acctg7

    Uploaded by

    Romcel Florendo
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    FINAL Acctg7.Docx

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    21 views5 pages

    FINAL Acctg7

    Uploaded by

    Romcel Florendo

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    © All Rights Reserved
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    Problem 4 (Evaluation of Performance)

    Rosal Corporation has three divisions – marketing, production, and personnel.


    There is a manager in each division. The flexible budget for each division follows:

    Marketing Production Personnel


    Controllable costs:
    Direct Materials - P 20,000 -
    Direct Labor - 50,000 -
    Salaries P 80,000 - P 70,000
    Supplies 20,000 6,000 4,000
    Maintenance 2,000 4,000 2,000
    Total P 102,000 P 80,000 P 76,000

    Actual Costs by divisions were:


    Marketing Production Personnel
    Controllable costs:
    Direct Materials - P 24,000 -
    Direct Labor - 48,000 -
    Salaries P 102,000 - P 68,000
    Supplies 1,600 4,000 3,000
    Maintenance 400 3,000 1,000
    Total P 104,000 P 79,000 P 72,000

    Required:

    (1.) Prepare and evaluate a performance report for the production manager.
    (2.) Prepare and evaluate a performance report for vice president. Other
    costs for the vice president are assumed to be: budgeted P70,000 and
    actual P68,800.

    This study source was downloaded by 100000885543663 from CourseHero.com on 05-07-2024 01:13:18 GMT -05:00

    https://www.coursehero.com/file/85246924/FINAL-acctg7docx/
    PROBLEM 4 SOLUTION
    Required 1
    PERFORMANCE REPORT FOR PRODUCTION MANAGER

    ACTUAL COST FLEXIBLE BUDGET VARIANCE


    COST UN/(FAV)
    Direct Materials P 24,000 P 20,000 P 4,000 (UN)
    Direct Labor 48,000 50,000 2,000 (FAV)
    Supplies 4,000 6,000 2,000 (FAV)
    Maintenance 3,000 4,000 1,000 (FAV)
    TOTAL P 79,000 P 80,000 P 1,000 (FAV)

     The production manager lessen the expected cost by P 1,000.

    Required 2
    PERFORMANCE REPORT FOR VICE PRESIDENT

    ACTUAL COST FLEXIBLE BUDGET VARIANCE


    COST UN/(FAV)
    Marketing P 104,000 P 102,000 P 2,000(UN)

    Production 79,000 80,000 1,000(FAV)

    Personnel 72,000 76,000 4,000(FAV)

    Other Cost 68,800 70,000 1,200(FAV)

    TOTAL P 323,800 P328,000 P 4,200(FAV)

     The vice president lessen the expected cost by P 4,200.

    This study source was downloaded by 100000885543663 from CourseHero.com on 05-07-2024 01:13:18 GMT -05:00

    https://www.coursehero.com/file/85246924/FINAL-acctg7docx/
    Problem 5 (Target Sales Price; Return on Investment)

    Favorite Products, a manufacturer of bicycles, uses normal volume as the basis for
    the cost figures used in setting price. That is, prices are set on the basis of long-
    run volume predictions. The prices are then adjusted only for large changes in pay
    rates or material prices. You are given by the following information:

    Materials, wages, and other variable costs P 300 per unit


    Fixed costs P 200,000 per year
    Target return on investments 20%
    Normal volume 1,500 units
    Investment (total assets) P 800,000

    Required:
    1. What sales price is needed to attain target return on investment of 20
    percent?
    2. What rate of return on investment will be earned at sales volumes of 2,000
    and 1,000 respectively, given the sales price determined in the requirement
    1?

    This study source was downloaded by 100000885543663 from CourseHero.com on 05-07-2024 01:13:18 GMT -05:00

    https://www.coursehero.com/file/85246924/FINAL-acctg7docx/
    PROBLEM 5 SOLUTION
    Required 1

    Materials, wages, and other variable cost (300x1,500) P 450,000


    Fixed costs 200,000
    Desired operating income (800,000x20%) 160,000
    Desired Revenue/Sales P 810,000

    Sales price needed to attain target ROI (810,000/1,500) P 540/UNIT

    Required 2

    Sales Volume 1,500 Units


    Revenue P 810,000

    Materials, wages, and other variable cost P 450,000


    Fixed costs 200,000
    Total Costs P 650,000

    Net Income P 160,000


    ROI Rate (160,000/800,000)x100% 20%

    Operating Leverage = (810,000 – 450,000)/160,000


    = 2.25

    %Change in Income = (2.25 x 33.33%)


    = 75%

    This study source was downloaded by 100000885543663 from CourseHero.com on 05-07-2024 01:13:18 GMT -05:00

    https://www.coursehero.com/file/85246924/FINAL-acctg7docx/
    Sales volume 2,000 Units
    Revenue (810,000/75%) P 1,080,000

    Materials, wages, and other variable cost (2,000x300) P 600,000


    Fixed cost 200,000
    Total cost P 800,000

    Net Income P 280,000


    ROI Rate (280,000/800,000)x100% 35%

    Sales volume 1,000 Units


    Revenue (1,080,000/2) P 540,000

    Materials, wages, and other variable cost (1,000x300) P 300,000


    Fixed cost 200,000
    Total cost P 500,000

    Net Income P 40,000


    ROI Rate (40,000/800,000)x100% 5%

    This study source was downloaded by 100000885543663 from CourseHero.com on 05-07-2024 01:13:18 GMT -05:00

    https://www.coursehero.com/file/85246924/FINAL-acctg7docx/
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