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Residual income can be used most effectively in comparing the performance of divisions of very different size.

Assume that ABC allocates manufacturing overhead using a plantwide rate with direct labor hours as the allocation base.  What is the plantwide overhead rate?

Sahara Corporation manufactures water fountains.  Sahara has the capacity to manufacture and sell 80,000 water fountains each year but is currently only manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units:   Per Unit Selling price $ 125 Manufacturing costs:     Variable $ 25 Fixed $ 40 Selling and administrative costs:     Variable $ 10 Fixed $ 15 UNF would like to purchase 3,000 water fountains from Sahara but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. The annual financial advantage (disadvantage) for the company as a result of accepting this special order from UNF should be: 

What is the Contribution Margin Ratio for March  2020?

Assume that ABC allocates manufacturing overhead using a plantwide rate with machine hours as the allocation base.  What is the plantwide overhead rate?

ABC Co. makes many types of widgets.  ABC has 700 units of widget Type V7 that are now obsolete due to technological advancements.  Which of the following would be relevant in ABC’s decision to sell or throw out the obsolete inventory?   Direct materialcost assignedto the inventory Fixed overheadcost assignedto the inventory A) Yes Yes B) Yes No C) No Yes D) No No  

Residual income can be used most effectively in comparing the performance of divisions of very different size.

Using the departmental overhead rates calculated in question # 29, how much overhead would be allocated to the 7 sting model? 

The Mako Kayak Company manufactures three types of kayaks – a fishing kayak, a tandem kayak and an ocean kayak. Data on sales and expenses for the past quarter follow: ​ Fishing Tandem Ocean ​ Total Kayaks Kayaks Kayaks Sales $200,000 $80,000 $70,000 $50,000 Variable manufacturing expenses 83,000 30,000 27,000 26,000 Contribution Margin 117,000 50,000 43,000 24,000 Fixed Expenses ​ ​ ​ ​   Advertising, traceable 22,000 7,000 10,000 5,000   Depreciation of special equipment 16,000 4,000 6,000 6,000   Product-line manager salary 28,000 8,000 12,000 8,000   Allocated common fixed expenses* 40,000 16,000 14,000 10,000 Total fixed expenses 106,000 35,000 42,000 29,000 Net Operating income (loss) $11,000 $15,000 $1,000 ($5,000) *Allocated on the basis of sales dollars ​ ​ ​ ​ Management is concerned about the continued losses shown by the ocean kayaks and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce ocean kayaks has no resale value.  If the ocean kayak line is dropped, the line supervisor assigned to the model line would be discharged.What is the financial advantage (disadvantage) per quarter of discontinuing the Ocean Kayaks?

Questions 29 through 31 are based on the following information: ABC Co. manufactures two models of guitar:-a 6-string model and a 7-string model.  The company considers all of its manufacturing overhead costs to be fixed.  All manufacturing overhead costs are incurred in either the Fabrication Department or the Assembly Department.  Details regarding manufacturing overhead costs by department are presented below: Fabrication Assembly Total Manufacturing OH costs $500,000 $200,000 $700,000 Direct labor hours   6 string model 5,000 2,000 7,000  7 string model 10,000 3,000 13,000 Machine hours  6 string model 1,000 0 1,000  7 string model 1,500 0 1,500