Chapter 22: 12DQ (page 1013)
What is a transfer price? What are the three main approaches to setting transfer prices?
Theprice of transferring the merchandise between the company’s various departmentsis known as the transfer price.
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Why is overhead allocation under ABC usually more accurate than either the plant-wide overhead allocation method or the departmental overhead allocation method?
Arctica manufactures snowmobiles and ATVs. These products are made in different departments, and each department has its own manager. Each responsibility performance report only includes those costs that the particular department manager can control: raw materials, wages, supplies used, and equipment depreciation. Using the data below, prepare a responsibility accounting report for the snowmobile department.
Budget | Actual | |||||
Snowmobile | ATV | Combined | Snowmobile | ATV | Combined | |
Raw material | \(19,500 | \)27,500 | \(47,000 | \)19,420 | \(28,820 | \)48,240 |
Employee wages | 10,400 | 20,500 | 30,900 | 10,660 | 21,240 | 31,900 |
Dept. manager salary | 4,300 | 5,200 | 9,500 | 4,400 | 4,400 | 8,800 |
Supplies used | 3,300 | 900 | 4,200 | 3,170 | 920 | 4,090 |
Depreciation – equipment | 6,000 | 12,500 | 18,500 | 6,000 | 12,500 | 18,500 |
Utilities | 360 | 540 | 900 | 330 | 500 | 830 |
Rent | 5,700 | 6,300 | 12,000 | 5,300 | 6,300 | 11,600 |
Totals | \(49,560 | \)73,440 | \(123,000 | \)49,280 | \(74,680 | \)123,960 |
Question: Classify each of the performance measures below into the most likely balanced scorecard perspective it relates to. Label your answers using C (customer), P (internal process), I (innovation and growth), or F (financial).
1. Customer wait time
2. Number of days of employee absences
3. Profit margin
4. Number of new products introduced
5. Change in market share
6. Employee sustainability training sessions attended
7. Length of time raw materials are in inventory
8. Customer satisfaction index
9. Gallons of water reused
10. CO2 emissions
Question: What is the difference between operating departments and service departments?
Compute the times interest earned for Park Company, which reports income before interest expense and income tacxes of \(1,885,000 and interest expense of \)145,000. Interpret its times interest earned (assume that its competitors average a times interest earned of 4.0).
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