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Managerial Accounting 1B
Financial
and Managerial Accounting
Chapter 22
1.
Exercise 22-1 Departmental expense
allocations L.O. C1

Won Han Co. has four departments:
materials, personnel, manufacturing, and packaging. In a recent month, the
four departments incurred three shared indirect expenses. The amounts of
these indirect expenses and the bases used to allocate them follow.

Indirect
Expense

Cost

Allocation
Base

Supervision

$

75,000

Number of employees

Utilities

60,000

Square feet occupied

Insurance

16,500

Value of assets in use

Total

$

151,500

Departmental data for the
companys recent reporting period follow.

Department

Employees

Square
Feet

Asset
Values

Materials

18

27,000

$

6,000

Personnel

6

4,500

1,200

Manufacturing

66

45,000

37,800

Packaging

30

13,500

15,000

Total

120

90,000

$

60,000

(1)

Use this information to allocate
each of the three indirect expenses across the four departments.(Omit the “$” & “%” signs in your
response.)

(2)

Prepare a summary table that
reports the indirect expenses assigned to each of the four departments.(Omit the “$” sign in your response.)

2.
Exercise 22-12B Joint real estate costs assigned L.O. C4

Tidy Home Properties is developing
a subdivision that includes 300 home lots. The 225 lots in the Garden section
are below a ridge and do not have views of the neighboring gardens and hills;
the 75 lots in the Premier section offer unobstructed views. The expected
selling price for each Garden lot is $50,000 and for each Premier lot is
$100,000. The developer acquired the land for $2,500,000 and spent another
$2,000,000 on street and utilities improvements.

Assign the joint land and
improvement costs to the lots using the value basis of allocation and
determine the average cost per lot. (Omit the
“$” sign in your response.)

Exercise 22-13B Joint product costs assigned L.O. C4
[The following information applies to the questions displayed
below.]

Pike Seafood Company purchases
lobsters and processes them into tails and flakes. It sells the lobster tails
for $20 per pound and the flakes for $15 per pound. On average, 100 pounds of
lobster are processed into 57 pounds of tails and 24 pounds of flakes, with
19 pounds of waste. Assume that the company purchased 3,000 pounds of lobster
for $6.00 per pound and processed the lobsters with an additional labor cost of
$1,800. No materials or labor costs are assigned to the waste. The company
sold 1,510 pounds of tails and 710 pounds of flakes.

3.Exercise 22-13B
Part 1

(1)

What is the allocated cost of the
sold items? The company allocates joint costs on a value basis.(Round your cost per pound to 2 decimal places. Omit the
“$” sign in your response.)

Cost
of goods sold

Lobster tails

Lobster flakes

4.
Exercise 22-13B Part 2

(2)

What is the allocated cost of the
ending inventory? The company allocates joint costs on a value basis.(Round your cost per pound to 2 decimal places. Omit the
“$” sign in your response.)

Cost
of the ending inventory

Lobster tails

Lobster flakes

Problem 22-1A Allocation of building occupancy costs to
departments L.O. P1
[The following information applies to the questions displayed
below.]

City Bank has several departments
that occupy both floors of a two-story building. The departmental accounting
system has a single account, Building Occupancy Cost, in its ledger. The
types and amounts of occupancy costs recorded in this account for the current
period follow.

DepreciationBuilding

$

18,000

InterestBuilding
mortgage

27,000

TaxesBuilding and
land

8,000

Gas (heating) expense

2,500

Lighting expense

3,000

Maintenance expense

5,500

Total occupancy cost

$

64,000

The building has 4,000 square feet
on each floor. In prior periods, the accounting manager merely divided the
$64,000 occupancy cost by 8,000 square feet to find an average cost of $8 per
square foot and then charged each department a building occupancy cost equal
to this rate times the number of square feet that it occupied.

Laura Diaz
manages a first-floor department that occupies 1,000 square feet, and Lauren
Wright manages a second-floor department that occupies 1,800 square feet of
floor space. In discussing the departmental reports, the second-floor manager
questions whether using the same rate per square foot for all departments
makes sense because the first-floor space is more valuable. This manager also
references a recent real estate study of average local rental costs for
similar space that shows first-floor space worth $30 per square foot and
second-floor space worth $20 per square foot (excluding costs for heating,
lighting, and maintenance).

5.
Problem 22-1A Part 1

Required:

1.

Allocate occupancy costs to the
Diaz and Wright departments using the current allocation method.(Omit the “$” sign in your response.)

Department

Total

Diazs Dept.

Wright’s Dept.

6.
Problem 22-1A Part 2

2.

Allocate the depreciation,
interest, and taxes occupancy costs to the Diaz and Wright departments in
proportion to the relative market values of the floor space. Allocate the
heating, lighting, and maintenance costs to the Diaz and Wright departments
in proportion to the square feet occupied (ignoring floor space market
values).(Round your cost per Sq. ft rate to
2 decimal places and final answers to the nearest whole number. Omit the
“$” sign in your response.)

Department

Total

Diazs Dept.

$

Wright’s Dept.

$

8.
Problem 22-3A
Departmental income statements; forecasts L.O. P1

Time-To-See Company began
operations in January 2011 with two operating (selling) departments and one
service (office) department. Its departmental income statements follow.

Time-To-See plans to open a third
department in January 2012 that will sell paintings. Management predicts that
the new department will generate $35,000 in sales with a 55% gross profit
margin and will require the following direct expenses: sales salaries,
$8,000; advertising, $800; store supplies, $500; and equipment depreciation,
$200. It will fit the new department into the current rented space by taking
some square footage from the other two departments. When opened the new
painting department will fill one-fifth of the space presently used by the
clock department and one-sixth used by the mirror department. Management does
not predict any increase in utilities costs, which are allocated to the
departments in proportion to occupied space (or rent expense). The company
allocates office department expenses to the operating departments in
proportion to their sales. It expects the painting department to increase total
office department expenses by $7,000. Since the painting department will
bring new customers into the store, management expects sales in both the
clock and mirror departments to increase by 7%. No changes for those
departments gross profit percents or their direct expenses are expected
except for store supplies used, which will increase in proportion to sales.

Required

Prepare departmental income
statements that show the companys predicted results of operations for
calendar year 2012 for the three operating (selling) departments and their
combined totals. (Input all amounts as
positive values. Round your percentage values to 1 decimal place,
intermediate and final answers to the nearest whole dollar amount. Omit
the “$” sign in your response.)

rev: 05_12_2012

Managerial Accounting 1BFinancial
and Managerial AccountingChapter 221.
Exercise 22-1 Departmental expense
allocations L.O. C1Won Han Co. has four departments:
materials, personnel, manufacturing, and packaging. In a recent month, the
four departments incurred three shared indirect expenses. The amounts of
these indirect expenses and the bases used to allocate them follow. Indirect
Expense CostAllocation
Base Supervision$75,000
Number of employees Utilities 60,000
Square feet occupied Insurance 16,500
Value of assets in use Total$151,500
Departmental data for the
companys recent reporting period follow. DepartmentEmployeesSquare
FeetAsset
Values Materials 18 27,000 $6,000 Personnel 6 4,500 1,200 Manufacturing 66 45,000 37,800 Packaging 30 13,500 15,000 Total 120 90,000 $60,000 (1)Use this information to allocate
each of the three indirect expenses across the four departments.(Omit the “$” & “%” signs in your
response.) (2)Prepare a summary table that
reports the indirect expenses assigned to each of the four departments.(Omit the “$” sign in your response.)2.Exercise 22-12B Joint real estate costs assigned L.O. C4Tidy Home Properties is developing
a subdivision that includes 300 home lots. The 225 lots in the Garden section
are below a ridge and do not have views of the neighboring gardens and hills;
the 75 lots in the Premier section offer unobstructed views. The expected
selling price for each Garden lot is $50,000 and for each Premier lot is
$100,000. The developer acquired the land for $2,500,000 and spent another
$2,000,000 on street and utilities improvements. Assign the joint land and
improvement costs to the lots using the value basis of allocation and
determine the average cost per lot. (Omit the
“$” sign in your response.) Exercise 22-13B Joint product costs assigned L.O. C4[The following information applies to the questions displayed
below.]Pike Seafood Company purchases
lobsters and processes them into tails and flakes. It sells the lobster tails
for $20 per pound and the flakes for $15 per pound. On average, 100 pounds of
lobster are processed into 57 pounds of tails and 24 pounds of flakes, with
19 pounds of waste. Assume that the company purchased 3,000 pounds of lobster
for $6.00 per pound and processed the lobsters with an additional labor cost of
$1,800. No materials or labor costs are assigned to the waste. The company
sold 1,510 pounds of tails and 710 pounds of flakes. 3.Exercise 22-13B
Part 1(1)What is the allocated cost of the
sold items? The company allocates joint costs on a value basis.(Round your cost per pound to 2 decimal places. Omit the
“$” sign in your response.) Cost
of goods sold Lobster tails Lobster flakes
4.Exercise 22-13B Part 2(2)What is the allocated cost of the
ending inventory? The company allocates joint costs on a value basis.(Round your cost per pound to 2 decimal places. Omit the
“$” sign in your response.) Cost
of the ending inventory Lobster tails Lobster flakesProblem 22-1A Allocation of building occupancy costs to
departments L.O. P1[The following information applies to the questions displayed
below.]City Bank has several departments
that occupy both floors of a two-story building. The departmental accounting
system has a single account, Building Occupancy Cost, in its ledger. The
types and amounts of occupancy costs recorded in this account for the current
period follow. DepreciationBuilding$18,000
InterestBuilding
mortgage 27,000
TaxesBuilding and
land 8,000
Gas (heating) expense 2,500
Lighting expense 3,000
Maintenance expense 5,500
Total occupancy cost$64,000
The building has 4,000 square feet
on each floor. In prior periods, the accounting manager merely divided the
$64,000 occupancy cost by 8,000 square feet to find an average cost of $8 per
square foot and then charged each department a building occupancy cost equal
to this rate times the number of square feet that it occupied. Laura Diaz
manages a first-floor department that occupies 1,000 square feet, and Lauren
Wright manages a second-floor department that occupies 1,800 square feet of
floor space. In discussing the departmental reports, the second-floor manager
questions whether using the same rate per square foot for all departments
makes sense because the first-floor space is more valuable. This manager also
references a recent real estate study of average local rental costs for
similar space that shows first-floor space worth $30 per square foot and
second-floor space worth $20 per square foot (excluding costs for heating,
lighting, and maintenance). 5.Problem 22-1A Part 1Required:1.Allocate occupancy costs to the
Diaz and Wright departments using the current allocation method.(Omit the “$” sign in your response.) DepartmentTotal Diazs Dept. Wright’s Dept.
6.Problem 22-1A Part 22.Allocate the depreciation,
interest, and taxes occupancy costs to the Diaz and Wright departments in
proportion to the relative market values of the floor space. Allocate the
heating, lighting, and maintenance costs to the Diaz and Wright departments
in proportion to the square feet occupied (ignoring floor space market
values).(Round your cost per Sq. ft rate to
2 decimal places and final answers to the nearest whole number. Omit the
“$” sign in your response.) DepartmentTotal Diazs Dept.$ Wright’s Dept.$

8.Problem 22-3A
Departmental income statements; forecasts L.O. P1Time-To-See Company began
operations in January 2011 with two operating (selling) departments and one
service (office) department. Its departmental income statements follow. Time-To-See plans to open a third
department in January 2012 that will sell paintings. Management predicts that
the new department will generate $35,000 in sales with a 55% gross profit
margin and will require the following direct expenses: sales salaries,
$8,000; advertising, $800; store supplies, $500; and equipment depreciation,
$200. It will fit the new department into the current rented space by taking
some square footage from the other two departments. When opened the new
painting department will fill one-fifth of the space presently used by the
clock department and one-sixth used by the mirror department. Management does
not predict any increase in utilities costs, which are allocated to the
departments in proportion to occupied space (or rent expense). The company
allocates office department expenses to the operating departments in
proportion to their sales. It expects the painting department to increase total
office department expenses by $7,000. Since the painting department will
bring new customers into the store, management expects sales in both the
clock and mirror departments to increase by 7%. No changes for those
departments gross profit percents or their direct expenses are expected
except for store supplies used, which will increase in proportion to sales. RequiredPrepare departmental income
statements that show the companys predicted results of operations for
calendar year 2012 for the three operating (selling) departments and their
combined totals. (Input all amounts as
positive values. Round your percentage values to 1 decimal place,
intermediate and final answers to the nearest whole dollar amount. Omit
the “$” sign in your response.)
rev: 05_12_2012

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