accounting 349 week 5 - 9748

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  • Due on: Wed 16 May, 2012 (02:17am)
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Determine minimum transfer price.

(SO 4)

Allied Company's Small Motor Division manufactures a number of small motors used in household and office appliances. The Household Division of Allied then assembles and packages such items as blenders and juicers. Both divisions are free to buy and sell any of their components internally or externally. The following costs relate to small motor LN233 on a per unit basis.


Fixed cost per unit

$ 5

Variable cost per unit


Selling price per unit



  1. Assuming that the Small Motor Division has excess capacity, compute the minimum acceptable price for the transfer of small motor LN233 to the Household Division.
  2. Assuming that the Small Motor Division does not have excess capacity, compute the minimum acceptable price for the transfer of the small motor to the Household Division.
    1. Explain why the level of capacity in the Small Motor Division has an effect on the transfer price.




Prepare a manufacturing overhead budget.

(SO 3)

For Savage Inc. variable manufacturing overhead costs are expected to be $20,000 in the first quarter of 2005 with $2,000 increments in each of the remaining three quarters. Fixed overhead costs are estimated to be $35,000 in each quarter. Prepare the manufacturing overhead budget by quarters and in total for the year.





Prepare a budgeted income statement for the year.

(SO 4)

Stoker Company has completed all of its operating budgets. The sales budget for the year shows 50,000 units and total sales of $2,000,000. The total unit cost of making one unit of sales is $24. Selling and administrative expenses are expected to be $300,000. Income taxes are estimated to be $150,000. Prepare a budgeted income statement for the year ending December 31, 2005


E 11- 6 compute the materials and labor variances and list reasons for unfavorable variances.

(SO 4, 6)

The following direct materials and direct labor data pertain to the operations of Batista Manufacturing Company for the month of August.



Actual labor rate

$13 per hour

Actual hours incurred and used

4,250 hours

Actual materials price

$128 per ton

Actual quantity of materials purchased and used

1,250 tons

Standard labor rate

$12 per hour

Standard hours used

4,300 hours

Standard materials price

$130 per ton

Standard quantity of materials used

1,200 tons


  1. Compute the total, price, and quantity variances for materials and labor.
    1. Provide two possible explanations for each of the unfavorable variances calculated above, and suggest where responsibility for the unfavorable result might be placed.



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