Question

18- Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:

Office Expenses	Total				Allocation Basis
Salaries	$	30,000			Number of employees
Depreciation		20,000			Cost of goods sold
Advertising		40,000			Net sales

Item	Drilling				Grinding				Total
Number of employees		1,000				1,500				2,500
Net sales	$	325,000			$	475,000			$	800,000
Cost of goods sold	$	75,000			$	125,000			$	200,000

The amount of salaries that should be allocated to Drilling for the current period is:

Multiple Choice

• $30,000.

• $18,000.

• $15,000.

• $10,000.

• $12,000.

  11- iSooky has a spotter truck with a book value of $40,000 and a remaining useful life of five years. At the end of the five years the spotter truck will have a zero salvage value. The market value of the spotter truck is currently $32,000. iSooky can purchase a new spotter truck for $120,000 and receive $31,000 in return for trading in its old spotter truck. The new spotter truck will reduce variable manufacturing costs by $25,000 per year over the five-year life of the new spotter truck. The costs not relevant to the decision of whether or not to replace the spotter truck are:

  Multiple Choice

• $31,000.

• $25,000.

• $125,000.

• $120,000.

• $40,000.

  12- Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?

  Multiple Choice

• Total cost times markup percentage.

• Total cost per unit times markup percentage per unit.

• Total cost per unit divided by markup percentage per unit.

• Markup percentage per unit divided by total cost per unit.

• Markup percentage divided by total cost.

  13- Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $53,000 for the past year. Kitchen division sales for the year were $1,040,000, and its variable costs were $775,000. The fixed costs of the division were $318,000. If the kitchen division is dropped, 60% of the fixed costs allocated to it could be eliminated. The impact on Valdez’s operating income from eliminating this business segment would be:

  Multiple Choice

• $74,200 decrease

• $265,000 increase

• $274,200 decrease

• $74,200 increase

• $265,000 decrease

  14- Gordon Corporation produced 10,000 digital watches in the current year. Variable costs are $8 per watch. Overhead assigned is $2.25 per watch. A supplier offers the watches for $9.50 each. Gordon's production manager reports the incremental overhead is $1.25 per watch. Gordon should:

  Multiple Choice

• Continue making the watches as an additional $1.50 per watch would be incurred if bought from the supplier.

• Continue making the watches as an additional $0.25 per watch would be incurred if bought from the supplier.

• Buy the watches as they would save $0.75 per watch.

• Buy the watches as they would save $1.50 per watch.

• Buy the watches as they would save $1.75 per watch.

  15 - Valber Company is considering eliminating its phone division. The company allocates fixed costs based on sales. If the phone division is dropped, $150,000 of the fixed costs allocated to that division could be eliminated. The impact on Valber’s operating income from eliminating the phone division would be:
  

  	Desktops				Laptops				Tablets				Phones
  Sales	$	356,000			$	871,500			$	694,000			$	975,000
  Variable costs		201,000				635,000				528,000				795,000
  Contribution margin		155,000				236,500				166,000				180,000
  Fixed costs		71,200				174,300				138,800				195,000
  Net income (loss)		83,800				62,200				27,200				(15,000	)

  Multiple Choice

• $30,000 increase

• $150,000 increase

• $150,000 decrease

• $15,000 increase

• $30,000 decrease

Answer 1

I have answered 4 in this.

18. Answer is 12000

Calculated based on weighted average of no. of employees

Item	Drilling		Grinding		Total
Number of employees		1,000		1,500		2,500
Net sales	$	3,25,000	$	4,75,000	$	8,00,000
Cost of goods sold	$	75,000	$	1,25,000	$	2,00,000
	Drilling		Grinding
Salaries	12000		18000

11.Answer is C.125000. All the other elements will be used to understand in benefit of buying and tax benefit of selling old one.

12.

Answer is B
Markup per unit is TOTAL cost per unit times markup percentage per unit
13. Answer is A
decrease in revenue	1040000
decrease in variable cost	775000
decrease in fixed cost	190800
Decrease in operating income	74200
Answer is A (74,200 decrease)