College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Chapter 25, Problem 6SEB
To determine
Ascertain the direct operating margin and direct operating margin percentage for both the departments.
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1. Allocate the support departments' costs to the operating departmens using the direct method.
2. Rank the support departments based on the % of their services provided to other support departments. Use this ranking to allocate the support departments' costs to the operating departments based on the step-down method.
3. How could you have ranked teh support departments differently?
The Bramble Company makes wheels and wings for ground transport vehicles and drones. In addition
to the key manufacturing departments, Bramble needs two key support services, provided by its
Maintenance and IT departments.
The Maintenance costs are allocated to other departments based on the square footage of space each
department occupies. The IT department allocates its costs to other departments based on the amount
of time the IT employees spend assisting the other departments. The cost information of all four
departments, along with their usage information for both allocation bases, is as follows.
Initial cost
Square feet occupied
IT labor hours used
Support Departments
Maintenance
IT
$120.000 $74.000
1,100
1.800
1,100
Operating Departments
Wheels
$396,000
2,160
2,280
Wings
$700,000
5,040 h
1.720
Totals
$1,290,000
10,100
5,100
In each blank next to the following terms, place the identifying letter of its best description.
Chapter 25 Solutions
College Accounting, Chapters 1-27
Ch. 25 - A department that incurs costs and generates...Ch. 25 - Departmental gross profit is the difference...Ch. 25 - Prob. 3TFCh. 25 - Direct expenses are operating expenses incurred...Ch. 25 - Departmental direct operating margin is the...Ch. 25 - A department that incurs costs but does not...Ch. 25 - The difference between a departments net sales and...Ch. 25 - Prob. 3MCCh. 25 - The difference between a departments gross profit...Ch. 25 - The difference between a departments gross profit...
Ch. 25 - Prob. 1CECh. 25 - Prob. 2CECh. 25 - Prob. 3CECh. 25 - Prob. 1RQCh. 25 - Prob. 2RQCh. 25 - Prob. 3RQCh. 25 - Prob. 4RQCh. 25 - Prob. 5RQCh. 25 - Prob. 6RQCh. 25 - Prob. 7RQCh. 25 - Prob. 8RQCh. 25 - Distinguish between departmental gross profit,...Ch. 25 - Prob. 10RQCh. 25 - GROSS PROFIT SECTION OF DE PART MENT AL INCO ME ST...Ch. 25 - ALLOCATING OPERATING EXPENSESQUARE FEET Weaverling...Ch. 25 - ALLOCATING OPERATING EXPENSERELATIVE NET SALES...Ch. 25 - ALLOCATING OPERATING EXPENSEMILES DRIVEN Mercado...Ch. 25 - COMPUTING OPERATING INCOME The sales, cost of...Ch. 25 - Prob. 6SEACh. 25 - INCOME STATEMENT WITH DEPART MENTAL GROSS PROFIT...Ch. 25 - INCOME STATE MENT WITH DEPARTMENTAL OPERATING...Ch. 25 - INCOME STATEMENT WITH DEPART MENTAL DIRECT...Ch. 25 - Prob. 10SPACh. 25 - GROSS PROFIT SECTION OF DEPART MENTAL INCOME...Ch. 25 - Prob. 2SEBCh. 25 - ALLOCATING OPERATING EXPENSERELATIVE NET SALES...Ch. 25 - ALLOCATING OPERATING EXPENSEMILES DRIVEN Herbert...Ch. 25 - Prob. 5SEBCh. 25 - Prob. 6SEBCh. 25 - INCOME STATEMENT WITH DEPART MENTAL GROSS PROFIT...Ch. 25 - Prob. 8SPBCh. 25 - Prob. 9SPBCh. 25 - Prob. 10SPBCh. 25 - Prob. 1MYWCh. 25 - Prob. 1ECCh. 25 - MASTERY PROBLEM Bobs Acme Supermarket has been in...Ch. 25 - CHALLENGE PROBLEM This problem challenges you to...
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- In each blank next to the following terms, place the identifying letter of its best description. 1. Cost center 2. Profit center 3. Responsibility accounting system 4. Service department 5. Indirect expenses 6. Controllable costs A. Incurs costs without directly yielding revenues. B. Provides information used to evaluate the performance of a department. C. Does not directly manufacture products but contributes to profitability of the entire company. D. Costs incurred for the joint benefit of more than one department. E. Costs that a manager has the ability to affect. F. Incurs costs and also generates revenues.arrow_forwardDepartmental direct operating margin less departmental indirect expenses equals a.direct operating expenses. b.total operating income. c.departmental operating income. d.departmental income.arrow_forwardThe difference between a department’s gross profit and its operating expenses is called(a) departmental gross profit.(b) departmental direct operating margin.(c) departmental operating income.(d) net income.arrow_forward
- INCOME STATEMENT WITH DEPART MENTAL GROSS PROFIT AND OPERATING INCOME Thomas and Hill Distributors has divided its business into two departments: commercial sales and industrial sales. The following information is provided for the year ended December 31, 20--: REQUIRED 1. Prepare an income statement showing departmental gross profit and total operating income. 2. Calculate departmental gross profit percentages.arrow_forwardINCOME STATEMENT WITH DEPART MENTAL DIRECT OPERATING MARGIN AND TOTAL OPERATING INCOME Durwood Thomas operates the business Thomas Security that sells security equipment for commercial property and residential homes. The following information is provided for the year ended December 31, 20--: REQUIRED 1. Prepare an income statement showing departmental direct operating margin and total operating income. 2. Calculate departmental direct operating margin percentages.arrow_forwardINCOME STATEMENT WITH DEPART MENTAL GROSS PROFIT AND OPERATING INCOME Bacon and Hand Distributors has divided its business into two departments: retail sales and wholesale sales. The following information is provided for the year ended December 31, 20--: REQUIRED 1. Prepare an income statement showing departmental gross profit and total operating income. 2. Calculate departmental gross profit percentages.arrow_forward
- Corrections to service department charges Panda Airlines Inc. has two divisions organized as profit centers, the Passenger Division and the Cargo Division. The following divisional income statements were prepared The service department charge rate for the service department costs was based on revenues. The following additional information is available a.Does the operating income for the two divisions accurately measure performance? b.Using service charge rates for service department charges, correct the divisional income statements.arrow_forwardWhich of the following is a measure of a cost center manager's performance? Oa. return on investment and residual income measures Ob. balance sheet Oc. budget performance report Od. divisional income statementsarrow_forwardProfit margin for an Investment center measures: Multiple Cholce Departmental contribution to overhead. How efficiently an investment center generates sales from its invested assets. Investment center income earned per dollar of sales. Investment center income compared to target investment center income. Investment center income generated from its invested assets.arrow_forward
- Instructions: Designate the best answer for each of the following questions. 1.Which of the following is a responsibility center that incurs expenses, generates revenues, and is responsible for generating a return on assets? a. Cost center b. Revenue center c. Profit center d. Investment center 2.Which one of the following is the most useful measure for evaluating a manager's performance in controlling revenues and costs in a profit center? a. Contribution margin b. Contribution net income c. Contribution gross profit d. Controllable margin 3.Hanover Corporation desires to earn target net income of $42,000. The selling price per unit is $18, unit variable cost is $5.60, and total fixed costs are $123,912. How many units must the company sell to earn its target net income? a. 13,380 b. 9,993 c. 3,387 d. 9,217 4.Remark…arrow_forwardPlease do not give solution in image format ?arrow_forwardWhich of the following is a measure of a manager’s performance working in a profit center? a. the return on investment and residual income measures b. a balance sheet c. a budget performance report d. the divisional income statementsarrow_forward
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