Q1Flinders Company has two service departments, Factory
Administration and Maintenance, and two operating
departments. Selected information relating to these departments
is given below:Service DepartmentsOperating
DepartmentsFactoryMaintenanceXYAdministration Department
al costs$ 119,700 $ 63,940 $ 723,000 $ 623,000 Number of
employees6 4 40 70 Total labor hours3,200 5,200 70,000
70,000 The company allocates service department costs by the
step-down method. Factory Administration costs are allocated
first on the basis of number of employees, and then
Maintenance costs are allocated on the basis of total labor
hours.Service DepartmentsOperating DepartmentsFactory
AdministrationMaintenanceXY Departmental costs$ $ $ $
Allocations: Factory Administration Maintenance Total
costs after allocations$ $ $ $
Q2Tajiri Corporation uses customers served as its measure of
activity. The following report compares the planning budget to
the actual operating results for the month of May:Tajiri
CorporationComparison of Planning Budget to Actual
ResultsFor the Month Ended May
31PlanningActualVariancesBudgetResults Customers
served39,000 40,000 Revenue (3.40q)$132,600 $136,500
$3,900 F Expenses: Wages and salaries ($23,900 +
$1.29q)74,210 75,500 1,290 U Supplies ($0.69q)26,910
24,210 2,700 F Insurance ($5,800)5,800 5,800
0 Miscellaneous ($4,800 + $.38q)19,620 16,920
2,700 F Total expense126,540 122,430 4,110 F Net
operating income$6,060 $14,070 $8,010 FRequired:1Complete
the company's flexible budget performance report for May.
Label each variance as favorable (F) or unfavorable (U). (Input
all amounts as positive values. Leave no cells blank - be certain
to enter "0" wherever required. Indicate the effect of each
variance by selecting "F" for favorable, "U" for unfavorable,
and "None" for no effect (i.e., zero variance). Omit the "$" sign

in your response.)Tajiri CorporationFlexible Budget
Performance Report Part 1 & 2For the Month Ended May
31Planning BudgetActivity VariancesU/F/NoneFlexible
BudgetRevenue and Spending VariancesU/F/NoneActual
Results Customers served39,000 40,000 Revenue$132,600
$$ $$136,500 Expenses: Wages and salaries74,210
75,500 Supplies26,910 24,210 Insurance5,800 5,800
Miscellaneous19,620 16,920 Total expense126,540
122,430 Net operating income$6,060 $$ $$14,070
Q3“I can’t understand what’s happening here,” said Mike Holt,
president of Severson Products, Inc. “We always seem to bid
too high on jobs that require a lot of labor time in the Finishing
Department, and we always seem to get every job we bid on that
requires a lot of machine time in the Milling Department.Yet we
don’t seem to be making much money on those Milling
Department jobs. I wonder if the problem is in our overhead
rates.” Severson Products manufactures high-quality wood
products to customers’ specifications. Some jobs take a large
amount of machine work in the Milling Department, and other
jobs take a large amount of hand finishing work in the Finishing
Department. In addition to the Milling and Finishing
departments, the company has three service departments. The
costs of these service departments are allocated to other
departments in the order listed below. (For each service
department, use the most appropriate allocation
base.)TotalSquare FeetNumber ofMachine-DirectLabor-Hoursof
SpaceEmployeesHoursLabor-OccupiedHours Cafeteria16,500
12,800 28 — — Custodial
Services8,500 3,600 42 — — Machinery
Maintenance14,900 10,100 60 — —
Milling30,500 40,600 106 168,000 17,000
Finishing105,000 20,300 310 50,000 71,000
175,400 87,400 546 218,000 88,000
Budgeted overhead costs in each department for the
current year are as follows: Cafeteria$340,000* Custodial
Services65,500 Machinery

Maintenance93,600 Milling417,000 Finishing163,000 Total
budgeted cost$1,079,100*This represents the amount of cost
subsidized by the company. Because of its simplicity, the
company has always used the direct method to allocate service
department costs to the two operating
departments.Required:1Using the step-down method, allocate
service department costs to the consuming departments. Then
compute predetermined overhead rates in the operating
departments for the current year using machine-hours as the
allocation base in the Milling Department and direct labor-hours
as the allocation base in the Finishing Department. (Leave no
cells blank - be certain to enter "0" wherever required. Amounts
to be deducted should be indicated with a minus sign. Do not
round intermediate calculations. Round your "Predetermined
overhead rates" to 2 decimal places and other answers to the
nearest dollar amount. Omit the " $" sign in your
response.)CafeteriaCustodialMachineryMillingFinishingService
sMaintenance Total costs before allocations$ 340,000 $
65,500 $ 93,600 $ 417,000 $ 163,000
Allocation: Cafeteria Custodial Services Machinery
Maintenance Total overhead after allocations$ $ $ $ $
Predetermined overhead rate$ $ 2Repeat (1) above, this time
using the direct method. Again compute predetermined overhead
rates in the the Milling and Finishing Departments. (Leave no
cells blank - be certain to enter "0" wherever required. Amounts
to be deducted should be indicated with a minus sign. Do not
round intermediate calculations. Round your "Predetermined
overhead rates" to 2 decimal places and other answers to the
nearest dollar amount. Omit the " $" sign in your
response.)CafeteriaCustodialMachineryMillingFinishingService
sMaintenance Total costs before allocations$ 340,000 $
65,500 $ 93,600 $ 417,000 $ 163,000
Allocation: Cafeteria Custodial Services Machinery
Maintenance Total overhead after allocations$ $ $ $ $
Predetermined overhead rate$ $ 3Assume that during the
current year the company bids on a job that requires machine

and labor time as follows:Machine-HoursDirectLabor-
Hours Milling Department2,300 1,500 Finishing
Department600 13,800 Total hours2,900 15,300
a.Determine the amount of overhead that would be assigned
to the job if the company used the overhead rates developed in
(1) above. (Round your "Predetermined overhead rates" to 2
decimal places and final answers to the nearest dollar amount.
Omit the " $" sign in your response.) Total overhead cost$
b.Determine the amount of overhead that would be assigned to
the job if the company used the overhead rates developed in (2)
above. (Round your "Predetermined overhead rates" to 2
decimal places and final answers to the nearest dollar amount.
Omit the " $" sign in your response.) Total overhead cost$
Q4Facilitator Corp. is a company that acts as a facilitator in
tax-favored real estate swaps. Such swaps, known as 1031
exchanges, permit participants to avoid some or all of the
capital gains taxes that would otherwise be due. The bookkeeper
for the company has been asked to prepare a report for the
company to help its owner/manager analyze performance. The
first such report appears below:
Facilitator Corp
Analysis of Revenues and Costs
For the Month Ended May 31
Planning Budget Unit Revenues and Costs Actual Unit
Revenues and Costs Variances
Exchanges completed 20 25
Revenue $ 750 $ 705 $ 45 U
Expenses:
Legal and search fees 135 139 4 U
Office expenses 208 173 35 F
Equipment depreciation 18 13 5 F
Rent 55 43 12 F
Insurance 11 10 1 F

Total expense 427 378 49 F
Net operating income $ 323 $ 327 $ 4 F
Note that the revenues and costs in the above report are unit
revenues and costs. For example, the average office expense is
$208 per exchange completed on the planning budget; whereas,
the average actual office expense is $173 per exchange
completed.
Legal and search fees is a variable cost; office expenses is a
mixed cost; and equipment depreciation, rent, and insurance are
fixed costs. In the planning budget, the fixed component of
office expenses was $4,100.
All of the company’s revenues come from fees collected
when an exchange is completed.
Required:
1. Whether report prepared by the bookkeeper is useful as a
performance report?
Yes
No
2.
Complete a performance report that would help the
owner/manager assess the performance of the company in May.
(Input all amounts as positive values. Leave no cells blank - be
certain to enter "0" wherever required. Indicate the effect of
each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit
the "$" sign in your response.)

Facilitator Corp
Flexible Budget Performance Report
For the Month Ended May 31
Planning Budget Activity Variances Flexible
Budget Revenue and Spending Variances Actual Results
Exchanges completed
Revenue $ $ $ $ $
Expenses:
Legal and search fees
Office expenses
Equipment depreciation
Rent
Insurance
Total expense
Net operating income $ $ $ $ $
Q5Facilitator Corp. is a company that acts as a facilitator in
tax-favored real estate swaps. Such swaps, known as 1031
exchanges, permit participants to avoid some or all of the
capital gains taxes that would otherwise be due. The bookkeeper
for the company has been asked to prepare a report for the
company to help its owner/manager analyze performance. The
first such report appears below:Facilitator CorpAnalysis of
Revenues and CostsFor the Month Ended May 31Planning
Budget Unit Revenues and Costs Actual Unit Revenues and
Costs Variances Exchanges completed20 25 Revenue$750
$705 $45 U Expenses: Legal and search fees135 139
4 U Office expenses208 173 35 F Equipment
depreciation18 13 5 F Rent55 43 12 F
Insurance11 10 1 F Total expense427 378 49 F

Net operating income$323 $327 $4 F Note that the
revenues and costs in the above report are unit revenues and
costs. For example, the average office expense is $208 per
exchange completed on the planning budget; whereas, the
average actual office expense is $173 per exchange
completed. Legal and search fees is a variable cost; office
expenses is a mixed cost; and equipment depreciation, rent, and
insurance are fixed costs. In the planning budget, the fixed
component of office expenses was $4,100. All of the
company’s revenues come from fees collected when an
exchange is completed.Required:1Whether report prepared by
the bookkeeper is useful as a performance
report?YesNo2Complete a performance report that would help
the owner/manager assess the performance of the company in
May. (Input all amounts as positive values. Leave no cells blank
- be certain to enter "0" wherever required. Indicate the effect
of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance). Omit
the "$" sign in your response.)Facilitator CorpFlexible Budget
Performance ReportFor the Month Ended May 31 Planning
BudgetActivity VariancesU/F/None Flexible
BudgetRevenue and Spending VariancesU/F/None Actual
Results Exchanges completed Revenue$ $ $ $ $
Expenses: Legal and search fees Office
expenses Equipment depreciation Rent Insurance Total
expense Net operating income$ $ $ $ $ rev: 11_17_2012
1. Cadavieco Detailing's cost formula for its materials and
supplies is $1,860 per month plus $5 per vehicle. For the month
of November, the company planned for activity of 81 vehicles,
but the actual level of activity was 46 vehicles. The actual
materials and supplies for the month was $2,150.
The spending variance for materials and supplies in November
would be closest to:

$60 U
$115 F
$60 F
$115 U
2. Craft Company produces a single product. Last year, the
company had a net operating income of $96,860 using
absorption costing and $82,300 using variable costing. The
fixed manufacturing overhead cost was $13 per unit. There were
no beginning inventories. If 23,800 units were produced last
year, then sales last year were:
24,920 units
22,680 units
9,240 units
38,360 units
3. While fixed costs should not be affected by a change in the
level of activity within the relevant range, they may change for
other reasons.
True
False
4. Roye Kennel uses tenant-days as its measure of activity; an
animal housed in the kennel for one day is counted as one
tenant-day. During September, Kennel budgeted for 3,200

tenant-days, but its actual level of activity was 3,250 tenant-
days. Kennel has provided the following data concerning the
formulas used in its budgeting and its actual results for
September:
Data used in budgeting:
Fixed element
per month
Variable element per tenant-day
Revenue
—
$34.10
Wages and salaries
$2,100
$7.10
Expendables
1,100
13.60
Facility expenses
7,600
2.60
Administrative expenses
6,100
0.20
Total expenses
$16,900
$23.50
Actual results for September:
Revenue
$107,351

Wages and salaries
$28,510
Expendables
$46,025
Facility expenses
$15,500
Administrative expenses
$7,091
The spending variance for expendables in September would be
closest to:
$1,405 U
$725 U
$1,405 F
$725 F
5. Roye Kennel uses tenant-days as its measure of activity; an
animal housed in the kennel for one day is counted as one
tenant-day. During September, Kennel budgeted for 5,300
tenant-days, but its actual level of activity was 5,340 tenant-
days. Kennel has provided the following data concerning the
formulas used in its budgeting and its actual results for
September:
Data used in budgeting:
Fixed element per month
Variable element per tenant-day
Revenue
—

$35.80
Wages and salaries
$2,500
$9.20
Expendables
1,700
15.70
Facility expenses
8,100
4.70
Administrative expenses
6,600
0.50
Total expenses
$18,900
$30.10
Actual results for September:
Revenue
$172,453
Wages and salaries
$28,720
Expendables
$85,025
Facility expenses
$33,430
Administrative expenses
$7,112
The overall revenue and spending variance (i.e., the variance

for net operating income in the revenue and spending variance
column on the flexible budget performance report) for
September would be closest to:
$6,856 U
$6,856 F
$6,628 F
$6,628 U
6. Diskind Corporation manufactures and sells a single product.
The company uses units as the measure of activity in its budgets
and performance reports. During October, the company
budgeted for 7,200 units, but its actual level of activity was
7,150 units. The company has provided the following data
concerning the formulas used in its budgeting and its actual
results for October:
Data used in budgeting:
Fixed
element
per month
Variable
element per tenant-day
Revenue
—
$34.70
Direct labor
$0

$6.70
Direct materials
0
13.20
Manufacturing overhead
42,000
2.20
Selling and administrative expenses
26,000
0.70
Total expenses
$68,000
$22.80
Actual results for October:
Revenue
$249,300
Direct labor
$48,110
Direct materials
$95,680
Manufacturing overhead
$46,000
Selling and administrative expenses
$30,520
The direct labor in the planning budget for October would be
closest to:
$48,110
$47,905
$48,240

$48,210
7. The Grand Company has budgeted departmental costs and
operating activity in its four departments for the coming year as
follows:
Service Department
Operating Department
Custodial
Repair
Production
Finishing
Departmental costs
$ 6,450
$ 7,010
$ 50,000
$ 60,000
Square feet
200
1,600
4,200
Number of repair requests
240
100
The company does not distinguish between fixed and variable
service department costs. Custodial costs are allocated on the
basis of square feet occupied. Repair costs are allocated on the
basis of the number of repair requests. Assume Custodial costs
are allocated first.

Assume Grand uses the step-down allocation method. After all
allocations, how much of the company's total overhead cost will
be charged to the Finishing Department for the coming year?
(Round your answer to the nearest dollar amount.)
$71,757
$66,640
$67,391
$64,515
8. Brarin Corporation is a small wholesaler of gourmet food
products. Data regarding the store's operations follow:
•
Sales are budgeted at $310,000 for November, $330,000 for
December, and $320,000 for January.
•
Collections are expected to be 60% in the month of sale, 39% in
the month following the sale, and 1% uncollectible.
•
The cost of goods sold is 65% of sales.
•
The company would like to maintain ending merchandise
inventories equal to 55% of the next month's cost of goods sold.
Payment for merchandise is made in the month following the
purchase.
•
Other monthly expenses to be paid in cash are $22,800.
•
Monthly depreciation is $20,700.
•

Ignore taxes.
Expected cash collections in December are:
$120,900
$330,000
$198,000
$318,900