Overview
1.
For 2021, RPC Corporation would like to increase total sales. The CEO believes that increasing sales of its new product, the CleanPro, will increase customer satisfaction and loyalty for the brand name. To achieve the company's goal, managers will receive incentives once sales of the CleanPro reach certain levels. However, when attempting to meet goals of sales of the CleanPro, sales of the Miracle Clean decline, and total sales actually decrease for the year. Is this an example of setting budget goals too tightly, too loosely, or conflicting budget goals?
2.
In 2020, Cards by Shannon generated the sales shown. The company expects for sales to increase by 2% for each product in the following year if the prices remain the same. Determine the budgeted revenue for 2021.
Cards by Shannon
Sales Budget
For the Year Ended December 31, 2020
Sales (2020) Sales (2021) Selling Price per Unit Budgeted Revenue
Product A 2,000 $10
Product B 5,000 12
Product C 1,500 8
3.
A profit center manager of a company's eastern sales division is looking at decreasing the following costs: direct labor, utilities, and purchasing, which is allocated by the number of requisitions. To do so, the manager plans to do the following: increase efficiency in production to decrease the number of hours needed, thus decreasing the direct labor and utilities and ordering larger quantities each purchase to decrease the number of purchase orders. Are all of the costs the manager would like to decrease controllable costs? Explain.
4.
Use the information shown below to calculate the profit margin, investment turnover, and rate of return on investment using the DuPont formula for the company in 2019 and 2020. Determine if changes in the rate of return on investment are favorable or unfavorable. Round answers to two decimal places.
2020 2019
Sales $ 456,000 $ 420,000
Income from operations 320,000 305,700
Invested assets 1,270,000 1,255,000
5.
Prepare an income statement that includes variances for the 2020 calendar year end for Bright Light using the information shown and the direct labor variances calculated in Exercise 10. The company sold all goods produced during the period at a selling price of $75 each.
Standard costs per unit:
Direct materials $ 10.00
Fixed factory overhead 6.50
Variable factory overhead 4.50
Direct labor 9.00
Total $ 30.00
Variances:
Direct materials price $(1,900)
Direct materials quantity $2,750
Factory overhead controllable $6,700
Factory overhead volume $(2,100)
Selling expenses $23,500
Administrative expenses $27,900
6.
Each lamp manufactured at Bright Light uses a standard of 0.75 hours to produce. Production employees are paid a $9 hourly wage. The company incurred 5,000 direct labor hours at a cost of $47,500 to produce 6,700 lamps. Calculate the following variances and determine if it is considered favorable or unfavorable:
(A) Direct labor rate variance (B) Direct labor time variance (C) Direct labor cost variance