Total operating expenses 277000 147000 130000

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Total operating expenses 277,000 147,000 130,000 Operating income (loss) $(2,000) $18,000 $(20,000) * Allocated based on sales dollars. Cartoons is a “wholesaler”- an organization that sells a video cartoons to various retailers. These retailers then sell the cartoons to consumers through their video stores. Cartoons is organized into two districts (areas) as shown above. Each district has about the same number of retail customers. These retailers place orders with their district salesperson and the goods are shipped to them from the central warehouse. The salespersons work out of their own home and are responsible for their own travelling and selling expenses. Additional information on the company follows: i. The office and warehouse are centrally located, being about the same distance from each district. ii. Each district salesperson specifies on the sales order what shipping (delivery) method is to be used (by truck or air). (All goods are shipped to the customer from the central warehouse.) Shipping is a variable cost, and it is traceable to the districts; differences in amounts above are reflective of the different shipping methods used. iii. All salespersons are paid a base salary of $500 per month, plus a commission of 10% of sales. There are 8 salespersons in the East District and 4 in the West District. iv. Each district sales manager must arrange his or her own district advertising program. v. Each district has a number of sales managers and each manager is paid the same amount. vi. The variable costs of processing orders, which have been included in the "Central office expenses" above, amount to $17,500. During March, the East District had 3,000 orders and the West District had 500 orders. The remainder of the "Central office expenses" are fixed and relate to general administrative assistance provided to all parts of the organization. Required: a. Porky Pig, the president, has asked Daffy Duck to prepare a segmented income statement for the two districts. (Ignore “controllability” as information is not provided). (14 marks) a. Based on the segmented income statement (prepared in a.), fully discuss ANY THREE points (relating to the districts) that should be brought to the attention of management? (9 marks)
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4 Question 4 (19 marks; suggested time, 25 minutes) Transfer Pricing and Responsibility Accounting Johnson Electric Motors is a multi-divisional, decentralized company that manufactures various kinds of motors and engines. The top-management team at Johnson makes all decisions regarding purchases of capital assets within the company. The Starter Division of Johnson Electric Motors manufactures a starter motor with the following standard costs: Direct material $ 5 Direct labour 30 Overhead 15 Total unit cost $50 The direct labour standard is $10 per hour. The overhead rate is 40% variable and 60% fixed per direct labour hour. The Starter Division has a capacity of 20,000 direct labour hours.
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