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The following
figures are available for the period just ended:
Sales
Cost of sales
Building occupancy costs:
Rent
Utilities
Supplies used
Wages
Miscellaneous
Allocated corporate overhead
$205,000
67,900
36,500
15,000
5,600
77,700
2,400
16,800
All employees except the store manager would be discharged. The manager, who earns $27,000
annually, would be transferred to store no. 19 in a neighboring suburb. Also, no. 16's furnishings
and equipment are fully depreciated and would be removed and transported to Papa Fred's
warehouse at a cost of $2,800.
Required:
A What is store no. 16's reported loss for the period just ended?
B Should the store be closed? Why?
C Would Papa Fred's likely lose all $205,000 of sales revenue if store no. 16 were closed?
Explain.
Case 2: Fowler Industries produces two bearings: C15 and C19. Data regarding these two bearings
follow.
Machine hours required per unit
Standard cost per unit:
Direct material
Direct labor
Manufacturing overhead:
Variable*
Fixed**
Total
C15
2.00
C19
2.50
$ 2.50
5.00
$ 4.00
4.00
3.00
4.00
$14.50
2.50
5.00
$15.50