Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 19: Q9-27 (page 1074)

Computing asset turnover ratio Blackerby Photo reported the following figures on its December 31, 2018, income statement and balance sheet:

Net sales

\( 441,000

Dec. 31, 2018

Dec. 31, 2017

Cash

\) 31,000

\( 30,000

Accounts Receivable

\) 68,000

\( 65,000

Merchandise Inventory

\) 80,000

\( 79,000

Prepaid Expenses

\) 16,000

\( 5,000

Property, plant, and equipment, net

\) 175,000

$ 18,000

Compute the asset turnover ratio for 2018 Round to two decimal places

Short Answer

Expert verified

Answer

The asset turnover ratio for the year 2018 is 1.55.

Step by step solution

01

Definition of Asset Turnover Ratio

The ratio determining the business entity's efficiency in using its assets to generate revenue is the asset turnover ratio. It compares the sales of the business entity with the average total assets.

02

Calculate Asset Turnover Ratio for Dec 31, 2018 year

Assetturnoverratio=NetsalesAveragetotalasssets=$441,000$283,500=1.55

Working note:

Total assets:

Particular

Dec. 31, 2018

Dec. 31, 2017

Cash

$31,000

$30,000

Accounts Receivable

68,000

65,000

Merchandise Inventory

80,000

79,000

Prepaid Expenses

16,000

5,000

Property, plant, and equipment, net

175,000

18,000

Total assets

$370,000

$197,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question:The Santos Shirt Company manufactures shirts in two departments: Cutting and Sewing. The company allocates manufacturing overhead using a single plantwide rate with direct labor hours as the allocation base. Estimated overhead costs for the year are\(500,000, and estimated direct labor hours are 200,000. In June, the company incurred 17,500 direct labor hours.

1. Compute the predetermined overhead allocation rate.

2. Determine the amount of overhead allocated in June.

The Santos Shirt Company has refined its allocation system by separating manufacturing overhead costs into two cost pools—one for each department. The estimated costs for the Cutting Department are \)200,000. They will be allocated based on directlabor hours, which are estimated to be 125,000 hours for the year. The estimated costs for the Sewing Department are $300,000.Those costs will be allocated based on machine hours, which are estimated to be 150,000 hours for the year. In June, the companyincurred 10,000 direct labor hours in Cutting and 12,500 machine hours in Sewing.

3. Compute the predetermined overhead allocation rates for each department.

4. Determine the total amount of overhead allocated in June.

Koehler (see Exercise E19-15) makes handheld calculators in two models—basic and professional—and wants to refine its costing system by allocating overhead using departmental rates. The estimated \(721,000 of manufacturing overhead has been divided into two cost pools: Assembly Department and Packaging Department. The following data have been compiled:

Assembly Packaging

Department Department Total

Overhead costs \) 456,500 \( 264,500 \) 721,000

Machine hours:

Basic Model 185,000 MHr 45,000 MHr 230,000 MHr

Professional Model 230,000 MHr 55,000 MHr 285,000 MHr

Total 415,000 MH 100,000 MHr 515,000 MHr

Direct labor hours:

Basic Model 20,000 DLHr 50,000 DLHr 70,000 DLHr

Professional Model 105,125 DLHr 280,625 DLHr 385,750 DLHr

Total 125,125 DLHr 330,625 DLHr 455,750 DLHr

Compute the predetermined overhead allocation rates using machine hours as the allocation base for the Assembly Department and direct labor hours for the Packaging Department. How much overhead is allocated to the basic model? To the professional model? Round allocation rates to two decimal places and allocated costs to whole dollars.

Rennie Plant Service completed a special landscaping job for Brenton Company. rennie uses ABC and has the following predetermined overhead allocation rates:

Activity Predetermined

Allocation Base Overhead Allocation Rate

Designing Number of designs \( 290 per design

Planting Number of plants \) 20 per plant

The Rennie job included \(1,500 in plants; \)800 in direct labor; one design; and 30 plants.

Requirements

3. If Rennie desires an operating income of 30% of cost, how much should the company charge for the Brenton job?

The Alexander Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in smartphones. Consider the following data regarding component T24 (amounts are per unit):

Direct materials cost \( 81.00

Direct labor cost 21.00

Activity-based costs allocated ?

Total manufacturing product cost ?

The activities required to build the component follow:

Activity

Allocation Base

Cost Allocated to Each Unit

Start Station

Number of raw component chassis

3 X \)1.50 = \(4.50

Dip Insertion

Number of dip insertions

? X 0.50 = 14.50

Manual Insertion

Number of manual insertions

13 X 0.40 = ?

Wave solder

Number of components solders

3 X 1.50 = 4.50

Backload

Number of backload insertions

7 X ? = 2.80

Test

Number of testing hours

0.39 60.0 = ?

Defect analysis

Number of defect analysis hours

0.10 X ? = 4.00

Total activity-based costs

\) ?

Requirements

2. Why might managers favor this ABC system instead of Alexander’s older system, which allocated all manufacturing overhead costs on the basis of direct labor hours?

Stegall, Inc. manufactures motor scooters. For each of the following examples of quality costs, indicate which of the following quality cost categories each example represents: prevention costs, appraisal costs, internal failure costs, or external failure costs.

1. Preventive maintenance on machinery

2. Direct materials, direct labor, and manufacturing overhead incurred to rework a defective scooter that is detected in-house through inspection

3. Lost profits from lost sales if the company’s reputation is hurt because customers previously purchased a poor-quality scooter

4. Cost of inspecting raw materials, such as chassis and wheels

5. Working with suppliers to achieve on-time delivery of defect-free raw materials

6. Cost of warranty repairs on a scooter that malfunctions at a customer’s location

7. Costs of testing durability of vinyl

8. Cost to reinspect reworked scooters
See all solutions

Recommended explanations on Business Studies Textbooks

Human Resources

Read Explanation

Strategic Direction

Read Explanation

Organizational Communication

Read Explanation

Managerial Economics

Read Explanation

Influences On Business

Read Explanation

Business Case Studies

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free