1. Exercise 8-13 Basic Payback Period and Simple Rate of Return Computations [LO8-1, LO8-6] A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment $ 682,000 Annual cost savings that will be provided by the equipment $ 110,000 Life of the equipment 10 years Required: 1-a. Compute the payback period for the equipment. 2. Problem 10-22 Performance Report for a Nonprofit Organization [LO10-1, LO10-4, LO10-6] The St. Lucia Blood Bank, a private charity partly supported by government grants, is located on the Caribbean island of St. Lucia. The blood bank has just finished its operations for September, which was a particularly busy month due to a powerful hurricane that hit neighboring islands causing many injuries. The hurricane largely bypassed St. Lucia, but residents of St. Lucia willingly donated their blood to help people on other islands. As a consequence, the blood bank collected and processed over 20% more blood than had been originally planned for the month. A report prepared by a government official comparing actual costs to budgeted costs for the blood bank appears below. Continued support from the government depends on the blood bank’s ability to demonstrate control over its costs. St. Lucia Blood Bank Cost Control Report For the Month Ended September 30 Actual Results Planning Budget Variances Liters of blood collected 880 700 Medical supplies $ 10,505 $ 8,365 $ 2,140 U Lab tests 12,359 10,185 2,174 U Equipment depreciation 2,020 1,800 220 U Rent 1,300 1,300 0 Utilities 286 260 26 U Administration 14,245 14,100 145 U Total expense $ 40,715 $ 36,010 $ 4,705 U The managing director of the blood bank was very unhappy with this report, claiming that his costs were higher than expected due to the emergency on the neighboring islands. He also pointed out that the additional costs had been fully covered by payments from grateful recipients on the other islands. The government official who prepared the report countered that all of the figures had been submitted by the blood bank to the government; he was just pointing out that actual costs were a lot higher than promised in the budget. The following cost formulas were used to construct the planning budget: Cost Formulas Medical supplies $11.95q Lab tests $14.55q Equipment depreciation $1,800 Rent $1,300 Utilities $260 Administration $12,700 + $2.00q Required: 1. Complete the performance report for September using the flexible budget approach. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations and round your final answers to nearest whole dollar.) 3. Problem 11-14 Basic Variance Analysis [LO11-1, LO11-2, LO.

1. 1.
Exercise 8-13 Basic Payback Period and Simple Rate of Return
Computations [LO8-1, LO8-6]
A piece of laborsaving equipment has just come onto the market
that Mitsui Electronics, Ltd., could use to reduce costs in one of
its plants in Japan. Relevant data relating to the equipment
follow:
Purchase cost of the equipment
$
682,000
Annual cost savings that will be
provided by the equipment
$
110,000
Life of the equipment
10
years
Required:
1-a. Compute the payback period for the equipment.

2. 2.
Problem 10-22 Performance Report for a Nonprofit
Organization [LO10-1, LO10-4, LO10-6]
The St. Lucia Blood Bank, a private charity partly supported by
government grants, is located on the Caribbean island of St.
Lucia. The blood bank has just finished its operations for
September, which was a particularly busy month due to a
powerful hurricane that hit neighboring islands causing many
injuries. The hurricane largely bypassed St. Lucia, but residents
of St. Lucia willingly donated their blood to help people on
other islands. As a consequence, the blood bank collected and
processed over 20% more blood than had been originally
planned for the month.
A report prepared by a government official comparing actual
costs to budgeted costs for the blood bank appears below.
Continued support from the government depends on the blood
bank’s ability to demonstrate control over its costs.
St. Lucia Blood Bank
Cost Control Report
For the Month Ended September 30
Actual Results
Planning Budget
Variances
Liters of blood collected
880
700

3. Medical supplies
$
10,505
$
8,365
$
2,140
U
Lab tests
12,359
10,185
2,174
U
Equipment depreciation
2,020
1,800
220
U
Rent
1,300
1,300
0
Utilities

4. 286
260
26
U
Administration
14,245
14,100
145
U
Total expense
$
40,715
$
36,010
$
4,705
U
The managing director of the blood bank was very unhappy with
this report, claiming that his costs were higher than expected
due to the emergency on the neighboring islands. He also
pointed out that the additional costs had been fully covered by
payments from grateful recipients on the other islands. The
government official who prepared the report countered that all
of the figures had been submitted by the blood bank to the
government; he was just pointing out that actual costs were a lot
higher than promised in the budget.
The following cost formulas were used to construct the planning
budget:

5. Cost Formulas
Medical supplies
$11.95q
Lab tests
$14.55q
Equipment depreciation
$1,800
Rent
$1,300
Utilities
$260
Administration
$12,700 + $2.00q
Required:
1. Complete the performance report for September using the
flexible budget approach. (Indicate the effect of each variance
by selecting "F" for favorable, "U" for unfavorable, and "None"
for no effect (i.e., zero variance). Input all amounts as positive
values. Do not round intermediate calculations and round your
final answers to nearest whole dollar.)
3.
Problem 11-14 Basic Variance Analysis [LO11-1, LO11-2,
LO11-3]
Becton Labs, Inc., produces various chemical compounds for
industrial use. One compound, called Fludex, is prepared using
an elaborate distilling process. The company has developed
standard costs for one unit of Fludex, as follows:

6. Standard Quantity
Standard Price
or Rate
Standard Cost
Direct materials
2.20 ounces
$
25.00
per ounce
$
55.00
Direct labor
0.50 hours
$
15.00
per hour
7.50
Variable manufacturing overhead
0.50 hours
$
3.00
per hour
1.50
$
64.00

7. During November, the following activity was recorded relative
to production of Fludex:
a. Materials purchased, 12,000 ounces at a cost of $282,000.
b. There was no beginning inventory of materials; however, at
the end of the month, 2,750 ounces of material remained in
ending inventory.
c. The company employs 25 lab technicians to work on the
production of Fludex. During November, they worked an
average of 110 hours at an average rate of $11.50 per hour.
d. Variable manufacturing overhead is assigned to Fludex on the
basis of direct labor-hours. Variable manufacturing overhead
costs during November totaled $2,400.
e. During November, 4,100 good units of Fludex were produced
.
Required:
1. For direct materials:
a. Compute the price and quantity variances. (Input all amounts
as positive values. Indicate the effect of each variance by
selecting "F" for favorable, "U" for unfavorable, and "None" for
no effect (i.e, zero variance).)
Exercise 12-9 Return on Investment (ROI) and Residual Income
Relations [LO12-1, LO12-2]
A family friend has asked your help in analyzing the operations
of three anonymous companies operating in the same service
sector industry. Supply the missing data in the table
below: (Loss amounts should be indicated by a minus sign. Do
not round intermediate calculations. Round your answers to

8. nearest whole number.)
Lou Barlow, a divisional manager for Sage Company, has an
opportunity to manufacture and sell one of two new products for
a five-year period. His annual pay raises are determined by his
division’s return on investment (ROI), which has exceeded 20%
each of the last three years. He has computed the cost and
revenue estimates for each product as follows:
Product A
Product B
Initial investment:
Cost of equipment (zero salvage value)
$
260,000
$
470,000
Annual revenues and costs:
Sales revenues
$

9. 310,000
$
410,000
Variable expenses
$
144,000
$
194,000
Depreciation expense
$
52,000
$
94,000
Fixed out-of-pocket operating costs
$
76,000
$
56,000
The company’s discount rate is 18%.
Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine
the appropriate discount factor using tables.
Required:
1. Calculate the payback period for each product. (Round your
answers to 2 decimal places.)

10. 2.
Problem 10-19 Activity and Spending Variances [LO10-1,
LO10-2, LO10-3]
You have just been hired by FAB Corporation, the manufacturer
of a revolutionary new garage door opening device. The
president has asked that you review the company’s costing
system and “do what you can to help us get better control of our
manufacturing overhead costs.” You find that the company has
never used a flexible budget, and you suggest that preparing
such a budget would be an excellent first step in overhead
planning and control.
After much effort and analysis, you determined the following
cost formulas and gathered the following actual cost data for
March:
Cost Formula
Actual Cost in March
Utilities
$16,900 plus $0.12 per machine-hour
$
21,460
Maintenance
$38,700 plus $2.00 per machine-hour
$
78,500
Supplies
$0.50 per machine-hour
$
11,300
Indirect labor
$94,800 plus $1.80 per machine-hour

11. $
137,100
Depreciation
$68,500
$
70,200
During March, the company worked 21,000 machine-hours and
produced 15,000 units. The company had originally planned to
work 23,000 machine-hours during March.
Required:
1. Complete the report showing the activity variances for
March. (Indicate the effect of each variance by selecting "F" for
favorable, "U" for unfavorable, and "None" for no effect (i.e.,
zero variance). Input all amounts as positive values.)
3.
Exercise 11-4 Direct Labor and Variable Manufacturing
Overhead Variances [LO11-2, LO11-3]
Erie Company manufactures a small mp3 player called the
Jogging Mate. The company uses standards to control its costs.
The labor standards that have been set for one Jogging Mate
mp3 player are as follows:
Standard
Hours
Standard Rate
per Hour
Standard
Cost
24 minutes

12. $5.60
$2.24
During August, 8,470 hours of direct labor time were needed to
make 19,600 units of the Jogging Mate. The direct labor cost
totaled $45,738 for the month.
Required:
1. According to the standards, what direct labor cost should
have been incurred to make 19,600 units of the Jogging Mate?
By how much does this differ from the cost that was
incurred? (Round Standard labor time per unit and Standard
direct labor rate to 2 decimal places.)
` `
4.
Exercise 12-3 Measures of Internal Business Process
Performance [LO12-3]
Management of Mittel Rhein AG of Köln, Germany, would like
to reduce the amount of time between when a customer places
an order and when the order is shipped. For the first quarter of
operations during the current year the following data were
reported:
Inspection time
0.4
day

13. Wait time (from order tostart of production)
16.0
days
Process time
3.3
days
Move time
0.8
day
Queue time
4.1
days
Required:
1.Compute the throughput time. (Round your answer to 1
decimal place.)
5.
Problem 12-15 Return on Investment (ROI) and Residual
Income [LO12-1, LO12-2]
Financial data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc.
Balance Sheet
Beginning
Balance
Ending
Balance
Assets
Cash

14. $
128,000
$
135,000
Accounts receivable
332,000
489,000
Inventory
564,000
481,000
Plant and equipment, net
806,000
765,000
Investment in Buisson, S.A.
404,000
430,000
Land (undeveloped)
247,000
247,000
Total assets
$
2,481,000
$
2,547,000
Liabilities and Stockholders' Equity
Accounts payable

15. $
378,000
$
337,000
Long-term debt
961,000
961,000
Stockholders' equity
1,142,000
1,249,000
Total liabilities and stockholders' equity
$
2,481,000
$
2,547,000
Joel de Paris, Inc.
Income Statement
Sales
$
4,255,000
Operating expenses
3,659,300
Net operating income
595,700

16. Interest and taxes:
Interest expense
118,000
Tax expense
208,000
326,000
Net income
$
269,700
The company paid dividends of $162,700 last year. The
“Investment in Buisson, S.A.,” on the balance sheet represents
an investment in the stock of another company.
Required:
1. Compute the company’s margin, turnover, and return on
investment (ROI) for last year. (Round your answers to 1
decimal place.)