Exam 3 Practice Quizzes PDF

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Lecture notes for Exam 3 Prac Qs...

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(Overhead cost by item) * (% used by the activity) = Cost assigned to activity cost pool Activity used x activity rates = assigned cost Allocations to the Deliver activity cost pool = Overhead cost per delivery = Total cost ÷ # of deliveries Estimated manufacturing overhead rate= Total estimated overhead costs for the period/ total amount of allocation base Predetermined overhead rate = Estimated manufacturing overhead cost total / Estimated number of machine hours OR Estimated manufacturing overhead cost total / Estimated total units in allocated base = Total (Estimated manufactured) Overhead / Total DLH CH 7

Explanation:

Explanation: Daba Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,810 units of Product F and 2,760 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year: Total Activity Activity Cost Pool Total Cost Product F Product G Total Machine setups $ 32,065 148 setups + 117 setups --------= 265 setups Purchase orders $ 373,860 1,500 orders + 1,290 orders -------=2,790 orders General factory $ 110,080 3,220 hours + 3,660 hours ----------- 6,880 hours Using activity-based costing approach, determine the overhead cost for each product line.

ABC Company uses activity-based costing. Two of ABC Company's production activities are spinning and molding. Assume the company estimates manufacturing overhead costs to be $10,000 per month for spinning and $25,000 per month for molding. ABC Company allocates spinning costs based on the number of machine hours used. Molding costs are allocated based on number of batches. Suppose ABC Company estimates it will use 40,000 machine hours and have 50,000 batches. What is the predetermined overhead allocation rate for spinning? Answer: c) $0.25 per machine hour predetermined overhead allocation rate = total estimated overhead cost / total estimated quantity of the overhead allocation base

What is Overhead cost for Product F and Product G? ***The overhead rates for each activity $ 32,065 / 265 setups = 121 overhead rate $ 373,860 / 2,790 orders = 134 overhead rate $ 110,080 / 6,880 hours = 16 overhead rate ***The overhead cost charged to each product F: 121 overhead rate x 148 setups = $17,908 134 overhead rate x 1500 orders = $201,000 16 overhead rate x 3,220 hours = $51520 Total  $270,428 ***The overhead cost charged to each product G: 121 overhead rate x 117 setups = 14,157 134 overhead rate x 1,290 orders = 172,860 16 overhead rate x 3,660 hours = 58,560 Total  $245,577 Product F: $270,428 / 1,810 = $149.41 per unit Product G: $245,577 / 2,760 = $88.98 per unit Glassey Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Processing, $20,000; Supervising, $33,500; and Other, $16,500. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: The activity rate for the Processing activity cost pool under activity-based costing is closest to: Processing: $20,000 ÷ 10,000 MHs = $2.00 per MH

Data concerning three of the activity cost pools of Salcido LLC, a legal firm, have been provided below: Activity Cost Pool Total Cost Total Activity Researching legal issues $ 22,130 750 research hours Meeting with clients $ 1,270,410 7,473 meeting hours Preparing documents $ 93,490 5,850 documents The activity rate for the "meeting with clients" activity cost pool is closest to: 1,270,410/7,473= $170 per hour

Baka corporation applies manufacturing overhead on the basis of direct labor-hours. at the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $239,700 and 4,700 estimated direct labor-hours. actual manufacturing overhead for the year amounted to $242,000 and actual direct labor-hours were 4,600. the applied manufacturing overhead for the year was closest to: First of all, the predetermined overhead rate will be calculated. Predetermined overhead rate = Estimated Overheads ÷ Estimated direct labor hours

spinning based on machine hours: $10,000 / 40,000 machine hours = $0.25 per machine hours

Estimated overheads = $ 239,700 Estimated direct labor hours = 4,700 hours Predetermined overhead rate = $ 239,700 ÷ 4,700 hours = $ 51 per direct labor hour Actual hours worked = 4,600 hours Applied overheads = Actual hours worked × Predetermined overhead rate

Paparo Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $ 775,100 46,000 machine-hours Processing orders $ 57,375 1,500 orders Inspection $ 108,772 1,420 inspection-hours

Tatman Corporation uses an activity-based costing system with the following three activity cost pools:

Data concerning the company's product Q79Y appear below: Annual unit production and sales 450 Annual machine-hours 1,120 Annual number of orders 110

The other activity pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs:

Activity Cost Pool Fabrication

Total Activity 10,000 Machine-hours

Order Processing Other

800 Orders N/A

Applied overheads = 4,600 hour × $ 51 per direct labor hour = $ 234,600 Feldpausch Corporation has provided the following data from its activity-based costing system: Activity Cost Pool

Total Cost

Total Activit

Assembly

$1,137,360

84,000 mach

Processing orders

$28,479

1,100 orders

Inspection

$97,155

1,270 inspec

The company makes 470 units of product W26B a year, requiting a total of 660 machine-hours, 50 orders, and 40

Annual inspection hours 50 Direct materials cost $ 41.00 per unit Direct labor cost $ 41.29 per unit

inspection-hours per year. The product’s direct materials cost is $40.30 per unit and its direct labor cost is $42.22 per unit. The product sells for $118.00 per unit. According to the activity-based costing system, the product margin for product W26B is:

Wages and Salaries 320,000 Depreciation

According to the activity-based costing system, the average cost of product Q79Y is closest to: The computation of average cost of product Q79Y is shown below: Activity cost Total cost Total activity Activity Rate pool Assembly $775,100 46,000 $16.85 Processing orders $57,375 1,500 $38.25 Inspection $108,772 1,420 $76.6 Average cost Direct Material Cost $41.00 Direct labor Cost $41.29 Total Direct Cost $37,031 (Material Cost + Labor Cost) × Number of Units Add: Assembly Cost $18,872 (1,120 Hours × $16.85) Add: Processing Order Cost $4,208 (110 Orders × $ 38.25) Add: Inspection Cost $3,830 (50 Hours × $ 76.6) Total Cost $63,941 Average Cost = Total Cost ÷ Annual Units = $63,941 ÷ 450 = $142.10

220,000

Occupancy

120,000

Total

660,000

The distribution of resource consumptions across activity cost pools is given below: (Activity Cost Pools/Order) Fabricati Processi Other Total on ng Wages and 20% salaries

65%

15%

100%

Depreciation15%

35%

50%

100%

Occupancy 5%

70%

25%

100%

The activity rate for the Fabrication activity cost pool is closest:

CH 8

Explanation: What is the cost of Tracie Corporation's direct labor in September? Budgeted Units Produced in Month = 13,600 Units Direct labor cost = Budgeted Units Produced in Month *Required hours of DL*Avg hourly cost of DL = $Answer

Explanation Expected cash collections in Month: *PRESENT credit sales collected in Month  ($Budgeted sales*% “in month of sale”) *PREVIOUS credit sales collected in Month  ($Budgeted sales × % “in month following sale”) *Total (+) cash collections  ADD Up ^

Cost of Month merchandise payments:

*Calculate cash collections * Cash disbursements for purchases o/merchandise inventory Month: Sales: 1st month Current (2nd month) 1. COGS (%_ of sales)  %*Sales 2. ADD desired end inventory (%_of 2nd month’s COGS) 3. Get total needs (Answ1+Answ2) 4. LESS beginning inventory (%_of 1st month’s COGS) Required purchases (disbursements) = (Answ3 – Answ4)

CH 10

The LaGrange Corporation had the following budgeted sales for the first half of the current year: Cash Sales Credit Sales January $ 80,000 $ 180,000 _February $ 85,000 $ 200,000 _March $ 48,000 $ 160,000 _April $ 43,000 $ 128,000 _May $ 53,000 $ 230,000_ June $ 110,000 $220,000. The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on sales: 50% in month of sale 40% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $75,000, of which $47,000 represents uncollected December sales and $28,000 represents uncollected November sales. What is the budgeted accounts receivable balance on May 31? Accounts Receivables are current assets of a company resulting from selling on credit and these accounts are the uncollected, outstanding balances. The November balance equals to 10% of total Credit sales and 10 % of November sales are collected in January the December balance equals 50% and 40% of the balance will be collected in January and 10% collected in February. Fast forward to the collection of May details credit sales May Uncollected Mar $160,000*10% $16,000 April $128,000 * 40% $51,200 $128,000 *10% $12,800 May $230,000 *50% $115,000 $230,000 *50% $115,000 TOTAL $127,800

At the beginning of the current year, the company had made the following estimates: Casting Customizing Machine-hours 16,200 12,200 Direct labor-hours 5,100 6,100 Total fixed manufacturing overhead cost $ 81,000 65,880 Variable manufacturing overhead per machine-hour $ 2.40 Variable manufacturing overhead per direct labor-hour $ 4.80

Gould Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Information is given as Activity Cost Pool; Amount; Activity Rate Setting up batches; $59.06; per batch Processing customer orders; $72.66; per customer order Assembling products; $3.75; per assembly hour

During the current month, the company started and finished Job T138. The following data were recorded for this job: Job T138: Casting Customizing Machine-hours 100 30 Direct labor-hours 12 80 The amount of overhead applied in the Customizing Department to Job T138 is closest to ________. Answer: Explanation: 1. Job T138 utilized 30 machine-hours and 80 direct labor-hours, thus the variable manufacturing overhead is $456 (= 30 * Variable manufacturing overhead per machine-hour $ 2.40) + (80 * Variable manufacturing overhead per direct labor-hour $ 4.80) = 456 2. Because Customizing Department’s predetermined overhead rate is based on direct labor-hours, so total fixed manufacturing overhead cost for Customizing Department $65,880 is for 6,100 direct labor-hours, then $10.8 is fixed manufacturing overhead cost per 1 direct labor-hours (=$65,880/ 6100) = 10.8 3. Job T138 utilized 80 direct labor-hours, then the fixed manufacturing overhead is $864 (= 80 * 10.8) The total overhead for Job T138 = variable $456 + fixed $864 = $1,320 Turrubiates Corporation makes a product that uses a material with the following standards:Standard quantity 6.6 liters per unit Standard price $ 1.10 per liter Standard cost $ 7.26 per unit The company budgeted for production of 2,400 units in April, but actual production was 2,500 units. The company used 17,000 liters of direct material to produce this output. The company purchased 18,700 liters of the direct material at $1.2 per liter. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for April is _____________? Explanation: materials quantity variance = (standard quantity allowed for actual production - Actual quantity) * Standard rate. (2.500 * 6.6 - 17.000) * 1.2 $ -600 (unfavorable)

Material Price Variance = $360 U Actual Price = Direct Material Purchased/ Purchased Quantity = 76800/10920 = $ 7.03296 Actual Quantity = 10350 Kilos, Standard Price = $7 Material Price Variance = (Actual Price - Standard Price) x Actual Quantity = (7.03296 - 7) x 1035 = $341 As actual price is greater than standard price, Material Price Variance is unfavorable, & nearest to $360

CH 13

Data concerning the two products is below: Product K91B: Number of batches = 84; number of customer orders = 32; number of assembly hours = 483 Product F650: Number of batches = 50; number of customer orders = 43; number of assembly hours = 890 How much overhead cost would be assigned to Product K91B using the activity-based costing system? Answer: a. $9,097.41 Explanation: The computation of the overhead cost assigned to Product K91B is shown below: = Setting up batches × number of batches + Processing customer orders × number of customer orders + Assembling products × number of assembly hours = $59.06 per batch × 84 + $72.66 per customer order × 32 + $3.75 number of assembly hours × 483 = $4,961.04 + $2,325.12 + $1,811.25 = $9,097.41 Majer Corporation makes a product with the following standard costs:Standard Quantity or Hours Standard Price or Rate Standard Cost Per UnitDirect materials 6.3 ounces $ 2.00 per ounce $ 12.60Direct labor 0.5 hours $ 10.00 per hour $ 5.00Variable overhead 0.5 hours $ 4.00 per hour $ 2.00The company reported the following results concerning this product in February.Originally budgeted output 4,900 unitsActual output 5,000 unitsRaw materials used in production 30,000 ouncesActual direct labor-hours 1,900 hoursPurchases of raw materials 32,400 ouncesActual price of raw materials $ 12.90 per ounceActual direct labor rate $ 22.40 per hourActual variable overhead rate $ 4.00 per hourThe company applies variable overhead on the basis of direct laborhours. The direct materials purchases variance is computed when the materials are purchased.Required:1. The variable overhead efficiency variance for February is __________. To calculate the variable overhead efficiency variance, we need to use the following formula: variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate Standard quantity= 5,000 units* 0.5 hours= 2,500 hours Actual quantity= 1,900 hours variable overhead efficiency variance= (2,500 - 1,900)*4= $2,400 favorable

Gary Corporation produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows: X Y Z Units produced: 2,500 3,000 4,000 Per.Unit sales value at split off: $20 $22 $25 Added processing costs per unit: $8 $8.50 $8 Per unit sales value if processed further: $30 $30 $35

If the cost of raw material input is $150,000, which of the products should be processed beyond the split-off point? Product: X Y Z YES NO YES Final sales value after further processing: $30 $30 $35 (Minus) Sales value at split-off point: $20 $22 $25 =Incremental revenue after futher processing: $10 $8 $10 (Minus) cost of further processing: $8 $8.50 $8 =Profit (loss) from further processing: $2 $(0.50) $2 +-+ Only product x and product z should be processed beyond split-off point.

Explanation Assume that Tolar decides to upgrade the calculators. At what selling price per unit would the company be as well off as if it just sold the calculators in their present condition? Price per calculator × # calculators – $ Total cost @ which calc. can be upgraded > $Calculators can be sold in their present condition Price per calculator × # calculators > $Calculators sold in present condition + $Total cost @ which calc. can be upgraded Price per calculator > $170,000 ÷ #($Calculators sold in present condition + $Total cost @ which calc. can be upgraded) = $_ per calculator

Explanation The _ Corporation makes _ motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:  Total relevant cost to make  Direct materials ($per unit × #units produced) + Direct labor($per unit × #units produced) + Variable manufacturing OH($per unit × #units produced)  Total cost to buy ($_OFFERED per unit × #units produced) Cost saved by making the units (Total cost to buy – Total relevant cost to make) Explanation Schickel Incorporated regularly uses material B39U and currently has in stock _ liters of the material for which it paid $_ several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $_ per liter. The relevant cost of the _ liters of material B39U is: The relevant cost is the current market value: Current in-stock_ liters × current market $_ per liter = $Relevant cost Explanation Up to how much should the company be willing to pay to acquire more of the constrained resource?

The company should be willing to pay up to $8.04 per minute to produce more FS.

Bed & Bath, a retailing company, has two departments—Hardware and Linens. The company’s most recent monthly contribution format income statement follows: Department Total Hardware Linens Sales $ 4,190,000 $ 3,180,000 $ 1,010,000 Variable expenses 1,242,000 841,000 401,000 Contribution margin 2,948,000 2,339,000 609,000 Fixed expenses 2,270,000 1,420,000 850,000 Net operating income (loss) $ 678,000 $ 919,000 $ (241,000 ) A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 18% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Answer: The financial advantage of discontinuing the Linens Department is $359,980 Explanation: If Linens Department is discontinued, there is only Hardware Department left. The new sales, costs and operating income will be: Sales = 3,180,000 x (1 -18%) = $2,607,600 (18% drop in sales of Hardware given Linens discontinuity) Variable cost = 2,607,600 x (841,000 / 3,180,000) = $689,620. Fixed cost = Fixed cost originally allocated to Hardware + Fixed cost further allocated to Hardware due to Linen's discontinuity = 1,420,000 + 379,000 = $1,799,000. Operating income = 2,607,600 - 689,620 - 1,799,000 = $118,980. => Difference between discontinuity of Linen Department and continuity of Linen Department = 118,980 - (-241,000) = $359,980. Two products, QI and VH, emerge from a joint process. Product QI has been allocated $9,600 of the total joint costs of $12,000. A total of 9,000 units of product QI are produced from the joint process. Product QI can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $54,000 and then sold for $18 per unit. If product QI is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with sale in its unprocessed form directly after the split-off point? Explanation: We calculate potential advantage/disadvantage by comparing profits from 2 approaches Approach 1, no processing Profits = (13*9000) - 9600 = $107,400 Approach 2, with processing...