Question

1. DelauderEnterprises makes a variety of products that it sells to other businesses. The company’s activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below:

Activity Cost Pool	Activity Measure	Activity Rate
Supporting assembly	Direct labor-hours (DLHs)	$	3.45	per DLH
Processing batches	Number of batches	$	193.30	per batch
Processing orders	Number of orders	$	83.05	per order
Serving customers	Number of customers	$	1,608.00	per customer

The cost of serving customers, $1,608.00 per customer, is the cost of serving a customer for one year. Grennon Corporation buys only one of the company’s products. The details of last year’s purchases of this product are listed below:

Number of units purchased		1,500	units
Number of batches		5	batches
Number of orders		2	orders
Direct labor-hour requirement		0.25	DLHs per unit
Selling price	$	18.55	per unit
Direct materials cost	$	8.35	per unit
Direct labor cost	$	3.95	per unit

According to the ABC system, the total overhead cost for this customer this past year was closest to:

Multiple Choice

• $4,034.35

• $22,484.35

• $2,426.35

• $18,450.00

2. Luchini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:

1. The budgeted selling price per unit is $111. Budgeted unit sales for April, May, June, and July are 7,100, 10,100, 13,300, and 14,000 units, respectively. All sales are on credit.
2. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month.
3. The ending finished goods inventory equals 10% of the following month's sales.
4. The ending raw materials inventory equals 30% of the following month’s raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $5.00 per pound.
5. Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.
6. The direct labor wage rate is $18.00 per hour. Each unit of finished goods requires 2.9 direct labor-hours.
7. Variable manufacturing overhead is $7.00 per direct labor-hour. Fixed manufacturing overhead is zero.

If the budgeted cost of raw materials purchases in April is $207,650 and in May is $282,625, then in May the total budgeted cash disbursements for raw materials purchases is closest to:

Multiple Choice

• $124,590

• $237,640

• $169,575

• $113,050

Answer 1

1. Answer is a. $4,034.35

Supporting Assembly	$                           1,293.75	=1500*0.25*3.45
Processing Batches	$                               966.50	=5*193.3
Processing Orders	$                               166.10	=2*83.05
Serving Customers	$                           1,608.00
Total	$                           4,034.35

2.
Cash Disbursements for May Purchase = $207650 x 60% + 282625 x 40% = $237640

Answer is b. $237,640