Question

1. Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $28,160 and variable expenses of $8,448. Product Y45E had sales of $36,000 and variable expenses of $19,800. The fixed expenses of the entire company were $23,500. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

Multiple Choice

would decrease.

would increase.

could increase or decrease.

would not change.

2. Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price

$

140

Units in beginning inventory

0

Units produced

9,300

Units sold

8,900

Units in ending inventory

400

Variable costs per unit:

Direct materials

$

25

Direct labor

$

67

Variable manufacturing overhead

$

13

Variable selling and administrative expense

$

17

Fixed costs:

Fixed manufacturing overhead

$

139,500

Fixed selling and administrative expense

$

9,500

What is the net operating income for the month under absorption costing?

Multiple Choice

$30,800

$11,200

$17,200

$6,000

3)The Southern Corporation manufactures a single product and has the following cost structure:

Variable costs per unit:

Production

$

35

Selling and administrative

$

15

Fixed costs per year:

Production

$

120,400

Selling and administrative

$

101,140

Last year, 6,020 units were produced and 5,920 units were sold. There was no beginning inventory.

The carrying value on the balance sheet of the ending inventory of finished goods under variable costing would be:

Multiple Choice

the same as absorption costing.

$5,920 greater than under absorption costing.

$5,920 less than under absorption costing.

$2,000 less than under absorption costing.

4. Neelon Corporation has two divisions: Southern Division and Northern Division. The following data are for the most recent operating period:

Total Company

Southern Division

Northern Division

Sales

$

302,000

$

160,200

$

141,800

Variable expenses

$

117,780

$

62,478

$

55,302

Traceable fixed expenses

$

177,300

$

60,800

$

116,500

Common fixed expense

$

60,400

$

32,040

$

28,360

The common fixed expenses have been allocated to the divisions on the basis of sales.

The Northern Division’s break-even sales is closest to:

Multiple Choice

$190,984

$129,762

$152,197

$198,689

5. Foster Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

Overhead costs:

Wages and salaries

$

160,000

Other expenses

77,000

Total

$

237,000

Distribution of resource consumption:

Activity Cost Pools

Making Bouquets

Delivery

Other

Total

Wages and salaries

60%

25%

15%

100%

Other expenses

30%

45%

25%

100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.

The amount of activity for the year is as follows:

Activity Cost Pool

Activity

Making bouquets

55,915

bouquets

Delivery

8,000

deliveries

What would be the total overhead cost per delivery according to the activity based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.)

Multiple Choice

$8.90

$7.62

$9.33

$10.19

6. Deemer Corporation has an activity-based costing system with three activity cost pools--Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Overhead costs:

Equipment expense

$

53,000

Indirect labor

$

6,400

Distribution of Resource Consumption Across Activity Cost Pools:

Activity Cost Pools

Processing

Supervising

Other

Equipment expense

0.50

0.40

0.10

Indirect labor

0.50

0.30

0.20

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 for the company's two products follow:

Activity:

MHs (Processing)

Batches (Supervising)

Product F6

16,400

1,050

Product X0

1,390

1,250

Total

17,790

2,300

The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

Multiple Choice

$5.35 per batch

$2.68 per batch

$25.83 per batch

$10.05 per batch

7. Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below:

Overhead costs:

Equipment depreciation

$

88,000

Supervisory expense

$

12,700

Distribution of Resource Consumption Across Activity Cost Pools:

Activity Cost Pools

Machining

Order Filling

Other

Equipment depreciation

0.50

0.30

0.20

Supervisory expense

0.50

0.20

0.30

In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.

Activity:

MHs

(Machining)

Orders

(Order Filling)

Product W1

5,540

142

Product M0

15,800

924

Total

21,340

1,066

Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.

Sales and Direct Cost Data:

Product W1

Product M0

Sales (total)

$

73,000

$

63,800

Direct materials (total)

$

37,900

$

19,600

Direct labor (total)

$

16,300

$

35,100

What is the product margin for Product W1 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2018-07-24

Multiple Choice

$7,570

$1,870

$6,430

$2,650

Answer 1

1) would decrese

Explanation

	Product C90B	Product Y45E
Sales (a)	$	28160		$	36000
Variable expenses		8,448			19800
Contribution margin (b)	$	19712		$	16200
CM ratio (b) ÷ (a)		70	%		45	%

Since Product C90B has a higher contribution margin ratio, a shift in sales to that product would decrease the break-even point of the entire company.

2) 17800

Direct materials $25

Direct labor 67

Variable manufacturing overhead 13

Fixed manufacturing overhead cost ($139,500 ÷ 9,300 units produced) 15

Absorption costing unit product cost $120

Sales ($140 per unit × 8,900 units)$1,246,000

Cost of goods sold ($120 per unit × 8,900 units)1,068,000

Gross margin178,000

Selling and administrative expenses ($17 per unit × 8,900 units + $9,500)160,800

Net operating income $17,200

3) 2000  less than under absorption costing.

Explanation:

The computation of the carrying value on the balance sheet of the ending inventory of finished goods under variable costing is shown below:

But before that first we have to determine the unit cost which is

Unit fixed manufacturing overhead

= 120400 ÷ 6,020

= $20

Now the difference is

= Unit fixed manufacturing overhead × Change in inventory in units

= $20 × (6,020 units - 5,920 units)= 2000

4) Northern sales 141800

-Variable expense 55302

Contribution 86498

Contribution ratio = contibution / sales

86498/ 141800 = 0.61

Break even = Tracebale fixed cost / contribution ratio

116500/0.61 = 190983.60

Answer is A 190984

5) Total overhead cost for delivery

Wages & salaries = 160000 x 25 % = 40000

Other expense = 77000 x 45% = 34650

Total associtaed cost with delivery 40000 + 34650 = 74650

Total delivery activity = 8000

Per unit = 74650/8000 = 9.33

So answer is C 9.33

6) Activity cost for supervising activity

Equipment expense 53000 x 40% = 21200

Indirect labour 6400 x 30% = 1920

Total cost 21200 +1920 = 23120

Total batches(1050+1250) = 2300

Cost per batch 23120/2300 = 10.05

So answer is D 10.05 per batch

7)

	Machining	Order filling	others	Total
Equipment dep.(0.5,0.3,0.2)	44000	26400	17600	88000
Supervisory (0.5 ,0.2 ,0.3)	6350	2540	3810	12700
Total	50350	28940	21410

Machinig cost 50350

Machine hours total

Machinig cost per hour 50350/21340 = 2.36

Order filling cost 28940

No. of total orders 1066

Order filing cost per order 28940/ 1066 = 27.15

	Product W1	Product M0
Sales	73000	63800
Less:
Direct material	37900	19600
Direct labour	16300	35100
Machining cost	5540x2.36 13074.4	15800x2.36 37288
Order filing	142x 27.15= 3855.3	924x 27.15= 258086.6

Margin	1870.3
Round off	1870

Answer is B 1870