In: Accounting
Goertz Corporation has an activity-based costing system with three activity cost pools--Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Overhead costs: | |||||||
Equipment depreciation | $ | 51,000 | |||||
Supervisory expense | $ | 3,000 | |||||
Distribution of Resource Consumption Across Activity Cost Pools:
Activity Cost Pools | |||||
Machining | Order Filling | Other | |||
Equipment depreciation | 0.40 | 0.10 | 0.50 | ||
Supervisory expense | 0.20 | 0.30 | 0.50 | ||
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 data for the company's two products follow:
Activity:
MHs (Machining) | Orders (Order Filling) | |
Product J3 | 9,100 | 100 |
Product F7 | 900 | 900 |
Total | 10,000 | 1,000 |
Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.
Sales and Direct Cost Data:
Product J3 | Product F7 | |||||||||
Sales (total) | $ | 145,200 | $ | 90,700 | ||||||
Direct materials (total) | $ | 81,400 | $ | 38,600 | ||||||
Direct labor (total) | $ | 37,700 | $ | 42,400 | ||||||
The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:
Multiple Choice
$3.33 per order
$3.00 per order
$54.00 per order
$6.00 per order
Provenzano Corporation manufactures two products: Product B56Z and Product D32N. The company is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products B56Z and D32N.
Activity Cost Pool | Activity Measure | Total Cost | Total Activity | ||
Machining | Machine-hours | $ | 330,000 | 15,000 | MHs |
Machine setups | Number of setups | $ | 50,000 | 100 | setups |
Product design | Number of products | $ | 88,000 | 2 | products |
Order size | Direct labor-hours | $ | 280,000 | 10,000 | DLHs |
Activity Measure | Product B56Z | Product D32N |
Machine-hours | 6,000 | 9,000 |
Number of setups | 80 | 20 |
Number of products | 1 | 1 |
Direct labor-hours | 6,000 | 4,000 |
What is the activity rate for the Machining activity cost pool?
rev: 03_17_2018_QC_CS-119201
Multiple Choice
$55.00 per MH
$22.00 per MH
$36.67 per MH
$74.80 per MH
Abel Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 200 units and of Product B is 400 units. There are three activity cost pools, with total cost and activity as follows:
Total Activity | ||||||
Activity Cost Pools | Total Cost | Product A | Product B | Total | ||
Activity 1 | $ | 16,660 | 600 | 100 | 700 | |
Activity 2 | $ | 18,450 | 1,100 | 700 | 1,800 | |
Activity 3 | $ | 9,731 | 60 | 160 | 220 | |
The cost per unit of Product B is closest to:
Multiple Choice
$41.58
$81.53
$74.73
$17.69
Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity Cost Pools | Activity Rate | ||
Size-related | $ | 1.13 | per guest |
Complexity-related | $ | 28.22 | per tier |
Order-related | $ | 74.72 | per order |
The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
Tijerina Wedding | Twersky Wedding | |||
Number of reception guests | 49 | 126 | ||
Number of tiers on the cake | 2 | 4 | ||
Cost of purchased decorations for cake | $ | 28.60 | $ | 54.64 |
Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Tijerina wedding cake to just break even?
Multiple Choice
$74.72
$215.13
$28.60
$260.31
Which of the following budgets are prepared before the sales budget?
Budgeted Income Statement | Direct Labor Budget | |
A) | Yes | Yes |
B) | Yes | No |
C) | No | Yes |
D) | No | No |
Multiple Choice
Choice A
Choice B
Choice C
Choice D
Fiwrt Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales Fiwrt (in units) for the next three months are as follows:
October | November | December | |||||
Budgeted unit sales | 30,000 | 36,000 | 34,000 | ||||
Fiwrt likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fiwrt plan on producing during the month of November?
Multiple Choice
35,400 mugs
26,800 mugs
36,000 mugs
34,300 mugs
The Tobler Corporation has budgeted production for next year as follows:
Quarter | ||||||||||
First | Second | Third | Fourth | |||||||
Production in units | 10,000 | 12,000 | 16,000 | 14,000 | ||||||
Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 pounds. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in the third quarter would be:
Multiple Choice
63,200 pounds
62,400 pounds
56,800 pounds
50,400 pounds
Goertz Corporation :$6.00 per order
The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:
Order Filling = Equipment depreciation x 0.10 + Supervisory expense x 0.30 = 51000 x 0.10 + 3000 x 0.30 = 6000
Cost per activity = 6000 / 1000 = $6.00 per order
Provenzano Corporation :$22.00 per MH
Activity rate for the Machining activity cost pool = Total Machining cost / Total machine hours = 330000 / 15000 = $22.00 per MH
Abel Corporation
Cost per unit of Product B is closest to :
Total Activity cost for B = (16660 x 100 / 700 ) + ( 18450 x 700 / 1800 ) + ( 9731 x 160 / 220) = 2380 + 7175 + 7077 = 16632
Cost per unit of Product B = 16632 / 400 units = $41.58
Nissley Wedding Fantasy Corporation :$215.13
The company would have to cover all of the avoidable costs of the wedding cake which are: | ||||||||
Size related ($1.13 per guest × 49 guests) | 55.37 | |||||||
Complexity-related ($28.22 per tier × 2 tiers) | 56.44 | |||||||
Order-related ($74.72 per order × 1 order) | 74.72 | |||||||
Cost of purchased decorations for cake | 28.6 | |||||||
Total cost | 215.13 | |||||||
Which of the following budgets are prepared before the sales budget?
Choice D
Fiwrt Corporation :35,400 mugs
November Mugs production plan :Unit Sales + Closing stock - Opening stock = 36000 units + (34000 x 30%) - ( 36000 x 0.30 ) = 36000 + 10200 - 10800 = 35,400 mugs
Tobler Corporation
Tobler Corporation | |||
Raw Material Purchase Budget | |||
Quarter | |||
Production in units | 10000 | 12000 | 16000 |
Raw mat req. per unit | 4 | 4 | 4 |
40000 | 48000 | 64000 | |
Closing Raw mat. | 4800 | 6400 | 5600 |
44800 | 54400 | 69600 | |
Opening Raw Mat. | -4000 | -4800 | -6400 |
40800 | 49600 | 63200 | |
14000 x 4 x 0.10 = 6400 |