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Goertz Corporation has an activity-based costing system with three activity cost pools--Machining, Order Filling, and Other....

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

Solutions

Expert Solution

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

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