Question

Part 1 A

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	$	70,000
Other expenses		50,000
Total	$	120,000

Distribution of resource consumption:

	Activity Cost Pools
	Making Bouquets	Delivery		Other	Total
Wages and salaries	70%	20%		10%	100%
Other expenses	45%	25%		30%	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	40,000	bouquets
Delivery	1,000	deliveries

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

Multiple Choice

$1.73

$1.79

$2.10

$1.35

Part 1B

The Puyer Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available:

	Monthly Fixed Cost		Variable Cost Per Deb Sold
Sales commissions			$	0.90
Shipping			$	1.40
Advertising	$	50,000	$	0.20
Executive salaries	$	60,000
Depreciation on office equipment	$	20,000
Other	$	40,000

All of these expenses (except depreciation) are paid in cash in the month they are incurred.

If the company has budgeted to sell 17,000 Debs in March, then the average budgeted selling and administrative expenses per unit sold for March is closest to:

Multiple Choice

$2.50 per unit

$17.00 per unit

$12.50 per unit

$10.00 per unit

Part 1C

Standahl Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $39,590 per month plus $2,649 per flight plus $4 per passenger. The company expected its activity in August to be 82 flights and 294 passengers, but the actual activity was 85 flights and 297 passengers. The actual cost for plane operating costs in August was $255,690.

The spending variance for plane operating costs in August would be closest to:

Multiple Choice

$2,294 F

$10,253 U

$2,294 U

$10,253 F

Part 1D

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	$	70,000
Other expenses		50,000
Total	$	120,000

Distribution of resource consumption:

	Activity Cost Pools
	Making Bouquets	Delivery		Other	Total
Wages and salaries	70%	20%		10%	100%
Other expenses	45%	25%		30%	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	40,000	bouquets
Delivery	1,000	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

$26.50

$30.00

$24.00

$27.00

Answer 1

Answer 1A. $1.79
	Amount	% allocable to making Bouquets	Overhead Cost to making Bouquets
Wages & Salaries	70,000.00	70%	49,000.00
Other Expenses	50,000.00	45%	22,500.00
Total			71,500.00
No. of Bouquets			40,000
Overhead Cost per Bouquet			1.79
Answer 1B. $12.50 per unit
Total Fixed Cost	170,000.00
No. of Units Sold	17,000.00
Fixed Cost per Unit	10.00
Variable Cost per Unit	2.50
Total Cost per Unit	12.50
Answer 1C. $10,253 (F)
Spending Variance = Flexible Budget - Actual Results
Flexible Ccost - Operating Costs = $39,590 + ($2,649 X 85 Flights) + ($4 X 297 Passengers)
Flexible Ccost - Operating Costs = $265,943
Spending Variance = $265,943 - $255,690
Spending Variance = $10,253 (F)
Answer 1D. $26.50
	Amount	% allocable to making Delivery	Overhead Cost to making Delivery
Wages & Salaries	70,000.00	20%	14,000.00
Other Expenses	50,000.00	25%	12,500.00
Total			26,500.00
No. of Deliveries			1,000
Overhead Cost per Delivery			26.50