Amy Lee hired Adler ​& Company to remodel her kitchen. A total of 33 professional hours were incurred on this job. In​ addition, Amy's remodelling job required one of the professionals to travel back and forth to her house for a total of 132 km. The blueprints had to be copied four times because Amy changed the plans several times. In​ addition, 19 hours of secretarial time were used lining up the subcontractors for the job.

Requirement 1. Calculate the current indirect cost allocation rate per professional hour. ​(Round your answer to the nearest​ cent.)

The current indirect cost allocation rate per professional hour is .....$ .

Requirement 2. Calculate the amount that would be billed to Amy Lee given the current costing structure.

Determine the​ formula, then calculate the amount that would be billed to Amy Lee given the current costing structure. ​(Round all calculations to the nearest​ cent.)

Requirement 3. Calculate the activity cost allocation rates that could be used to allocate operating overhead costs to client jobs.

Determine the​ formula, then calculate the activity cost allocation rates that could be used to allocate operating overhead costs to client jobs. ​(Round your final answers to the nearest​ cent.)

Requirement 4. Calculate the amount that would be billed to Amy Lee using ABC costing.

Determine the​ formula, then calculate the amount that would be billed to Amy Lee using ABC costing. ​(Round all calculations to the nearest​ cent.)

Requirement 5. Which type of billing system is fairer to​ clients? Explain.

The

▼

ABC

traditional

billing system should be fairer to clients because they are charged according to

▼

the direct labour hours on the job

the resources they used

the total hours on the job

.

For​ example, copying blueprints is

▼

not expensive

very expensive

. Under the fairer​ system, clients are charged

▼

a set one time fee for

according to the number of

blueprint copies that their job required. The fairer system better recognized the extent to which

▼

operating

receiving

selling

costs are incurred by each unique client job.

Appendix: Normal and Abnormal Spoilage in Process Costing, Changes in Output Measures, Multiple Departments

Grayson Company produces an industrial chemical used for cleaning and lubricating machinery. In the Mixing Department, liquid and dry chemicals are blended to form slurry. Output is measured in gallons. In the Baking Department, the slurry is subjected to high heat, and the residue appears in irregular lumps. Output is measured in pounds. In the Grinding Department, the irregular lumps are ground into a powder, and this powder is placed in 50-pound bags. Output is measured in bags produced. In April, the company reported the following data:

The Mixing Department transferred 50,000 gallons to the Baking Department, costing $250,000. Each gallon of slurry weighs two pounds.
The Baking Department transferred 100,000 pounds (irregular lumps) to the Grinding Department. At the beginning of the month, there were 5,000 gallons of slurry in process, 25 percent complete, costing $35,000 (transferred-in cost of $25,000 plus conversion cost of $10,000). No additional direct materials are added in the Baking Department. At the end of April, there was no ending work in process. Conversion costs for the month totaled $205,000. Normal loss during baking is 5 percent of good output. All transferred-in materials are lost, but since loss occurs uniformly throughout the process, only 50 percent of the conversion units are assumed to be lost.
The Grinding Department transferred 2,500 bags of chemicals to its finished goods warehouse. Beginning work in process for this department was 25,000 pounds, 40 percent complete with the following costs: transferred-in cost, $132,500; conversion cost, $15,000. Bags are used at the end of the process and cost $1.50 each. During bagging, normally one out of every 11 bags is torn and must be discarded. No powder is lost (the tearing occurs when the bag is being attached to a funnel). Conversion costs for the month's production are $172,500. There is no ending work in process.

Required:

1. Using FIFO, calculate the cost per bag of chemicals transferred to the finished goods warehouse. Round per-unit costs to the nearest cent. Round all other answers to the nearest unit or dollar, if required.

Baking Department (to obtain the cost of goods transferred out):

Units to account for:
  Beginning work in process _
  Units started _
  Total units to account for _
Units accounted for:
  Units transferred out_
  Normal spoilage_
  Abnormal spoilage_
  Total units accounted for_

Equivalent Units
Conversion Costs Transferred In

Total equivalent units __ __

Total unit cost $__

Cost of units transferred out:
Started and competed $__
Prior period costs $__
Costs to finish__
Normal spoilage__
Total $__

Grinding Department:

Total units accounted for_

Note: (For direct materials: 11 bags are used to get 10 good bags).

Unit cost of units started and completed:
Direct Materials Conversion Costs Transferred In   
Costs added $__ $__ $__
Total equivalent units __ __ __

Cost per equivalent unit $__ $__ $__ $__

Unit cost of units from beginning work in process:
Prior period costs $__
Costs to finish: __
Direct materials __
Conversion costs __

Total $__

Unit cost $__ per unit

2. Prepare the journal entry needed to remove abnormal spoilage from the Baking department.

____ __

____ __

SAXTON COMPANY

Income Statement For the Year Ended December 31, 2009

Sales (all on credit) …………………………………………………………… $ 4,000,000

Cost of Goods Sold…………………………………………………………………3,000,000

Gross Profit………………………………………………………………………….$ 1,000,000

Selling and Administrative Expenses……………………………………. 450,000

Operating Profit ……………………………………………………………………$ 550,000

Interest Expense…………………………………………………………………… 50,000

Extraordinary Loss…………………………………………………………………. 200,000

Earnings Before Taxes……………………………………………………………$ 300,000

Income Taxes (33%)………………………………………………………………. 100,000

Net Income…………………………………………………………………………….$ 200,000

SAXTON COMPANY

Balance Sheet As of December 31, 2009

Assets Cash…………………………………………………………………………… $ 30,000

Accounts Receivable………………………………………………….. 350,000

Marketable Securities ……………………………………………….. 50,000

Inventory……………………………………………………………………. 370,000

Total Current Assets……………………………………………………. $ 800,000

Net Plant and Equipment…………………………………………….. 800,000

Total Assets………………………………………………………………….$ 1,600,000

Liabilities and Stockholders’ Equity

Accounts Payable…………………………………………………………..$ 50,000

Notes Payable……………………………………………………………….. 250,000

Total Current Liabilities…………………………………………………..$ 300,000

Long Term Liabilities………………………………………………………… 300,000

Total Liabilities ………………………………………………………………..$ 600,000

Common Stock…………………………………………………………………. 400,000

Retained Earnings…………………………………………………………….. 600,000

Total Stockholders’ Equity……………………………………………….$ 1,000,000

Total Liabilities and Stockholders’ Equity………………………… $ 1,600,000

Based upon the Saxton Company (financials), assume that Net Income is a Perpetuity. Then for the Saxton Company:

1. Using Net Income as a Perpetuity, determine a (Present) Value for the Saxton Company assuming that ROE is the % Discount Rate (i.e. % Required Rate of Return)

2. Determine the Weighted Average Cost of Capital (WACC), where ROE can be viewed as the Cost of Equity (component) and the Cost of Debt can be determined by dividing the Interest Expense by the Total Debt

3. Using Net Income as a Perpetuity, determine a (Present) Value for the Saxton Company (now) assuming that the WACC is the Discount Rate (i.e.% Required Rate of Return).

1. Compute the marginal products of the first through the eighth units of labor and enter them in the table. (It may be easiest to just copy and paste this whole page into your submission and complete it there.)

Marginal      Average
Units of Total product       product
labor production   of labor of labor

   0    0 0 0

   1    80 _____         _____

   2 200 _____         _____

   3 330 _____         _____

   4 400 _____         _____

   5 450 _____         _____

   6 480 _____         _____

   7 490 _____         _____

   8 480 _____         _____

2. Now compute the average products of the various quantities of labor and enter them in
the table.

3. There are increasing returns to labor from the first through the __________ units of labor and
decreasing returns from the __________ through the eighth units.

Second exercise (entirely new set of data, you're through with the table you just completed)

Now use the data given in the following table. The fixed cost of the firm is $500, and the firm’s total variable cost is indicated in the table.

Output   Total variable cost (TVC)

1                                         $?200

   2 360

   3 500

   4 700

   5 1000

   6 1800

a. Calculate average variable cost for 4 units of output.

b.Calculate average total cost for 4 units of output.

The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers it uses in its budgeting and performance reports—the number of courses and the total number of students. For example, the school might run two courses in a month and have a total of 60 students enrolled in those two courses. Data concerning the company’s cost formulas appear below:

For example, administrative expenses should be $3,500 per month plus $45 per course plus $5 per student. The company’s sales should average $900 per student.

The company planned to run four courses with a total of 60 students; however, it actually ran four courses with a total of only 54 students. The actual operating results for September were as follows:

Rosenthal Company manufactures bowling balls through two processes: Molding and Packaging. In the Molding Department, the urethane, rubber, plastics, and other materials are molded into bowling balls. In the Packaging Department, the balls are placed in cartons and sent to the finished goods warehouse. All materials are entered at the beginning of each process. Labor and manufacturing overhead are incurred uniformly throughout each process. Production and cost data for the Molding Department during June 2020 are presented below.

(a)

Prepare a schedule showing physical units of production.

eTextbook and Media

Save for Later

Attempts: 0 of 3 used

Submit Answer

Using multiple attempts will impact your score.

10% score reduction after attempt 2

(b)

Determine the equivalent units of production for materials and conversion costs.

eTextbook and Media

Save for Later

Attempts: 0 of 3 used

Submit Answer

Using multiple attempts will impact your score.

10% score reduction after attempt 2

(c)

Compute the unit costs of production.

eTextbook and Media

Save for Later

Attempts: 0 of 3 used

Submit Answer

Using multiple attempts will impact your score.

10% score reduction after attempt 2

(d)

Determine the costs to be assigned to the units transferred out and in process for June.

eTextbook and Media

Save for Later

Attempts: 0 of 3 used

Submit Answer

Using multiple attempts will impact your score.

10% score reduction after attempt 2

(e)

Prepare a production cost report for the Molding Department for the month of June.

A company has developed a design for a high-quality portable printer. The two key components of manufacturing cost are direct labor and parts. During a testing period, the company has developed prototypes and conducted extensive product tests with the new printer. The company's engineers have developed the bivariate probability distribution shown below for the manufacturing costs. Parts cost (in dollars) per printer is represented by the random variable x and direct labor cost (in dollars) per printer is represented by the random variable y. Management would like to use this probability distribution to estimate manufacturing costs.

(a)

Show the marginal distribution of direct labor cost and compute its expected value (in dollars), variance, and standard deviation (in dollars). (Round your answer for standard deviation to the nearest cent.)

)

Show the marginal distribution of parts cost and compute its expected value (in dollars), variance, and standard deviation (in dollars). (Round your answer for standard deviation to the nearest cent.)

(c)

Total manufacturing cost per unit is the sum of direct labor cost and parts cost. Show the probability distribution for total manufacturing cost per unit.

(d)

Compute the expected value (in dollars), variance, and standard deviation (in dollars) of total manufacturing cost per unit. (Round your answer for standard deviation to two decimal places.)

expected value dollars

variance 39

standard deviation dollars

(e)

Are direct labor and parts costs independent? Why or why not?

Since the covariance equals , which ---Select---is not equal to zero, we can conclude that direct labor cost ---Select---is not independent of parts cost.

If you conclude that direct labor and parts costs are not independent, what is the relationship between direct labor and parts cost?

There is a positive correlation between the costs of direct labor and parts.

There is a negative correlation between the costs of direct labor and parts.    

The costs of direct labor and parts are independent.

(f)

The company produced 1,500 printers for its product introduction. The total manufacturing cost was $198,450. Is that about what you would expect?

The expected manufacturing cost for 1,500 printers is $ which is ---Select---lower than higher than equal to $198,450.

If it is higher or lower, what do you think may have caused it? (Select all that apply.)

A supplier increased the cost of one of the more common printer parts this company uses in the manufacturing process.At first there was a steep learning curve, but as more printers were manufactured direct labor costs decreased.There was an increase in the cost of direct labor due to an influx of many new employees.The expected manufacturing cost is equal to $198,450.

A company has developed a design for a high-quality portable printer. The two key components of manufacturing cost are direct labor and parts. During a testing period, the company has developed prototypes and conducted extensive product tests with the new printer. The company's engineers have developed the bivariate probability distribution shown below for the manufacturing costs. Parts cost (in dollars) per printer is represented by the random variable x and direct labor cost (in dollars) per printer is represented by the random variable y. Management would like to use this probability distribution to estimate manufacturing costs.

(a)

Show the marginal distribution of direct labor cost and compute its expected value (in dollars), variance, and standard deviation (in dollars). (Round your answer for standard deviation to the nearest cent.)

(b)

Show the marginal distribution of parts cost and compute its expected value (in dollars), variance, and standard deviation (in dollars). (Round your answer for standard deviation to the nearest cent.)

(c)

Total manufacturing cost per unit is the sum of direct labor cost and parts cost. Show the probability distribution for total manufacturing cost per unit.

(d)

Compute the expected value (in dollars), variance, and standard deviation (in dollars) of total manufacturing cost per unit. (Round your answer for standard deviation to two decimal places.)

expected value dollarsvariancestandard deviation dollars

(e)

Are direct labor and parts costs independent? Why or why not?

Since the covariance equals  , which  ---Select--- is is not equal to zero, we can conclude that direct labor cost  ---Select--- is is not independent of parts cost.

If you conclude that direct labor and parts costs are not independent, what is the relationship between direct labor and parts cost?

There is a positive correlation between the costs of direct labor and parts.There is a negative correlation between the costs of direct labor and parts.    The costs of direct labor and parts are independent.

(f)

The company produced 1,700 printers for its product introduction. The total manufacturing cost was $198,450. Is that about what you would expect?

The expected manufacturing cost for 1,700 printers is $  which is  ---Select--- lower than higher than equal to $198,450.

If it is higher or lower, what do you think may have caused it? (Select all that apply.)

A supplier increased the cost of one of the more common printer parts this company uses in the manufacturing process.At first there was a steep learning curve, but as more printers were manufactured direct labor costs decreased.There was an increase in the cost of direct labor due to an influx of many new employees.The expected manufacturing cost is equal to $198,450.

A square, 32.0- turn coil that is 11.0 cm on a side with a resistance of 0.770Ω is placed between the poles of a large electromagnet. The electromagnet produces a constant, uniform magnetic field of 0.550 T directed out of the screen. As suggested by the figure, the field drops sharply to zero at the edges of the magnet. The coil moves to the right at a constant velocity of 2.70 cm/s. A shaded, rectangular region of uniformly distributed dots signifying a magnetic field out of the screen, and a clear region to the right of the shaded region. Inside and near the middle of the shaded region is a smaller square coil moving to the right with velocity V. The coil is labeled as having N turns. What is the current ?1 through the wire coil before the coil reaches the right edge of the field? Define counterclockwise current as positive and clockwise current as negative. ?1= A What is the current ?2 through the wire coil while the coil is leaving the field? ?2= A What is the current ?3 through the wire coil after the coil leaves the field? ?3= A What is the total charge magnitude ∣Δ?∣ that flows past a given point in the coil as it leaves the field? ∣Δ?∣= C

Hana Coffee Company roasts and packs coffee beans. The process begins by placing coffee beans into the Roasting Department. From the Roasting Department, coffee beans are then transferred to the Packing Department. The following is a partial work in process account of the Roasting Department at July 31:

Required:

1. Prepare a cost of production report, and identify the missing amounts for Work in Process—Roasting Department. If an amount is zero, enter "0". When computing cost per equivalent units, round to two decimal places.

2. Assuming that the July 1 work in process inventory includes $9,180 of direct materials, determine the increase or decrease in the cost per equivalent unit for direct materials and conversion between February and July. If required, round your answers to the nearest cent.