Superior Company provided the following account balances for the year ended December 31 (all raw materials are used in production as direct materials):

Mello Manufacturing Company is a diversified manufacturer that manufactures three products (Alpha, Beta, and Omega) in a continuous production process. Senior management has asked the controller to conduct an activity-based costing study. The controller identified the amount of factory overhead required by the critical activities of the organization as follows:

The activity bases identified for each activity are as follows:

The activity-base usage quantities and units produced for the three products were determined from corporate records and are as follows:

Each product requires 40 minutes per unit of machine time.

2. Activity Table - beta

3, Activity Table - Omega

Vance Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company’s estimator has been involved in a long-simmering dispute with the on-site work supervisors. The on-site supervisors claim that the estimator does not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and non-routine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that non-routine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square metres by $4,700 per thousand square metres to determine the bid price. Since our average cost is only $3,700 per thousand square metres, that leaves enough cushion to take care of the additional costs of non-routine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.”

To shed light on this controversy, the company initiated an ABC study of all of its costs. Data from the ABC system follow:

* The total number of jobs includes non-routine jobs as well as routine jobs. Non-routine jobs as well as routine jobs require estimating and setup work.

Required:

1. Perform the first-stage allocation of costs to the activity cost pools. (Do not leave any empty spaces; input a 0 wherever it is required.)

2. Compute the activity rates for the activity cost pools. (Round your answers to 2 decimal places.)

3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square metres of each of the following jobs according to the ABC system:

a. A routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)

total costs of jobs

average cost per thousand square meters

b. A routine 2,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)

total cost of jobs

cost per thousand square meters

c. A non-routine 1,000-square-metre asbestos removal job. (Round your answers to 2 decimal places.)

total cost of jobs

cost per thousand square meters

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:

Distribution of resource consumption:

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:

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:

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:

Distribution of resource consumption:

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:

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

Gilbert Inc. manufactures custom conveyor systems for manufacturing and commercial operations. Erin Smith is Gilbert's management accountant and she is in the process of training a new employee, Heather Fontenot, on the order costing system by Gilbert Inc. uses. The costing system is based on normal costs; overhead costs are allocated based on the cost of direct labor. Heather has collected the following order cost records for July:

FIF: indirect manufacturing costs

To explain the missing order number, Erin informed Heather that job # 668 had been completed and delivered in June. She also told him that Order No. 667 was the only order in progress at the beginning of July. At that time, $ 4,300 had been allocated as the cost of raw materials and $ 900 as the cost of direct labor. At the end of July, order N. 671 was not completed; all others had been completed. Among the completed orders, orders N. 667, 669 and 672 were delivered in July. Heather also obtains a total amount of $ 17,500 corresponding to the actual indirect manufacturing costs incurred in July. Erin asked Heather several questions to determine if she understood the cost-to-order system. Help Heather answer the following questions.

1.a What is the predetermined imputation rate used by Gilbert INC?

a. 15%              b. 140%            c. 40%               d. 115%

1.b What was the total cost of stocks of products in progress at the beginning of July?

a. 4 300 $          b. 5 200 $         c.1035 $            d. 6 235 $

1.c What was the total primary cost incurred for the month of July?

a. 81 339 $        b. 94 529 $        c. 99 729 $         d. 13 190 $

1.d What was the total cost of stocks of finished products at the end of July?

a. 9 621 $          b. 11 102 $        c. 1 481 $          d. 10 798 $

1.e How much were the indirect manufacturing costs under-charged or over-charged?

a. sub-imputed by 3 285 $ b. Over-charged by 1 295 $             c. Over-charged by 3 285 $      d. sub-imputed by 1 295 $

1.f What is the final balance of the cost of products sold if the indirect or under-charged manufacturing costs were adjusted.

a. 38 060 $        b. 15 856 $        c. 50 153 $         d. 48 858 $

Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,530, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2017 was as follows.

In 2017, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40 per direct labor hour was determined by dividing total expected manufacturing overhead of $8,037,860 by the total direct labor hours (200,000) for the two models.

Under traditional costing, the gross profit on the models was Royale $560 ($1,530 – $970) and Majestic $610 ($1,320 – $710). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model.

Before finalizing its decision, management asks Schultz’s controller to prepare an analysis using activity-based costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2017.

The cost drivers used for each product were:

a) Assign the total 2017 manufacturing overhead costs to the two products using activity-based costing (ABC) and determine the overhead cost per unit. (Round cost per unit to 2 decimal places, e.g. 12.25.)

b) Calculate cost per unit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.)

c) Calculate gross profit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.)

A firm will purchase additional workers as long as worker's

Select one:

a. marginal revenue product is greater than zero

b. marginal revenue product is greater than or equal to its marginal resource cost

c. marginal revenue product equals the product price

d. marginal revenue product is less than its marginal resource cost

e. total revenue product is greater than its marginal resource cost

A firm will purchase additional workers as long as worker's

Select one:

a. marginal revenue product is greater than zero

b. marginal revenue product is greater than or equal to its marginal resource cost

c. marginal revenue product equals the product price

d. marginal revenue product is less than its marginal resource cost

e. total revenue product is greater than its marginal resource cost

A firm will purchase additional workers as long as worker's

Select one:

a. marginal revenue product is greater than zero

b. marginal revenue product is greater than or equal to its marginal resource cost

c. marginal revenue product equals the product price

d. marginal revenue product is less than its marginal resource cost

e. total revenue product is greater than its marginal resource cost

Tim's sandwiches, a leading producer of frozen sandwiches, is considering hiring more workers to keep up with expanding demand. If Tim's wishes to maximize profits, it should hire more workers as long as

Select one:

a. the additional revenue generated by each additional worker is positive.

b. the additional revenue generated by the next worker to be hired is greater than the additional cost of hiring that worker.

c. the additional revenue generated by selling one more sandwich is greater than the hourly wage of the next worker.

d. each additional worker can produce at least as many sandwiches per hour as the average of all the other workers.

If 25 workers produce a total of 2,500 widgets and 26 workers produce a total of 2,574 widgets,

Select one:

a. the marginal product of the 26th worker is 2,574

b. the marginal product of the 26th worker is 100 widgets

c. the marginal product of the 26th worker is 74 widgets

d. the marginal product of the 26th worker is 99 widgets

e. diminishing returns begins with the 26th worker

(DO NOT NEED TO PROVIDE EXPLANATION!)

in each region of the world we adapt to cultural norms and nuances, but we hold true to our standards and best practices that benefit our owners, team members, and guests. This impacts our approach to every aspect of our business—from the ways we train and engage our team members to our customer marketing campaigns and service delivery. Our strategic perspective is that a brand is a promise consistently delivered. Equally important, we strive to be culturally relevant. Cultural differences largely come to life in food and beverage and leisure amenities, such as spa offerings. For example, our eforea: spa at Hilton treatment menus are designed so that each hotel offers core elements that our guests expect, but the menus also give our owners in China flexibility to add treatments specific to their local market. Hilton Guangzhou Tianhe will feature spa treatments such as a foot massage and a variety of full-body massages inspired by traditional Chinese aromatherapy oils.

As a global brand with hotels in 78 countries, we invest a great deal of time and research into understanding the needs and expectations of travelers today, and we are prepared to meet these needs as they evolve over time. Research tells us that travelers have a great deal of trust for Hilton, particularly when traveling abroad. Because traveling abroad is a new experience for many of our guests from mainland China, our brand gives them confidence that the hotel experience will meet their needs so that they can focus on exploring a new destination.

From our more than two decades of experience operating in mainland China, we see two trends that differentiate the Chinese traveler. These trends are similar to the trends we have historically experienced with other rapidly expanding customer segments. First, we must provide our guests with familiar comforts, and make it a point to have team members fluent in Mandarin on staff at our hotels outside China. The recent global launch of the Hilton Huanying program is helping us achieve this goal.

Second, we recognize that most travelers from China are booking through government-approved travel agents and tour operators, rather than booking directly with a hotel or online. This affects how we communicate with our customers when they are considering lodging options. With more than 20 years of experience serving the China market, we have developed longstanding relationships with government travel agencies and tour operators. Hilton Worldwide opened its first international sales offices in Beijing and Shanghai in 2005, so we have teams in the market who really understand the travelers and communicate regularly with government travel agencies and tour operators. With Hilton Huanying, for example, we invited many of the tour operators to participate in the global launch events in San Francisco, Beijing, and Shanghai.

Our brand also has an aggressive marketing campaign in China, offers a Chinese version of our consumer site (www.hilton.com.cn) and recently launched a Chinese version of our global press site (www.hiltonglobalmediacenter.com.cn) as a resource for Chinese media

QUESTION

How do Hiltons china operations differ from its operations elsewhere?

Sheffield has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2000 units, Sheffield used 3200 pounds of materials at a total cost of $18720. Sheffield's total variance is

Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors claim that the estimators do not adequately distinguish between routine work, such as removal of asbestos insulation around heating pipes in older homes, and nonroutine work, such as removing asbestos-contaminated ceiling plaster in industrial buildings. The on-site supervisors believe that nonroutine work is far more expensive than routine work and should bear higher customer charges. The estimator sums up his position in this way: “My job is to measure the area to be cleared of asbestos. As directed by top management, I simply multiply the square footage by $2.80 to determine the bid price. Since our average cost is only $2.585 per square foot, that leaves enough cushion to take care of the additional costs of nonroutine work that shows up. Besides, it is difficult to know what is routine or not routine until you actually start tearing things apart.”

To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow:

Required:

1. Perform the first-stage allocation of costs to the activity cost pools.

2. Compute the activity rates for the activity cost pools.

3. Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system.

a. A routine 1,000-square-foot asbestos removal job.

b. A routine 2,000-square-foot asbestos removal job.

c. A nonroutine 2,000-square-foot asbestos removal job.

Complete this question by entering your answers in the tabs below.

• Req 1

Perform the first-stage allocation of costs to the activity cost pools.

Req 2

Compute the activity rates for the activity cost pools.

Req 3A to 3C

Using the activity rates you have computed, determine the total cost and the average cost per thousand square feet of each of the following jobs according to the activity-based costing system. (Round the "Average Cost per thousand square feet" to 2 decimal places.)

a. A routine 1,000-square-foot asbestos removal job.
b. A routine 2,000-square-foot asbestos removal job.
c. A nonroutine 2,000-square-foot asbestos removal job.

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