QUESTION 6: - JustAnswer



All necessary calculations are on the attached excel sheet

QUESTION 6:

Sala Corporation uses the weighted-average method in its process costing system. The Fitting Department is the second department in its production process. The data below summarize the department's operations in March.

|  |Units |Percent Complete with Respect to |

| | |Conversion |

|  Beginning work in process inventory |9,500   |30% |

|  Transferred in from the prior department during   March |45,000   |  |

|  Ending work in process inventory |3,700   |80% |

The Fitting Department's cost per equivalent unit for conversion cost for March was $2.44.

How much conversion cost was assigned to the units transferred out of the Fitting Department during March?

[pic]

|[pic] | |

|$131,174.4 | |

| | |

|[pic] | |

|$109,800 | |

| | |

|[pic] | |

|$123,952 | |

| | |

|[pic] | |

|$132,980 | |

| | |

| | |

| | |

| | |

Units in Beginning Inventory 9,500

Add: Units Started into Production 45,000

Less: Units in Ending Inventory 3,700

Units Transferred Out 50,800

Cost per Equivalent Unit × $2.44

Conversion Cost Assigned to Units Transferred Out $123,952

QUESTION 7:

Sumter Company uses the weighted-average method in its process costing system. The following data pertain to operations in the first processing department for a recent month:

|  Work in process, beginning: |  |

|  Units in process |5,900      |

|  Percent complete with respect to materials |70%   |

|  Percent complete with respect to conversion |30%   |

|  Costs in the beginning inventory: |  |

|  Materials cost |$76,400      |

|  Conversion cost |$2,900      |

|  Units started during the month |?      |

|  Units completed and transferred out during the month |70,200      |

|  Costs added to production during the month: |  |

|  Materials cost |$293,968      |

|  Conversion cost |$198,524      |

|  Work in process, ending: |  |

|  Units in process |8,700      |

|  Percent complete with respect to materials |80%   |

|  Percent complete with respect to conversion |35%   |

How many units were started into production during the month?

[pic]

|[pic] |55,600 units |

|[pic] |67,400 units |

|[pic] |84,800 units |

|[pic] |73,000 units |

QUESTION 9:

|Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small |

|bottles and is prized as a flavoring for drinks and for use in desserts. The bottles are sold for $12 each. (The Mexican currency is the |

|peso and is denoted by $.) The first stage in the production process is carried out in the Mixing Department, which removes foreign matter|

|from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process|

|costing system. A hastily prepared report for the Mixing Department for April appears below: |

|  |  |

|  Units to be accounted for: |  |

|Work in process, April 1 (materials 90% |6,000   |

|complete; conversion 80% complete) | |

|     Started into production |34,000   |

|  Total units to be accounted for |40,000   |

|  Units accounted for as follows: |  |

|     Transferred to next department |24,000   |

|Work in process, April 30 (materials 75% |16,000   |

|complete; conversion 50% complete) | |

|  Total units accounted for |40,000   |

|[pic] |

 

|  Cost Reconciliation |  |

|  Cost to be accounted for: |  |

|     Work in process, April 1 |$16,100   |

|     Cost added during the month |84,800   |

|  Total cost to be accounted for |$100,900   |

|  Cost accounted for as follows: |  |

|     Work in process, April 30 |7,800   |

|     Transferred to next department |$93,100   |

|  Total cost accounted for |$100,900   |

|[pic] |

 

|Management would like some additional information about Cooperative San José's operations. |

 

|Requirement 1: |

|What were the equivalent units for the month? |

|  |Materials |Conversion |

|  Equivalent units of production |[pic] |[pic] |

|[pic] |

 

36,000 , and 32,000

|Quantities | Physical Units | Equivalent Units |

| | | Materials | Conversion |

|Units to be accounted for | | | |

| Work in Process, Beginning | 6,000 | | |

|Started into Production | 34,000 | | |

| Total Units | 40,000 | | |

|Units Accounted for | | | |

| Transferred Out | 24,000 | 24,000 | 24,000 |

| WIP, Ending | 16,000 | 12,000 | 8,000 |

| Total Units | 40,000 | 36,000 | 32,000 |

| |

| |

| |

|Requirement 2: |

|What were the costs per equivalent unit for the month? The beginning inventory consisted of the following costs: materials, $11,000 and |

|conversion cost, $5,100. The costs added during the month consisted of: materials, $52,000; and conversion cost, $32,800. (Round your |

|answers to 2 decimal places. Omit the "$" sign in your response) |

|  |Materials |Conversion |

|  Cost per equivalent unit |$ [pic] |$ [pic] |

|[pic] |

 

$1.75 , $1.18

|Cost per Equivalent Unit | | | |

|Unit Costs | Material | Conversion | Total |

| WIP | 11,000 | 5,100 | 16,100 |

| Costs in Month | 52,000 | 32,800 | 84,800 |

| Total Cost | 63,000 | 37,900 | 100,900 |

| Equivalent Units | 36,000 | 32,000 | |

| Unit Costs | 1.75 | 1.18 | 2.93 |

|Requirement 3: |

|How many of the units transferred to the next department were started and completed during the month? |

|  Units started and completed during April |[pic]  |

 

Started and completed = 18,000

|Requirement 4: |

|The manager of the Mixing Department stated, "Materials prices jumped from about $1.50 per unit in March to $3.00 per unit in April, but |

|due to good cost control I was able to hold our materials cost to less than $3.00 per unit for the month." Should this manager be rewarded|

|for good cost control? |

|  |

No. The manager should not be rewarded. In weighted average method, the costs of prior period get mixed with the costs of current period. Thus if cost is March is $1.50 and in April it is $3.00, the average cost would be less than $3.00 in the weighted average method.

QUESTION 10:

Testing a prototype of a new product is an example of a:

[pic]

|[pic] |Unit-level activity. |

|[pic] |Product-level activity. |

|[pic] |Organization-sustaining activity. |

|[pic] |Batch-level activity. |

QUESTION 11:

Kraska Corporation has provided the following data from its activity-based costing system:

|  Activity Cost Pool |  Total Cost |  Total Activity |

| Assembly |$455,000 |36,000 | machine-hours |

| Processing orders |$33,740 |960 | orders |

| Inspection |$108,348 |1,320 | inspection-hours |

Data concerning one of the company’s products, Product O11W, appear below:

| Selling price per unit |$96.0 |

| Direct materials cost per unit |$16.8 |

| Direct labor cost per unit |$13.0 |

| Annual unit production and sales |370.0 |

| Annual machine-hours |880.0 |

| Annual orders |85.0 |

| Annual inspection-hours |22.0 |

According to the activity-based costing system, the product margin for product O11W is (round activity rates to 2 decimal places):

[pic]

|[pic] |$6,798.43 |

|[pic] |$1,428.00 |

|[pic] |$8,578.58 |

|[pic] |$4,810.00 |

QUESTION 12:

Kassabian Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:

Costs:

| Wages and salaries |$500,000 |

| Depreciation |226,000 |

| Utilities |235,000 |

| Total |$961,000 |

Distribution of resource consumption:

|  |Activity Cost Pools |

|  |Assembly |Setting Up |Other |Total |

| Wages and salaries |50% |30% |20% |100% |

| Depreciation |20% |40% |40% |100% |

| Utilities |25% |35% |40% |100% |

How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?

[pic]

|[pic] |$384,400 |

|[pic] |$250,000 |

|[pic] |$115,250 |

|[pic] |$353,950 |

Total Assembly Cost:

Wages and Salaries: 50% × $500,000 $250,000

Depreciation: 20% ×$226,000 $45,200

Utilities: 25% × $235,000 $58,750

Total $353,950

QUSTION 13:

Worker recreational facilities is an example of a cost that would ordinarily be considered to be:

|[pic] |Organization-sustaining. |

|[pic] |Unit-level. |

|[pic] |Batch-level. |

|[pic] |Product-level. |

QUESTION 14:

|Grodin Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity |

|rates in its activity-based costing system: |

 

|  |Activity Cost Pools |

|  |Preparing |Arranging |

| |Meals |Functions |

|  Wages |$2.5 |$310 |

|  Supplies |$1.25 |$230 |

|  Other expenses |$1.25 |$210 |

 

|The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used |

|as the activity measure for the Arranging Functions activity cost pool. |

|Management would like to know whether the company made any money on a recent function at which 360 meals were served. The company catered |

|the function for a fixed price of $33 per meal. The cost of the raw ingredients for the meals was $18.65 per meal. This cost is in |

|addition to the costs of wages, supplies, and other expenses detailed above. |

|For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are |

|classified as a Yellow cost; supplies and raw ingredients as a Green cost; and other expenses as a Red cost. |

 

|Suppose an action analysis report is prepared for the function mentioned above. What would be the "red margin" in the action analysis |

|report? (Round to the nearest whole dollar.) |

[pic]

|[pic] |$2,466 |

|[pic] |$2,766 |

|[pic] |$2,516 |

|[pic] |$2,616 |

Sales (360 × $33) $11,880

Green Costs:

Supplies & Raw Ingredients (360 × $19.90) + $230 $7,394

Green Margin $4,486

Yellow Cost:

Wages (360 × $2.5) + $310 $1,210

Yellow Margin $3,276

Red Costs:

Other Expenses (360 × $1.25) + $210 $660

Red Margin $2,616

QUESTION 15:

If a cost object such as a product or customer has a positive green margin, then:

[pic]

|[pic] |its red margin may be either positive, negative, or zero. |

|[pic] |its red margin will be zero. |

|[pic] |its red margin will be positive. |

|[pic] |its red margin will be negative. |

QUESTION 16:

Fordham 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 |$ 105,000 |

| Other expenses |45,000 |

| Total |$150,000 |

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 |29,000 | bouquets |

| Delivery |3,600 | 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 your answer to 2 decimal places.)

[pic]

|[pic] |$2.92 |

|[pic] |$5.83 |

|[pic] |$8.96 |

|[pic] |$4.02 |

Delivery Cost:

| |Wages and salaries: 20% × $105,000 |$21,000 |

| |Other expenses: 25% × $45,000 | 11,250 |

| |Total |$32,250 |

| | | (a) | (b) | |

| | | | |(a) ÷ (b) |

| |Activity Cost Pool |Total Cost |Total Activity |Activity Rate |

| |Delivery |$32,250 |3,600 deliveries |$8.96 per delivery |

QUESTION 17:

|Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder. Data concerning these two product lines appear |

|below: |

 

|  |Xtreme |Pathfinder |

|  Selling price per unit |$144             |$106             |

|  Direct materials per unit |$65             |$40             |

|  Direct labor per unit |$20             |$20             |

|  Direct labor-hours per unit |2 DLHs    |2 DLHs    |

|  Estimated annual production |11,000 units     |61,000 units     |

|[pic] |

 

|The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data |

|concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: |

|  |

|  |  |

|  Estimated total manufacturing overhead |$2,260,800            |

|  Estimated total direct labor-hours |144,000 DLHs   |

|[pic] |

 

|Requirement 1: |

|(a) |Calculate the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the "$" sign in your response.) |

|  |  |

|  Predetermined overhead rate |$[pic]   |

 

[pic]=$15.7

|(b) |Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. (Negative |

| |amount should be indicated by a minus sign. Round predetermined overhead rate to 2 decimal places. Round your answers to the nearest|

| |dollar amount. Omit the "$" sign in your response.) |

|  |  |

|  |Xtreme |Pathfinder |Total |

|  Product margin |$[pic]   |$[pic]   |$[pic]   |

|[pic] |

 

|Requirement 2: |

|The company is considering replacing its traditional costing system with an activity-based costing system that would assign its |

|manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle |

|capacity costs): |

|  |

|  |  |Expected Activity |

|Activities and Activity Measures |Estimated |Xtreme |Pathfinder |Total |

| |Overhead cost | | | |

|  Supporting direct labor (direct labor-hours) |$796,320   |22,000    |122,000    |144,000    |

|  Batch setups (setups) |486,300   |150    |150    |300    |

|  Product sustaining (number of products) |602,100   |1    |1    |2    |

|  Other |376,080   |NA    |NA    |NA    |

|  Total manufacturing overhead cost |$2,260,800   |  |  |  |

|[pic] |

 

|Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative amount should be|

|indicated by a minus sign. Omit the "$" sign in your response.) |

|  |

|  |Xtreme |Pathfinder |Total |

|  Product margin |$[pic]    |$[pic]    |$[pic]    |

|[pic] |

 

|Requirement 3: |

|Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your percentage values to one decimal |

|place and round all other values to the nearest whole number. Omit the "$" & "%" signs in your response.) |

|  |

|  |Xtreme |Pathfinder |Total |

|  Traditional Cost System |Amount |% |  |% |Amount |

|  Direct materials |$[pic]   |[pic]%   |$[pic]   |[pic]%   |$[pic]   |

|  Direct labor |[pic]  |[pic]%   |[pic]  |[pic]%   |[pic]  |

|  Manufacturing overhead |[pic]  |[pic]%   |[pic]  |[pic]%   |[pic]  |

|  Total cost assigned to products |$[pic]   |  |$[pic]   |  |$[pic]   |

|  Activity-Based Costing System |  |  |  |  |  |

|  Direct costs: |  |  |  |  |  |

|  Direct materials |$[pic]   |[pic]%   |$[pic]   |[pic]%   |$[pic]   |

|  Direct labor |[pic]  |[pic]%   |[pic]  |[pic]%   |[pic]  |

|  Indirect costs: |  |  |  |  |  |

|  Supporting direct labor |[pic]  |[pic]%   |[pic]  |[pic]%   |[pic]  |

|  Batch setups |[pic]  |[pic]%   |[pic]  |[pic]%   |[pic]  |

|  Product sustaining |[pic]  |[pic]%   |[pic]  |[pic]%   |[pic]  |

|  Total cost assigned to products |$[pic]   |  |$[pic]   |  |$[pic]   |

|  Costs not assigned to products: |  |  |  |  |  |

|  Other |  |  |  |  |[pic]  |

|  Total cost |  |  |  |  |$[pic]   |

QUESTION 18:

|Ellix Company manufactures two models of ultra-high fidelity speakers, the X200 model and the X99 model. Data regarding the two products |

|follow: |

|  Product |Direct labor hours |Annual |Total Direct |

| | |production |Labor Hours |

|  X200 |.3 DLHs per unit     |22,000 Units    |6,600 DLHs    |

|  X99 |.5 DLHs per unit     |38,000 Units    |11,400 DLHs    |

|  |  |  |25,600 DLHs    |

|[pic] |

|Additional information about the company follows: |

|a.|Model X200 requires $33 in direct materials per unit, and model X99 requires $27. |

|b.|The direct labor rate is $60 per hour. |

|c.|The company has always used direct labor-hours as the base for applying manufacturing overhead cost to products. |

|d.|Model X200 is more complex to manufacture than model X99 and requires the use of a special equipment. |

|e.|Because of the special work required in (d) above, the company is considering the use of activity based costing to apply manufacturing |

| |overhead cost to products. Three activity cost pools have been identified as follows: |

|  |  |  |Estimated Total Activity |

|  Activity Cost Pool |Activity Measure |Estimated |X200 |X99 |Total |

| | |Total Cost | | | |

|  Machine setups |  Number of setups |$154,100   |138       |92     |230   |

|  Special processing |  Machine-hours |403,300   |1,090       |0     |1,090   |

|  General factory |  Direct labor-hours |510,000   |3,400       |13,600     |17,000   |

|  |  |$1,067,400   |  |  |  |

|[pic] |

|Requirement 1: |

|Assume that the company continues to use direct labor-hours as the base for applying overhead cost to products. |

 

|(a)|Compute the predetermined overhead rate. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.) |

|  Predetermined overhead rate |$[pic] |  per DLH |

|(b)|Compute the unit product cost of each model. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |

|  |Model |

|  |X200 |X99 |

|  Unit product Cost |$[pic]   |$[pic]   |

|[pic] |

|Requirement 2: |

|Assume that the company decides to use activity-based costing to apply overhead cost to products. |

 

|(a)|Compute the activity rate for each activity cost pool and determine the amount of overhead cost that would be applied to each model. |

| |(Leave no cells blank - be certain to enter "0" wherever required. Round the Overhead cost per unit to 2 decimal places. Omit the "$"|

| |sign in your response.) |

|  Activity cost Pool |Activity Rate |

|  Machine setups |$[pic] | Per setup |

|  Special processing |$[pic] | Per MH |

|  General factory |$[pic] | Per DLH |

|[pic] |

|Model X200: |

|  Activity Cost Pool |Overhead Applied |

|  Machine setups |$[pic]      |

|  Special processing |[pic]     |

|  General factory |[pic]     |

|  Total manufacturing overhead cost |$[pic]      |

|  Overhead cost per unit |$[pic]      |

|[pic] |

|Model X99 |

|  Activity Cost Pool |Overhead Applied |

|  Machine setups |$[pic]      |

|  Special processing |[pic]     |

|  General factory |[pic]     |

|  Total manufacturing overhead cost |$[pic]      |

|  Overhead cost per unit |$[pic]      |

|[pic] |

|(b)|Compute the unit product cost of each model. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |

|  Unit product cost of Model X200 |$[pic]   |

|  Unit product cost of Model X99 |$[pic]   |

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