ACC 3300 Practice Test

The use of activity-based costing is most appropriate for:

Firms that manufacture multiple product lines.

The cost of unused capacity can be determined using ABC costing for the purpose of:

Helping managers plan the short and longer-term use of the operating resources.

O'Leary Company manufactures Product Z in a two-stage production cycle in Departments A and B. Materials are added at the beginning of the process in Department B. O'Leary uses the weighted-average method. Conversion costs for Department B were 40% complete as to the 5,000 units in the beginning work-in-process (WIP) inventory and 50% complete as to the 7,000 units in the ending work-in-process inventory. 10,000 units were completed and transferred out of Department B during October. An analysis of the costs relating to work-in-process inventories and production activity in Department B for October follows: TransIn/Materials/Conversion WIP October 1 --- 10,000/3000/1000 Costs added ------ 24000/5500/4400 The total cost per equivalent unit transferred-out for October of Product Z, rounded to the nearest penny, was:

$2.90 EQ Units Materials Started and Completed + Ending 10000+7000 = 17000 Conversion Started and Completed + Ending * % 10000+7000*50% = 13500 Trans In (cost/units) per unit 34000/17000 = 2.00 per unit Materials 8500/17000 = 0.50 per unit Conversion 5400/13500 = .40 Total Cost per unit = 2.90

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total Costs Variable Manufacturing $2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price using a desired gross margin percentage of 50%, the price is:

$375.00 Full Manufacturing Cost/(1-GM %) Determine Full Manufacturing = Var Manufacturing + Fix OH + Batch Level = 2,350,000+1,200,000+200,000 Full Manufacturing Cost/(1-GM %) / Units 3750000/(1-50%)/20,000 = 375.000

Nerrod Company sells its products at $500 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs: Activity Cost Driver and Rate Sales calls $400 per visit Order processing $100 per order Deliveries $50 per order + $0.50 per mile Sales returns $60 /return & $3 restocking/unit returned Nerrod Company has gathered the following data pertaining to activities it performed for two of its customers: XBT NINTO Number of orders 10 2 Number of parts per order 500 2000 Sales returns: Number of returns 4 10 Number of units returned 40 50 Number of sales calls 6 10 Miles per delivery 10 20 Shipping terms FOB, Factory FOB, Destination What is Nerrod's total customer unit-level cost applicable to XBT as a customer?

$480 Unit Level Costs Sales Returns 4 returns*40 units*3 charge = 480 $60 Return Charge is customer batch-level

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8". Beginning WIP (40% completed) - 400 Transferred in 1600 Normal Spoilage 100 Abnormal Spoilage 100 Transferred Out 1400 Ending WIP (25% completed) 400 Costs Conversion beginning inventory 180,500 Current Conversion Costs 728,218 Universal Automotive Group calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question: What are the unit conversion costs?

$534.54 Determine EQ for Conversion Transferred out + spoilage + Ending % 1400 + 100 +100 + (400*25%) = 1700 Determine per unit conversion costs (180500+728218)/1700 = 534.54

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. The cost of goods completed and transferred out under the weighted-average method is calculated to be:

$957,600 Determine EQ for material (P and Q) WIP Sept 1 + Started = 28000+72000 = 100,000 Determine EQ for conversion WIP Sept 1 + (Started- end) + (end * 50%) = 28000+(72000-16000) +(16000*50%) = 28,000+56000+8000 = 92,000 Determine how many products started and completed. WIP Beginning + Started - Ending 28,000 + 72,000-16000 = 84,000 Cost of Material P (120,000+180,000)/100,000 = 3.00 Cost of Material Q (110,000+165,000)/100,000 = 2.75 Cost of Conversion (165,000+354800)/92,000 = 5.65 Total cost for products started and completed (3.00+2.75+5.65)*84,000 =- 957,600

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. Total equivalent units for Material P under the weighted-average method are calculated to be:

100,000 see above for explanation

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. Total equivalent units for Material Q under the weighted-average method are calculated to be:

100,000 see above for explanation

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. Units Sales Value at If Processed Further Product Produced Split Off Sales Value Add Costs X 6,000 $40,000 $80,000 $1,200 Y 3,000 15,000 40,000 3,000 Z 1,000 16,000 30,000 1,500 The amount of joint costs allocated to product Z using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

12000

Stoltenberg Co. had the following information for the month of June: WIP June 1 2000 units Trans In 16000 WIP June 30 4000 Beginning work-in-process inventory is 30 percent complete as to conversion. Ending work-in-process inventory is 50 percent complete as to conversion. Materials are added at the end of the process. How many units were started and completed in June?

12000 Determine Units completed in June Starting + Trans In - Ending 2000+16000-4000 = 14000 How many were BOTH started and completed Units completed - WIP June 1 14,000-2000 = 12000 ALTERNATIVE Transferred in less WIP June 30 16000-4000 = 120000

Stoltenberg Co. had the following information for the month of June: WIP June 1 2000 units Trans In 16000 WIP June 30 4000 Beginning work-in-process inventory is 30 percent complete as to conversion. Ending work-in-process inventory is 50 percent complete as to conversion. Materials are added at the end of the process. The equivalent units for transferred-in costs under the FIFO method are calculated to be:

14000 EQ Trans In - Beginning for FIFO method 16000-2000= 14000

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $2.40 per part Manu supervision Hours of machine time $14.80 per hour Assembly Number of parts $3.30 per part Machine setup Each setup $56.50 per setup Inspection and testing Logged hours $45.50 per hour Packaging Logged hours $19.50 per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $164.50 $75.60 Number of parts 160.00 120.00 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3.00 2.00 The product cost for model B-13 is:

1457.82 (see above)

Stoltenberg Co. had the following information for the month of June: WIP June 1 2000 units Trans In 16000 WIP June 30 4000 Beginning work-in-process inventory is 30 percent complete as to conversion. Ending work-in-process inventory is 50 percent complete as to conversion. Materials are added at the end of the process. The equivalent units for conversion under the weighted average method are calculated to be:

16000 (check) EQ for Conversion Beg WIP + 2000 +(16000-4000)+(4000*0%) 2000+12000= 14000 Materials are added at the end of the process

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8". Beginning WIP (40% completed) - 400 Transferred in 1600 Normal Spoilage 100 Abnormal Spoilage 100 Transferred Out 1400 Ending WIP (25% completed) 400 Costs Conversion beginning inventory 180,500 Current Conversion Costs 728,218 Universal Automotive Group calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question: What are the equivalent units for conversion costs?

1700 Determine EQ for Conversion Transferred out + spoilage + Ending % 1400 + 100 +100 + (400*25%) = 1700

Stoltenberg Co. had the following information for the month of June: WIP June 1 2000 units Trans In 16000 WIP June 30 4000 Beginning work-in-process inventory is 30 percent complete as to conversion. Ending work-in-process inventory is 50 percent complete as to conversion. Materials are added at the end of the process. The equivalent units for MATERIALS under the weighted average method are calculated to be:

18,000 (check) EQ for Materials starting + (trans in - end) + (end * %) 2000 +(16000-4000)+(4000*100%) 2000+12000+4000 = 18000

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. Cost per equivalent unit for Material Q under the weighted-average method is calculated to be:

2.75 see above for explanation (check)

Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates: Exterior construction can manufacture 100,000 juicer exteriors per day. Pulp filter insertion can install 25,000 filters every 6 hours. Painting can decorate 3,000 juicers every half hour. Packaging can package 5,000 juicers per hour. The plant operates 24/7, 24 hours a day every day of the week. How many JM50 machines can Bryan Inc. manufacture per month (assume an average 30-day month)?

3,000,000 Exterior = 100,000 Pulp Filter = 25,000* 4 = 100,000 Painting = 3,000*48 = 144,000 Packaging = 5,000 * 24 = 120,000 Constraint - Exterior or Pulp Filter 100,000*30 = 3,000,000

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. Cost per equivalent unit for Material P under the weighted-average method is calculated to be:

3.00 see above for explanation

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total Costs Variable Manufacturing $2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 If Johnson determines price using a 20% markup of life cycle cost, the price is:

306.00 Determine Full Manufacturing = Var Manufacturing + Total S&A = 2,350,000+600,000+750000 = 5,100,000 Var Manufacturing Cost*(1+M/U) / Units 5,100,000*120%/20,000 = 306.00

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Sales High F 10000 Great P 16000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: F P Materials 38.00 25.40 Labor 17.52 13.14 Budget OH Eng & Design 2409 engineering hours 404712 QC 12848 inspection hours 269808 Machinery 33726 machine hours 539616 Misc 26400 DL hours 134904 total 1349040 National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: F P Eng & Design 969 1440 QC 5648 7200 Machinery 20286 13440 Misc 12000 14400 What is the overhead application rate using the firm's VOLUME-based costing system (rounded to the nearest percent or cents)?

350% of direct labor Total OH/(F sales*Labor) + (P sales*labor) 1349040/(10000*17.52) +(16000*13.14) = 3.5

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. Units Sales Value at If Processed Further Product Produced Split Off Sales Value Add Costs X 6,000 $40,000 $80,000 $1,200 Y 3,000 15,000 40,000 3,000 Z 1,000 16,000 30,000 1,500 The amount of joint costs allocated to product Y using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

36000

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Sales High F 10000 Great P 16000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: F P Materials 38.00 25.40 Labor 17.52 13.14 Budget OH Eng & Design 2409 engineering hours 404712 QC 12848 inspection hours 269808 Machinery 33726 machine hours 539616 Misc 26400 DL hours 134904 total 1349040 National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: F P Eng & Design 969 1440 QC 5648 7200 Machinery 20286 13440 Misc 12000 14400 Using activity-based costing, total overhead per unit of Great P model is (rounded to the nearest cent):

42.61 Determine activity rates E&G 404712/2409 = 168 QC 569808/12848 = 21 Machinery 539616/33726 = 16 Misc 134904/26400 = 5.11 Muliply rates above by used by P/ Sales E&G (168*1440)/16000 = 15.12 QC (21*7200)/16000 = 9.45 Machinery (16 *13440)/16000 = 13.44 Misc (5.11 *14400)/16000 = 4.60 Total 16.28+11.86+32.46+6.13 = 42.61

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Sales High F 10000 Great P 16000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: F P Materials 38.00 25.40 Labor 17.52 13.14 Budget OH Eng & Design 2409 engineering hours 404712 QC 12848 inspection hours 269808 Machinery 33726 machine hours 539616 Misc 26400 DL hours 134904 total 1349040 National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: F P Eng & Design 969 1440 QC 5648 7200 Machinery 20286 13440 Misc 12000 14400 Using the firm's volume-based costing, applied factory overhead per unit for the High P model is (rounded to the nearest cent):

45.99 Total OH/(F sales*Labor) + (P sales*labor) 1349040/(10000*17.52) +(16000*13.14) = 3.50 Multiply P labor rate * overall OH 13.14*3.5 = 45.99

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. Cost per equivalent unit for conversion under the weighted-average method is calculated to be:

5.65 see above for explanation (check)

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8". Beginning WIP (40% completed) - 400 Transferred in 1600 Normal Spoilage 100 Abnormal Spoilage 100 Transferred Out 1400 Ending WIP (25% completed) 400 Costs Conversion beginning inventory 180,500 Current Conversion Costs 728,218 Universal Automotive Group calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question: What are the total conversion costs of abnormal spoilage?

53,454.00 Abnormal = 100 units * 534.54 (see above)

Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables. Cost data based on sales of 13,000 workbenches: Budgeted Q Actual Q Actual Cost Direct materials (pounds) 175,000 168,000 $3,450,000 Direct labor (hours) 72,800 71,500 825,000 Machine setups (no. of setups) 900 880 250,000 Mechanical ass (machine hrs) 273,000 281,250 3,750,000 If the profit per unit is maintained, the target cost per unit is (rounded to the nearest whole dollar):

557

Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates: Exterior construction can manufacture 100,000 juicer exteriors per day. Pulp filter insertion can install 25,000 filters every 6 hours. Painting can decorate 3,000 juicers every half hour. Packaging can package 5,000 juicers per hour. The plant operates 24/7, 24 hours a day every day of the week. What is the least amount of monthly capacity you would have to add to the bottleneck(s) to shift the bottleneck to a different process?

600,001 juicers per month 120,000* 30 = 3,600,000 Less existing constraint 3,000,000 Exterior = 100,000 Pulp Filter = 25,000* 4 = 100,000 Painting = 3,000*48 = 144,000 Packaging = 5,000 * 24 = 120,000 Constraint - Exterior or Pulp Filter

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Sales High F 10000 Great P 16000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: F P Materials 38.00 25.40 Labor 17.52 13.14 Budget OH Eng & Design 2409 engineering hours 404712 QC 12848 inspection hours 269808 Machinery 33726 machine hours 539616 Misc 26400 DL hours 134904 total 1349040 National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: F P Eng & Design 969 1440 QC 5648 7200 Machinery 20286 13440 Misc 12000 14400 Using the firm's volume-based costing, applied factory overhead per unit for the High F model is (rounded to the nearest cent):

61.32 Total OH/(F sales*Labor) + (P sales*labor) 1349040/(10000*17.52) +(16000*13.14) = 3.50 Multiply F labor rate * overall OH 17.52*3.5 = 61.32

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders. Sales High F 10000 Great P 16000 National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows: F P Materials 38.00 25.40 Labor 17.52 13.14 Budget OH Eng & Design 2409 engineering hours 404712 QC 12848 inspection hours 269808 Machinery 33726 machine hours 539616 Misc 26400 DL hours 134904 total 1349040 National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities: F P Eng & Design 969 1440 QC 5648 7200 Machinery 20286 13440 Misc 12000 14400 Using activity-based costing, total overhead per unit of the High F model is (rounded to the nearest cent):

66.73 Determine activity rates E&G 404712/2409 = 168 QC 569808/12848 = 21 Machinery 539616/33726 = 16 Misc 134904/26400 = 5.11 Muliply rates above by used by F/ Sales E&G (168*969)/10000 = 16.28 QC (21*5648)/10000 = 11.86 Machinery (16 *20286)/10000 = 32.46 Misc (5.11 *12000)/1000 = 6.13 Total 16.28+11.86+32.46+6.13 = 66.73

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. Units Sales Value at If Processed Further Product Produced Split Off Sales Value Add Costs X 6,000 $40,000 $80,000 $1,200 Y 3,000 15,000 40,000 3,000 Z 1,000 16,000 30,000 1,500 The amount of joint costs allocated to product X using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

72000 Determined by % of product produced *120,000

The Gargus Company, which manufactures projection equipment, is ready to introduce a new line of portable projectors. The following data are available for a proposed model: Variable manufacturing costs 270 Applied fixed manufacturing overhead 135 Variable selling and administrative costs 90 Applied fixed selling and administrative costs 105 What price will the company charge if the firm uses cost-plus pricing based on total cost and a markup percentage of 30%?

780.00 Determine Total Cost 270+135+90+105 = 600 600*130% = 780.00

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8". Beginning WIP (40% completed) - 400 Transferred in 1600 Normal Spoilage 100 Abnormal Spoilage 100 Transferred Out 1400 Ending WIP (25% completed) 400 Costs Conversion beginning inventory 180,500 Current Conversion Costs 728,218 Universal Automotive Group calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question: What are the total conversion costs transferred to finished goods?

801,810 Determine EQ for Conversion Transferred out + spoilage + Ending % 1400 + 100 +100 + (400*25%) = 1700 Determine per unit conversion costs (180500+728218)/1700 = 534.54 Total units in Finished Goods Transferred Out + Ending 25% 1400+100=1500 1500*534.54 = 801,810

Talamoto Co. manufactures a single product that goes through two processes — mixing and cooking. The following data pertains to the Mixing Department for September. WIP Sept 1 28000 units Conversion Completed 70% WIP Sept 30 16000 units Conversion Completed 50% Units started into production in Sept. 72000 Units completed and transferred out?? Cost WIP Sept 1 Material P 120,000 Material Q 110,000 Conversion 165,000 Costs Added Material P 180,000 Material Q 165,000 Conversion 354,800 Material P is added at the beginning of work in the Mixing Department. Material Q is also added in the Mixing Department, but not until units of product are forty percent completed with regard to conversion. Conversion costs are incurred uniformly during the process. Total equivalent units for conversion under the weighted-average method are calculated to be:

92,000

A measure of the quantity of resources consumed by an activity is:

A resource consumption cost driver

Which of the following is not true regarding activity-based costing (ABC) systems? ABC is used in both manufacturing and non-manufacturing companies. ABC is likely to have more overhead rates than volume-based systems. ABC identifies more costs as indirect costs than do traditional volume-based systems. ABC is likely to be more time-consuming than volume-based systems. ABC can provide more accurate product costs.

ABC identifies more costs as indirect costs than do traditional volume-based systems.

A concept which is commonly employed with allocation bases related to size is:

Ability-to-bear.

Process costing can be found in which of the following companies (industries)? Coca-Cola. Reichhold Chemical (chemicals). All of these answer choices are correct. Royal Dutch Shell Group (petroleum). Kimberly-Clark (paper products).

All

Activity-based costing (ABC) and the theory of constraints (TOC) are viewed as methods that are:

Complementary.

Invoicing cost is an example of a:

Customer batch-level cost.

Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates: Exterior construction can manufacture 100,000 juicer exteriors per day. Pulp filter insertion can install 25,000 filters every 6 hours. Painting can decorate 3,000 juicers every half hour. Packaging can package 5,000 juicers per hour. The plant operates 24/7, 24 hours a day every day of the week. Which function(s) is/are the bottleneck(s)?

Exterior construction and pulp filter insertion. Exterior = 100,000 Pulp Filter = 25,000* 4 = 100,000 Painting = 3,000*48 = 144,000 Packaging = 5,000 * 24 = 120,000 Constraint - Exterior or Pulp Filter

Which of the following activity cost pools would most likely be allocated based on the number of production runs? Factory heating costs. Factory janitorial costs. Indirect labor costs. Raw materials warehousing costs. Machinery set-up costs.

Machinery set-up costs.

Generally, firms will price a product more competitively at which stages of the product's sales life cycle?

Maturity and Decline.

Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Quality's workbenches due to aggressive pricing by competitors. Quality's workbench sells for $1,140 whereas the competition's comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables. Cost data based on sales of 13,000 workbenches: Budgeted Q Actual Q Actual Cost Direct materials (pounds) 175,000 168,000 $3,450,000 Direct labor (hours) 72,800 71,500 825,000 Machine setups (no. of setups) 900 880 250,000 Mechanical ass (machine hrs) 273,000 281,250 3,750,000 In order to reduce costs so as to reach the desired target cost, Quality Industries should also focus on reducing the cost of:

Mechanical Assemby Actual Quantity > Budgeted Quantify

The objectives of cost allocation are to:

Motivate effort, provide incentives, and fairly determine rewards.

Elimination of low-value-added activities in a firm should:

Not affect customer value.

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $2.40 per part Manu supervision Hours of machine time $14.80 per hour Assembly Number of parts $3.30 per part Machine setup Each setup $56.50 per setup Inspection and testing Logged hours $45.50 per hour Packaging Logged hours $19.50 per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $164.50 $75.60 Number of parts 160.00 120.00 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3.00 2.00 If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)? B-13 F-32 A) $80 $120 B) $1,378 $125 C) $318 $856 D) $1,378 $856 E) $318 $422

Option D New Sale price - (old Sale price - Product Cost) B-13 Product Cost Materials 164.50 Handling 2.40*160 =384.00 Supervision 14.80*7.90 = 116.92 Assembly 3.30*160 = 528.00 Setup 56.50*3 = 169.50 I&T 45.50 * 1.7 =77.35 Packaging 19.50*.9 = 17.55 Total B-13 Product Cost = 1457.82 F-32 Product Cost Materials 75.60 Handling 2.40*120=288.00 Supervision 14.80*4.20= 62.16 Assembly 3.30*120= 396.00 Setup 56.50*2.00= 113.00 I&T 45.50 * 0.80=36.40 Packaging 19.50*.0.50= 9.5 Total F-32 Product Cost = 980.91 B-13 1695-(1775-1457.82)= 1378 F-32 1095-(1220-980.91) = 856

Which of the following activities is a facility-level activity? Product inspection. Materials handling. Design engineering. Purchase orders. Plant maintenance.

Plant maintenance.

Allocation of service department costs to producing departments is the most complex of the allocation phase of departmental cost allocation because of the likely presence of:

Reciprocal flows

During the sales life cycle, which is an example of what happens during the introduction phase?

Sales rise slowly as customers become aware of the new product or service. Product variety is limited.

Effective implementation of activity-based costing (ABC) requires:

Support of top management and key employees.

When comparing Activity-based costing (ABC) and the Theory of Constraints (TOC), the approach each method takes toward profitability analysis is:

TOC takes a short-term approach and ABC takes a long-term approach.

A key ethical issue in cost allocation involves costing in an international context, because the choice of a cost allocation method can affect:

Taxes in domestic and foreign countries

Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product. Askin Bskin Total Sales 4,000,000 2,600,000 6,600,000 COGS -2,600,000 -2,100,000 -4,700,000 Gross Profit 1,400,000 500,000 1,900,000 R&D -1,170,000 Selling Exp -130,000 Profit B Taxes 600,000 Seventy-five percent of the research and development and selling expenses were traceable to Askin. Profit before taxes for the Askin product, per life-cycle income statements, is:

WRONG - $425,000 Determine how much R&D and Selling is attributed to Askin 75% 1. ($1,170,000 + 130,000) × .75 = $975,000 Gross profit of Askin less the R&D and Selling 2. $1400,000 - $975,000 = $425000

Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates: Exterior construction can manufacture 100,000 juicer exteriors per day. Pulp filter insertion can install 25,000 filters every 6 hours. Painting can decorate 3,000 juicers every half hour. Packaging can package 5,000 juicers per hour. The plant operates 24/7, 24 hours a day every day of the week. What cost management technique does this case illustrate?

Theory of constraints.

Time-driven ABC provides a direct way to measure:

Unused capacity.

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost Pools Allocation Base Costing Rate Materials handling Number of parts $2.40 per part Manu supervision Hours of machine time $14.80 per hour Assembly Number of parts $3.30 per part Machine setup Each setup $56.50 per setup Inspection and testing Logged hours $45.50 per hour Packaging Logged hours $19.50 per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $164.50 $75.60 Number of parts 160.00 120.00 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3.00 2.00 To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

WRONG - 34 Current Product cost - New Product Cost/Part Cost (1457.82-1378)/2.40 = 34

DeFond Company has a process costing system. All materials are introduced at the beginning of the process in Department One. The following information is available for the month of January: WIP July 1 - 40% complete for Conversion) - 400 Started 2000 Completed and Trans to Dept 2 - 1900 WIP July 31 (60% complete for conversion) - 500 What are the equivalent units for the month of July if the company uses the FIFO method?

WRONG - Option C = 2400/2200 Started and completed Started - Ending WIP = 2000-500 = 1500 Materials 400+1500+500 = 2400 Conversion 400+1500+ (500*60%) = 1900+300= 2200

In an activity-based costing system, overhead costs are divided into separate:

WRONG - Resource consumption and activity consumption cost drivers.

When gathering activity data, which of the following would not be a question that ABC project team members typically ask employees or managers? Value the activity has for the customer Resources required for the activity Where the activity takes place Time spent performing the activity

Where the activity takes place