1. Maxx Inc. has provided the following data from its activity-based costing system:
Activity Cost Pools Total Cost Total Activity
Designing products $384,200 6,550 product design hrs
Setting up batches $52,678 7366 batch set-ups
Assembling products $25,122 4,018 assembly hours
The activity rate for the “designing products” activity cost pool is:
2. Sasha Company allocates the estimated $189,900 of its accounting departments costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated on the number of employees using the direct method. Information regarding costs and employees follows:
How much of the accounting department costs will be allocated to the production?
3. Medusa Company allocates costs from the payroll dep’t (S1) and the maintenance dep’t (S2) to the molding (P1). Finishing (P2), and packaging (P3) dep’ts. Payroll dep’t costs are allocated based on the number of employees in the dep’t and maintenance dep’t costs are allocated based on the number of square feet which the production dep’t occupies within the factory. Information about the dep’ts is presented below:
Department Costs # of Employees # of Square Feet Occupied
Payroll (S1) $135,000 2 2,000
Maintenance (S2) $220,000 8 64,000
Molding (P1) 60 100,000
Finishing (P2) 40 60,000
Packaging (P3) 22 40,000
Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar. What amount of the payroll department costs will be allocated to the allocated to the molding department?
4. The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboard are upgraded at a cost of $8,000, they could be sold for $19,000. Alternatively, the keyboards could be sold “as is” for $7,300.
What is the net advantage or disadvantage or re-working the keyboards?
5. Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains cost that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the shipment is summarized below:
Cost Pool Target Costs Cost Driver Annual Activity
Packaging & shipping $161,300 Number of boxes shipped 24,300 boxes
Final Inspection $200,200 # of individual items shipped 96,900 items
Gen. operations & superv. $82,400 # of orders 8,200
During the period, the Far East sales office generated 670 orders for a total of 6,000 items. These orders were shipped in 1,306 boxes. What amount of shipping department costs should be allocated to these sales?
6. Baller Financial is a banking services company that offers many different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to their various types of checking accounts. The following data relate to the money market checking accounts, one of the popular checking accounts, and the ABC cost pools: Annual number of accounts = 51,000 accounts. Checking account pools:
Cost Pool Cost Cost Drivers
Returned check costs $2,760,000 # of returned checks
Checking acct recon cost $60,000 # of acct recon requests
New acct set-up $645,000 # of new accounts
Copies of cancelled checks $398,000 # of cancelled check copy requests
Online banking website maintenance $191,000 Per product group (type of account)
Annual activity information related to cost drivers:
Cost Pool All Products Money Market Checking
Returned checks 197,000 returned checks 18,000
Check reconciliation costs 398,000 checking account 420
New accounts 59,000 new accounts 15,000
Cancelled check copy requests 97,000 cancelled checks 60,000
Website costs 1 types of account 1
Calculate the overhead cost per account for the Money Market Checking?
7. Sosa Company has $39 per unit variable costs and $1,900,000 per year fixed costs. Demand is estimated to be 138,000 units annually. What is the price if markup of 35% on total cost is used to determine the price?
8. Bob’s company sells one product with a variance cost of $5 per unit. The company is unsure what price to change in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various process, what price should be charged in order to maximize profits?
Units sold Price
9. A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation?
a. The original selling price
b. The anticipated profit
c. The original purchase price
d. The current selling price
10. Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to access customer profitability. Results appear below:
Cost Pool Annual Cost Cost Driver Annual Driver uality
Processing electronic orders $1,000,000 # of orders 500,000
Processing non-electronic orders $2,000,000 # of orders 400,000
Picking orders $3,000,000 # of different products 800.000
Packaging orders $1,500,000 # of items ordered 50,000,000
Returns $2,000,000 # of returns 50,000
If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered?
11. Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order?
a. Profits would increase $40,000
b. Profits would increase $60,000
c. Profits would decrease $200,000
d. Profits would increase $80,000
12. A company has $6.20 per unit variable costs and $4.80 per unit fixed costs at a volume of 50,000 units. If the company marks up total costs by 0.53, what price should be charged if 66,000 units are expected to be sold?
13. Customer profitability analysis might result in:
a. Dropping some customers that are unprofitable
b. Lowing price or offering incentives to profitable customers
c. Giving incentives to all customers to place orders online
d. All of the above
14. The Estrada Company uses cost-plus pricing with a 0.50 markup. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $5.20. In addition, the company incurs $199,200 in fixed costs annually. If demand falls to $85,600 units and the company wants to continue to earn a 0.50 return, what price should the company charge?
15. A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $135.00 per unit. The company requires a profit of 0.26 of selling price. How much is the target cost per unit?
16. A company using activity based pricing marks up the cost of goods by 0.29 plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $7.80 per order placed; $3.50 per separate item ordered; $27.00 per return. A customer places 10 orders with a total direct cost of $2,900, orders 296 separate items, and makes 5 returns. What will the customer be charged?
17. A law firm uses activity-based pricing. The company’s activity pools are as follows:
Cost Pool Annual Estimated Cost Cost Driver Annual Driver Quality
Consultation 181,000 # of consultations 90 consultations
Administrative costs 143,000 Admin labor hours 9,400 labor hours
Client service 88,000 # of clients 110 clients
The firm had two consultations with this client and required 130 administrative labor hours. What additional costs will be charged to this customer?
|Due By (Pacific Time)||11/14/2014 12:00 am|
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