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ACC-1B Lecture Notes - Lecture 5: Rollerblade, Contribution Margin, Income Statement

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26 Oct 2020

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Tyler company manufactures roller blade and skateboard wheels that it sells to manufactures and retail outlets. Manufacturing consists of two processes: machining and assembly. Machining department shapes, hones, and drills the raw materials. The assembly department assembles and packages the parts. Abc: key concepts activity based costing = abc. Identify overhead cost pools and drivers, assign overhead to production using abc methods. Activity any event, action, transaction, or work sequence that incurs costs when producing a product or performing a service. Activity cost pool the oh cost attributed to a distinct activity. Ordering materials setting up machines, assembling products and inspecting products. Cost driver any factor or activity that has a direct cause effect relationship with the resources consumed. Overhead costs - activity cost pools - cost drivers - products. Cvp & relevant costing 16 questions on the oa. Variable costs: costs that vary in total directly and proportionately with changes in the activity level.

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Related Questions

2. Sphere Company produces two products, Alpha and Beta. Alpha is ahigh-volume item totaling 20,000 units annually. Beta is alow-volume item totaling only 6,000 units per year. Alpha requiresone hour of direct labor for completion, while each unit of Betarequires 2 hours. Therefore, total annual direct labor hours are32,000 (20,000 + 12,000). Expected annual manufacturing overheadcosts are $640,000. Sphere uses a traditional costing system andassigns overhead based on direct labor hours. Each unit of Betawould be assigned overhead of
A) $20.00.
B) $24.61.
C) $40.00.
D) need more information to compute.
3. Racquet King Corporation manufactures titanium and aluminumtennis racquets. Racquet King's total overhead costs consist ofassembly costs and inspection costs. The following information isavailable: Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $30,000
Inspections 350 150 $50,000
2,100 labor hours 1,900 labor hours

Racquet King is considering switching from one overhead rate basedon labor hours to activity-based costing.
Total overhead costs assigned to titanium racquets, using a singleoverhead rate, are
A) $40,000.
B) $42,000.
C) $50,000.
D) $56,000.
4. Racquet King Corporation manufactures titanium and aluminumtennis racquets. Racquet King's total overhead costs consist ofassembly costs and inspection costs. The following information isavailable: Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $30,000
Inspections 350 150 $50,000
2,100 labor hours 1,900 labor hours

Racquet King is considering switching from one overhead rate basedon labor hours to activity-based costing.
Using activity-based costing, how much assembly cost is assigned totitanium racquets?
A) $10,500.
B) $15,000.
C) $15,750.
D) $21,000.
5. Racquet King Corporation manufactures titanium and aluminumtennis racquets. Racquet King's total overhead costs consist ofassembly costs and inspection costs. The following information isavailable: Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $30,000
Inspections 350 150 $50,000
2,100 labor hours 1,900 labor hours

Racquet King is considering switching from one overhead rate basedon labor hours to activity-based costing.
Using activity-based costing, how much inspections cost is assignedto titanium racquets?
A) $15,000.
B) $23,750.
C) $25,000.
D) $35,000.
6. Minnie Moore Corporation has the following overhead costs andcost drivers. Direct labor hours are estimated at 100,000 for theyear.
Activity Cost Pool Cost Driver Est. Overhead Cost DriverActivity
Ordering and Receiving Orders $ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections

If overhead is applied using traditional costing based on directlabor hours, the overhead application rate is
A) $9.60.
B) $12.00.
C) $15.00.
D) $34.17.
7. Minnie Moore Corporation has the following overhead costs andcost drivers. Direct labor hours are estimated at 100,000 for theyear.
Activity Cost Pool Cost Driver Est. Overhead Cost DriverActivity
Ordering and Receiving Orders $ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections

If overhead is applied using activity-based costing, the overheadapplication rate for ordering and receiving is
A) $1.20 per direct labor hour.
B) $240 per order.
C) $0.12 per part.
D) $6,834 per order.
8. An example of a cost which would not be assigned to an overheadcost pool is
A) salaries.
B) freight-out.
C) depreciation.
D) supplies.
9. One of Melman Company's activity cost pools is inspecting, withestimated overhead of $100,000. Melman produces throw rugs (700inspections) and area rugs (1,300 inspections). How much of theinspecting cost pool should be assigned to throw rugs?
A) $35,000.
B) $50,000.
C) $53,846.
D) $100,000.
10. For its inspecting cost pool, Sosa Company expected overheadcost of $200,000 and 4,000 inspections. The actual overhead costfor that cost pool was $240,000 for 5,000 inspections. Theactivity-based overhead rate used to assign the costs of theinspecting cost pool to products is
A) $40 per inspection.
B) $48 per inspection.
C) $50 per inspection.
D) $60 per inspection.
11. Buren Company manufactures two products, Regular and Supreme.Buren's overhead costs consist of machining, $2,000,000; andassembling, $1,000,000. Information on the two products is: RegularSupreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Regular using traditional costing using directlabor hours is
A) $860,000.
B) $1,200,000.
C) $1,800,000.
D) $2,140,000.
12. Buren Company manufactures two products, Regular and Supreme.Buren's overhead costs consist of machining, $2,000,000; andassembling, $1,000,000. Information on the two products is: RegularSupreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Supreme using traditional costing using directlabor hours is
A) $860,000.
B) $1,200,000.
C) $1,800,000.
D) $2,140,000.
13. Buren Company manufactures two products, Regular and Supreme.Buren's overhead costs consist of machining, $2,000,000; andassembling, $1,000,000. Information on the two products is: RegularSupreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Regular using activity-based costing is
A) $860,000.
B) $1,200,000.
C) $1,800,000.
D) $2,140,000.
14. Buren Company manufactures two products, Regular and Supreme.Buren's overhead costs consist of machining, $2,000,000; andassembling, $1,000,000. Information on the two products is: RegularSupreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Supreme using activity-based costing is
A) $860,000.
B) $1,200,000.
C) $1,800,000.
D) $2,140,000.
15. Cooledge Co. produces 3 products: P1, Q2, and R3. P1 requires400 purchase orders, Q2 requires 600 purchase orders, and R3requires 1,000 purchase orders. Cooledge has identified an orderingand receiving activity cost pool with allocated overhead of$120,000 for which the cost driver is purchase orders. Direct laborhours used on each product are 50,000 for P1, 40,000 for Q2, and110,000 for R3. How much ordering and receiving overhead isassigned to each product?P1 Q2 R3

A) $40,000 $40,000 $40,000

B) $30,000 24,000 $66,000

C) 24,000 $36,000 $60,000

D) $27,000 $30,000 $63,000

16. NulyMade Inc. computed an overhead rate for machining costs($1,000,000) of $10 per machine hour. Machining costs are driven bymachine hours. If computed based on direct labor hours, theoverhead rate for machining costs would be $20 per direct laborhour. The company produces two products, Grit and Grind. Gritrequires 60,000 machine hours and 20,000 direct labor hours, whileGrind requires 40,000 machine hours and 30,000 direct labor hours.Using activity-based costing, machining costs assigned to eachproduct isGrit Grind

A) $400,000 $600,000
B) $500,000 $500,000
C) $533,333 $466,667
D) $600,000 $400,000
17. Lasse Inc. manufactures 2 products, hammers and screwdrivers.The company has estimated its overhead in the assembling departmentto be $165,000. The company produces 300,000 hammers and 600,000screwdrivers each year. Each hammer uses 2 parts, and eachscrewdriver uses 3 parts. How much of the assembly overhead shouldbe allocated to hammers?
A) $41,250.
B) $55,000.
C) $66,000
D) $70,714.
18. Banes Co. incurs $350,000 of overhead costs each year in itsthree main departments, machining ($200,000), inspections($100,000) and packing ($50,000). The machining department works4,000 hours per year, there are 500 inspections per year, and thepacking department packs 500 orders per year. Information aboutBanes's two products is as follows: Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

If traditional costing based on direct labor hours is used, howmuch overhead is assigned to Product X this year?
A) $84,167
B) $121,154
C) $170,000
D) $175,000
19. Banes Co. incurs $350,000 of overhead costs each year in itsthree main departments, machining ($200,000), inspections($100,000) and packing ($50,000). The machining department works4,000 hours per year, there are 500 inspections per year, and thepacking department packs 500 orders per year. Information aboutBanes's two products is as follows: Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

Using ABC, how much overhead is assigned to Product X thisyear?
A) $84,167
B) $121,154
C) $170,000
D) $175,000
20. One of Stellar Company's activity cost pools is machine setups,with estimated overhead of $180,000. Stellar produces sparklers(400 setups) and lighters (600 setups). How much of the machinesetup cost pool should be assigned to sparklers?
A) $180,000
B) $72,000
C) $90,000
D) $108,000
21. Bichon Company manufactures two products, Tini A and Tall B.Bichon's overhead costs consist of setting up machines, $1,200,000;machining, $2,700,000; and inspecting, $900,000. Information on thetwo products is: Tini A Tall B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Tini A using traditional costing using directlabor hours is
A) $1,800,000.
B) $2,304,000.
C) $2,505,000.
D) $2,880,000.
22. Bichon Company manufactures two products, Tini A and Tall B.Bichon's overhead costs consist of setting up machines, $1,200,000;machining, $2,700,000; and inspecting, $900,000. Information on thetwo products is: Tini A Tall B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Tall B using traditional costing using directlabor hours is
A) $1,920,000.
B) $2,304,000.
C) $2,505,000.
D) $3,000,000.
23. Bichon Company manufactures two products, Tini A and Tall B.Bichon's overhead costs consist of setting up machines, $1,200,000;machining, $2,700,000; and inspecting, $900,000. Information on thetwo products is: Tini A Tall B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Tini A using activity-based costing is
A) $1,800,000.
B) $2,304,000.
C) $2,496,000.
D) $2,880,000.
24. Bichon Company manufactures two products, Tini A and Tall B.Bichon's overhead costs consist of setting up machines, $1,200,000;machining, $2,700,000; and inspecting, $900,000. Information on thetwo products is: Tini A Tall B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Tall B using activity-based costing is
A) $1,920,000.
B) $2,304,000.
C) $2,496,000.
D) $3,000,000.
25. Simpson Co. produces three products: Earth, Wind, and Fire.Earth requires 80 machine setups, Wind requires 60 setups, and Firerequires 180 setups. Simpson has identified an activity cost poolwith allocated overhead of $480,000 for which the cost driver ismachine setups. How much overhead is assigned to each product?EarthWind Fire

A) $160,000 $160,000 $160,000

B) $100,000 $75,000 $225,000

C) $120,000 $90,000 $270,000

D) $90,000 $160,000 $230,000

26. Tierra Co, incurs $240,000 overhead costs each year in itsthree main departments, setup ($15,000), machining ($165,000), andpacking ($60,000). The setup department performs 40 setups peryear, the machining department works 5,000 hours per year, and thepacking department packs 500 orders per year. Information aboutTierra's two products is as follows: Product A1 Product B1
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400

If machining hours are used as a base, how much overhead isassigned to Product A1 each year?
A) $48,000
B) $120,000
C) $82,500
D) $72,000
27. Tierra Co, incurs $240,000 overhead costs each year in itsthree main departments, setup ($15,000), machining ($165,000), andpacking ($60,000). The setup department performs 40 setups peryear, the machining department works 5,000 hours per year, and thepacking department packs 500 orders per year. Information aboutTierra's two products is as follows: Product A1 Product B1
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400

Using ABC, how much overhead is assigned to Product A1 eachyear?
A) $120,000
B) $181,500
C) $48,000
D) $58,500
28. Tierra Co, incurs $240,000 overhead costs each year in itsthree main departments, setup ($15,000), machining ($165,000), andpacking ($60,000). The setup department performs 40 setups peryear, the machining department works 5,000 hours per year, and thepacking department packs 500 orders per year. Information aboutTierra's two products is as follows: Product A1 Product B1
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400

Using ABC, how much overhead is assigned to Product B1 eachyear?
A) $120,000
B) $96,000
C) $181,500
D) $192,000
29. AJ Accounting performs two types of services, Audit and Tax.AJ's overhead costs consist of computer support, $200,000; andlegal support, $100,000. Information on the two services is: AuditTax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to audit services using traditional costingis
A) $100,000.
B) $120,000.
C) $180,000.
D) $200,000.
30. AJ Accounting performs two types of services, Audit and Tax.AJ's overhead costs consist of computer support, $200,000; andlegal support, $100,000. Information on the two services is: AuditTax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to tax services using traditional costing is
A) $100,000.
B) $120,000.
C) $180,000.
D) $200,000.
31. AJ Accounting performs two types of services, Audit and Tax.AJ's overhead costs consist of computer support, $200,000; andlegal support, $100,000. Information on the two services is: AuditTax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to audit services using activity-based costingis
A) $100,000.
B) $120,000.
C) $180,000.
D) $200,000.
32. AJ Accounting performs two types of services, Audit and Tax.AJ's overhead costs consist of computer support, $200,000; andlegal support, $100,000. Information on the two services is: AuditTax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to tax services using activity-based costingis
A) $100,000.
B) $120,000.
C) $180,000.
D) $200,000.
33. AJ Accounting performs two types of services, Audit and Tax.AJ's overhead costs consist of computer support, $200,000; andlegal support, $100,000. Information on the two services is: AuditTax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

AJ Accounting performs tax services for Dan Morris. Direct laborcost is $1,200; 600 CPU minutes were used; and 1 legal hour wasused. What is the total cost of the Morris job using activity-basedcosting?
A) $2,400
B) $2,500
C) $3,600
D) $3,700