ACCT I S 211 Study Guide - Midterm Guide: Coq, Southwest Airlines, Finished Good
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1.If there is a change in the level of the number of unitsproduced:
a.fixed costs per unit will be the same and variable costs per unitwill change.
b.fixed and variable costs per unit will change.
c.fixed and variable costs per unit will remain the same.
d.fixed costs per unit will change and variable costs per unit willbe the same.
2.Which of the following will decrease a companyâs breakevenpoint?
A) Decreasing the contribution margin per unit.
B) Increasing the variable cost per unit.
C) Increasing the total fixed costs.
D) Increasing the selling price per unit.
3.In generating cost information fordetermining whether or not to delete a product line, the mostimportant distinction to identify is: | ||
A) | direct versus indirect costs | |
B) | fixed versus variable costs | |
C) | manufacturing versus non-manufacturing costs | |
D) | avoidable versus unavoidable costs |
4.Which of the following is the proper sequence in anactivity-based costing system?
A) Identification of cost drivers, identification ofcost pools, calculation of cost application rates, assignment ofcost to products.
B) Identification of cost pools, identification of costdrivers, calculation of cost application rates, assignment of costto products.
C) Assignment of cost to products, identification ofcost pools, identification of cost drivers, calculation of costapplication rates,.
D) Calculation of cost application rates,identification of cost drivers, identification of cost pools,assignment of cost to products.
5.Which of the following statements is true?
A) A traditional volume-based system based on directlabor generally undercosts high volume product lines.
B) In a traditional volume-based costing system basedon direct labor, low volume products generally subsidize highvolume products.
C) An activity-based costing system generallyundercosts low-volume, complex product lines.
D) A traditional volume-based costing system based ondirect labor generally undercosts low-volume, complex productlines.
6.Hamilton Company applies overhead based on direct labor hours.At the beginning of 2005, the company estimated that manufacturingoverhead would be $700,000, and direct labor hours would be 10,000.Actual overhead by the conclusion of 2005 amounted to $800,000 andactual direct labor hours were 14,000. On the basis of thisinformation, Horton's 2005 predetermined overhead rate is:
A) $50.00
B) $70.00
C) $80.00
D) $57.14
Cabat Company manufactures two products, Product C and Product D. The company estimated it would incur $189,910 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current periodâs operations appear below:
Product C | Product D | |||||||
Estimated volume | 4,400 | units | 3,600 | units | ||||
Direct labor-hours per unit | 2.40 | hours | 2.00 | hour | ||||
Direct materials cost per unit | $ | 17.60 | $ | 30.90 | ||||
Direct labor cost per unit | $ | 15.60 | $ | 12.00 |
Requried: | |
a-1. | Compute the predetermined overhead rate under the current method. (Round your answer to 2 decimal places.) |
Predertemined overhead rate | ____ per DLH |
a-2. | Determine the unit product cost of each product for the current year. (Do not round your intermediate calculations. Round your final answer to 2 decimal places.) |
Product C | Prodcut D | |
Unit Product Cost |
b. | The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below: |
Activity Cost Pools | Estimated | Expected Activity | |||
Product C | Product D | Total | |||
Machine setups | $ | 13,390 | 230 | 240 | 470 |
Purchase orders | 78,840 | 1,060 | 1,400 | 2,460 | |
General factory | 97,680 | 10,560 | 7,200 | 17,760 | |
Total | $ | 189,910 | |||
Determine the unit product cost of each product for the current period using the activity-based costing approach. (Round your intermediate calculations and final answers to 2 decimal places.)
Product C | Prodcut D | |
Unit Product Cost |
Problem 17-3A (Part Level Submission)
Shaker Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2017 are as follows.
Overhead Cost Pools | Amount | |
Purchasing | $73,800 | |
Handling materials | 82,160 | |
Production (cutting, milling, finishing) | 221,000 | |
Setting up machines | 96,250 | |
Inspecting | 96,000 | |
Inventory control (raw materials and finished goods) | 131,040 | |
Utilities | 450,000 | |
Total budgeted overhead costs | $1,150,250 |
For the last 4 years, Shaker Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2017, 100,000 machine hours are budgeted.
Jeremy Nolan, owner-manager of Shaker Stairs Co., recently directed his accountant, Bill Seagren, to implement the activity-based costing system that he has repeatedly proposed. At Jeremy Nolanâs request, Bill and the production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.
Activity Cost Pools | Cost Drivers | Expected Use of | ||
Purchasing | Number of orders | 600 | ||
Handling materials | Number of moves | 8,000 | ||
Production (cutting, milling, finishing) | Direct labor hours | 100,000 | ||
Setting up machines | Number of setups | 1,250 | ||
Inspecting | Number of inspections | 6,000 | ||
Inventory control (raw materials and finished goods) | Number of components | 168,000 | ||
Utilities | Square feet occupied | 90,000 |
Steve Hannon, sales manager, has received an order for 250 stairways from Community Builders, Inc., a large housing development contractor. At Steveâs request, Bill prepares cost estimates for producing components for 250 stairways so Steve can submit a contract price per stairway to Community Builders. He accumulates the following data for the production of 250 stairways.
Direct materials | $104,200 | |
Direct labor | $112,200 | |
Machine hours | 15,300 | |
Direct labor hours | 5,300 | |
Number of purchase orders | 60 | |
Number of material moves | 800 | |
Number of machine setups | 100 | |
Number of inspections | 450 | |
Number of components | 16,000 | |
Number of square feet occupied | 8,000 |
a) Compute the predetermined overhead rate using traditional costing with machine hours as the basis.
(b) What is the manufacturing cost per stairway under traditional costing?
(c) What is the manufacturing cost per stairway under the proposed activity-based costing?(Prepare all of the necessary schedules.)
(d) Which of the two costing systems is preferable in pricing decisions and why?