ACCT I S 211 Study Guide - Midterm Guide: Coq, Southwest Airlines, Finished Good

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tanfly138

13 Oct 2016

School

UW-Madison

Department

Accounting And Info Systems

Course

ACCT I S 211

Professor

Matsumura Ella

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Document Summary

Assignment of indirect costs based only on (cid:498)unit-level(cid:499) or unit volume drivers: may have multiple overhead rate based on different cost drivers, but the cost drivers will typically be unit-level. Ex: direct labor hours, direct labor cost, machine hours, direct. Because of this focus on unit volume drivers, traditional cost systems often: underestimate the cost of resources required for specialty, low volume products, overestimate the cost of resources for high volume, standard products. These have been developed to eliminate cost distortions. Activity-based cost (abc) assigns resource expenses to activities on the basis of how much of the resource each activity uses. Especially useful when: large cost pool- manufacturing support, customer support, etc, diversity- diversity of resource usage by products, services or customers. Unit related: proportional to number of units produced: direct labor hours, machine hours. Batch related: not unit related, related to number of batches run: machine setups, 1st item inspection.

Related Questions

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

pearpig306

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

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 Overhead Costs		Expected Activity
Activity Cost Pools	Estimated Overhead Costs		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

crimsonyellowjacket954

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 Cost Drivers
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?

amethystmoose429

ACCT I S 211 Study Guide - Midterm Guide: Coq, Southwest Airlines, Finished Good

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