ECON 10B Chapter Notes - Chapter 17: Subledger, General Ledger, Direct Labor Cost
Document Summary
Get access
Related Documents
Related Questions
Brilliant Accents Company (BAC) manufactures and sells several styles of kitchen faucet handles. The companyâs overhead allocation system uses direct labor hours as an allocation base. The following were estimates of 2015âs production and some production data for two of its styles. Note that BAC makes more than these two styles of product.
| Table 1: Estimates for 2015 | BRASS | CHROME |
| Projected sales in units | 30,000 | 50,000 |
| Per unit data: | ||
| Selling price | $40 | $20 |
| Direct materials | $ 8 | $ 4 |
| Direct labor | $15 | $ 3 |
| Hours per 1000-unit batch: | ||
| Direct labor hours | 40 | 10 |
| Machine hours | 25 | 25 |
| Setup hours | 0.5 | 1.0 |
| Inspection hours | 15 | 29 |
| Total overhead costs (primarily rent, depreciation and other fixed costs of the manufacturing plant): | $870,000 | |
| Estimated activity | ||
| Direct labor hours | 2,900 hours | |
| Machine hours | 2,400 hours | |
The companyâs controller just returned from an all-expenses-paid seminar in Maui on activity-based costing, sponsored by an ABC consulting firm. There, she surprisingly became convinced ABC was right for BAC. She decided to re-do 2015âs overhead allocation using an ABC system. She commissioned a study of the companyâs overhead costs and the related activities.
Since the examples used in the Maui seminar used setups and inspections, she used those as the activities for her ABC study. The results of her study, showing total overhead costs and activity levels for the year are:
| Table 2: Overhead costs | ||
| Activity | Estimated 2015 total activity levels | Total Cost |
| Setups | 95 setup hours | $465,000 |
| Inspections | 2,700 inspection hours | $405,000 |
| $870,000 | ||
During 2015, the company had the following actual results:
| Table 3: 2015 actual results | ||
| Total overhead costs: | $767,000 | |
| Direct labor hours | 2,750 hours | |
| Machine hours | 2,200 hours |
a. (8 points) Using the companyâs traditional cost allocation system that allocates overhead costs via direct labor hours, compute the allocated overhead costs per unit for the Brass and Chrome faucet handles.
b. (4 points) How much overhead would be over- or under-applied for the year using the traditional system?
c. (4 points) If BAC implements an activity-based costing system using the data in table 2, determine the activity cost driver rates for setup costs and inspection costs. Fully label your answer.
d. (8 points) Using the ABC cost allocation system, compute the estimated overhead costs per unit for the Brass and Chrome faucet handles.
e. (4 points) Why do the costs calculated by the two systems differ? Be specific. Generic or nonsense answers wonât get you any points.
f. (3 points) Which cost system (the traditional or the ABC system) is more accurate? That is, which cost system comes closer to calculating the true, actual overhead costs per unit for the products listed above? Explain your answer.
1. Terms of Payment found in international business contracts include:
a. CFR (cost and freight, foreign port)
b. Consignment
c. Documentary Drafts
d. all of the above
e. (b) and (c) above
2. Joint Ventures have the
a. advantage of utilizing the expertise of a local partner.
b. disadvantage of not being able to make all the decisions because control is shared.
c. advantage of being able to share the profits.
d. all of the above
e. (a) and (b) above
4. Businesses are using global or regional brands for the following reason(s):
a. private brands do not offer any meaningful competition.
b. economies of scale usually result in reduced costs.
c. satellite and cable TV are widely available.
d. all of the above
e. (b) and (c) above
6. E-Commerce Potential is
a) is higher for Jamaica than for Argentina.
b) is an index based on mobile phones, internet hosts, and number of PCs.
c) is a composite ranking of three indices.
d) (a) and (b) above
e) (a) and (c) above
7. Generally, industrial products require __________ adaptation than consumer products to meet the demands of the world market.
a) greater
b) less
c) the same amount of
d) only slightly less
e) only slightly more
13. Although global sourcing can be beneficial it may have some disadvantages such as
a. added costs
b. exchange rate fluctuations affecting prices
c. quality control
d. all of the above
e. (b) and (c) above
14. In staffing
a. an ethnocentric policy is always the most effective if qualified personnel are available.
b. a polycentric policy is always the least effective even when qualified personnel are available.
c. using third country personnel would be considered most frequently with regiocentric or geocentric policies.
d. all of the above
e. (a) and (c) above
16. In the most recent 40 years, union membership around the world has been in decline, in part because:
a) There are more women in the workforce.
b) The unions have been successful and priced themselves out of the market.
c) Employers have made efforts to keep business union-free.
d) (a) and (c) above only
e) All of the above.
17. When a firm has less than a majority interest in a subsidiary it can still have control by having
a) a management contract
b) the right to control the technology
c) the right to vote its shares
d) all of the above
e) (a) and (b) above only
18. The Female Wage Gap
a. is the percent of Male Wages earned by Female Employees.
b. younger females have less of a gap in all countries.
c. is the smallest for older females in Korea.
d. all of the above
e. (a) and (c) above
19. Income earned abroad by U.S. citizens:
a) incurs a tax liability in the US with some adjustments.
b) incurs tax liability only on the portions earned in the U.S.
c) incurs no tax liability.
d) incurs a tax liability in the US on all income earned with no adjustments for
taxes paid in other countries.
e) none of the above
20. The international structural stages model suggests that a typical evolutional path for an international company's structure would be:
a) from international division to geographical area division to worldwide product division.
b) from international division to worldwide product division to geographical area division.
c) from geographical area division to worldwide product division to global matrix.
d) from functional division to horizontal company to virtual corporation.
e) from international division to worldwide product division to global matrix.
21. Competitive advantage is acquired by developing competencies that
a. are common to all competitors so the firm can compete.
b. create value for customers even if the price is higher than customers want to pay.
c. are difficult to imitate.
d. all of the above
e. (a) and (c) above only
22. In their measurement and disclosure for accounting systems, less developed countries tend toward:
23. Export Marketing plans should be specific about: A. The markets to be developed B. The marketing strategy for servicing them. C. the tactics required to make the strategy operational
| | |||||||||||||||||
| | ||||||||||||||||||
24. Factors that are involved in the operation of a manufacturing system include:
A. Plant location
B. Plant layout
C. Material handling
D. Human asset
E. all of the above
| 26. A middle ground between an ad campaign that is standardized worldwide and an entirely local ad campaign is called a:
| |||||||||||||
27. In selecting a foreign market, a screening process is used by a firm. In regard to this process, answer the following:
a) The importance of the priority order of the steps in the screening process.
b) The reasons for participating in either a trade show or in a trade mission.(Select one)
c) The reasons for using cluster analysis in assessing global markets.
d) The importance of regional or ethnic subcultures in evaluating competitive forces.
28. Select any four of the following, explain each of them, and discuss the role each of them plays in international business activities:
a) Summarize any one of the videos from week six or eight (either one of them not both) and discuss the role the information in this video plays in international business activities.
b) Foreign (Free) Trade Zones
c) Countertrade
d) Explain why a manager with a global assignment needs a mentor in the host country and a mentor in the home country.
e) Quality and quantity of the labor force in a country
f) Labor Mobility and Guest Workers