1. Max co has provided the following data from its activity-based costing system
Activity cost pools Total cost Total activity
Designing Products $382,900 6,580 products design hours
Setting up batches $52,678 7366 batch set ups
Assembling products $25,122 4018 assembly hours
The activity rate for the “designing products” activity cost pool is
2. Sasha co allocates the estimated $200,000 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable function. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows;
Department Employees
Accounting 4
Production 38
Sales 10
How much of the accounting department costs will be allocated to the production?
3. Maze co allocates costs from the payroll dept (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) department. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory> information about the department is presented below
Department cost No of employees No of square feet occupied
Payroll (S1) $130,000 2 2,000
Maintenance (S2) $220,000 8 64,000
Molding (P1) 61 100,000
Finishing (P2) 44 60,000
Packaging (P3) 15 40,000
Maze co uses the direct method to allocate costs> Round all the answers to the nearest dollar. What amount of the payroll department costs will be allocated to the molding department?
4. The Manass co has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,400, they could be sold for $19,300. Alternatively, the keyboard could be sold “as is” for $8,700. what is the net advantage or disadvantage of re-working the keyboard?
5.Ritz co sells fine collectible statues and has implemented activity based costing. Cost in the shipping department have been divided into three cost pools. The first cost pool contains costs 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 shipment. Information about the department is summarized below;
Cost pool Total Costs Cost Driver Annual Activities
Packaging and shipping $163,300 No of boxes shipped 23,500 boxes
Final inspection $198,000 No of individual items shipped 96,400 items
General operations & supervision $82,400 No of orders 9,500 orders
During the period, the far east sales office generated 690 orders for a total of 6,030 items. These orders were shipped in 1,449 boxes. What amount of shipping department costs should be allocated to these sales?
6. Baller Financial is a banking service company that offers many different types of checking accounts. The bank has recently adopted an activity based costing system to assign cost 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 =52,000 accounts Checking account cost pools:
Cost Pools All Products Money Market checking
Returned check 200,000 returned checks 18,000
Check reconciliation 379,000 checking account 420
New accounts 53,000 new accounts 15,000
Cancelled check copy requests 90,000 cancelled checks 60,000
Web site cost 7 types of accounts 1
Calculate the overhead cost per account for the money market checking
7. Sosa co has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price?
8. Tim co sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represent the demand at various prices, what price should be charged in order to maximize profit
Units Sold Price
30,000 $10
40,000 $9
50,000 $8
60,000 $7
A. $10
B. $9
C. $8
D. $7
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 the situation
A. The original selling price
B. the anticipated profit
C. the original purchase price
D. the current selling price
10. Carlton products co has analysed the indirect cost associated with servicing its various customers in order to assess customer profitability. Results appear below
Cost Pool Annual Cost Cost Driver Annual Driver Quality
Processing electronic order $1,000,000 number of orders 500,000
Processing non-electronic orders $2,000,000 number of orders 400,000
Picking orders $3,000,000 number of different products ordered 800,000
Packaging orders $1,500,000 number of item ordered 50,000,000
Returns $2,000,000 number of returns 50,000
11. Costa co has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton co has approached Costa about buying 2,000 units for only $300 each. The unit 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 profit if Costa were to accept this special order?
A. Profit will increase $40,000
B. Profits will increase $60,000
C. Profits will decrease $200,000
D. Profits will increase $80,000
12. A company has $7.70 per units in variable costs and $4.10 per unit in fixed costat a volume of 50,000 units. If the company marks up total cost by 0.55, what price should be charged if 56,000 units are expected to be sold?
13. Customer profitability analysis might result in
A. dropping some customers that are unprofitable
B. Lowering price or offering incentive to profitability customers
C. Giving incentives to all customers to place orders online
D. All of the above
14. The Trade co uses cost plus pricing with a 0.32 mark up. The company is currently selling 100,000 units. Each units has a variable cost of $4.40. In addition, the company incurs $196,200 in fixed costs annually. If demand falls to 73,900 units and the company wants to continue to earn a 0.32 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 targeted costing methodology. An analysis of similar products on the market suggests a price of $130.00 per unit. The company requires a profit of 0.22 of selling price. How much is the target cost per Unit?
16. A Company using activity based pricing marks up the direct cost of goods by 0.26 plus charges customers of indirect costs based on the activities utilized by the customers.Indirect costs are charged as follows: $7.20 per order placed; $2.20 per separate item ordered; $26.50 per return. A customer places 5 orders with a total direct cost of $2,800, orders 292 seperate items, and makes 7 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 quantity
Consultation 188,000 no of consultations 100 consultation
Administrative costs 136,000 Admin Labor Hours 9,000 Labor Hours
Client services 81,000 No of clients 110 clients
The film had two consultation with this clients and required 130 administrative labor hours. What additional costs will be charged to this customer?
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