Exam I

Pages: 8 (827 words) Published: September 19, 2014
Q1. Altima Company uses an overhead costing system based on direct labor hours for its two products X and Y. The company is considering adopting an activity-based costing system, and collects the following information for the month of October.

(1) Compute the unit manufacturing cost of Product X under a volume-based costing system based on direct labor hours.

(2) Compute the unit manufacturing cost of Product Y under a volume-based costing system based on direct labor hours.

*Note that the direct labor based costing system overcosted the high volume Job B and undercosted the low volume Job A

Q2. Assad Company uses the process costing method with the following data for the month of July.

Required:

(1) Compute cost per equivalent unit under the weighted-average method.
EUs for materials = 50,000+20,000 = 70,000
EUS for conversion = 50,000+(20,000*0.6) = 62,000

(2) Compute cost per equivalent unit under FIFO method. 
EUs for DM = 50,000 + 20,000 – 30,000 = 40,000
EUs for Conv: 50,000 + 12,000 – 30,000 * 0.3 = 53,000

DM: $120,000/40,000 =$3 per DM EU
Conv: $199,810/53,000=$3.77 per Conv EU
Total: $3+$3.77= $6.77 per EU

(3) Calculate the cost of units completed and transferred out using the weighted-average method. Under WA
50,000*$6.71 = $335,500
Under FIFO
# of units started & completed this period = 50,000 - 30,000 = 20,000 - 20,000 * $6.77 = $135,400
Let’s calculate the cost incurred to finish BWIP:
6,000 * 0 * $3 = $0
6,000 * 0.7 * $3.77 = $79,170
Total cost of units finished from BWIP = $0 + $79,170 + $65,500 + $51,910 = $196,580 Thus, the cost of completed and transferred out units = $135,400 +$196,580= $331,980

(4) Calculate the cost of ending work in process using the weighted-average method Under WA
DM : 20,000 EUs *$2.65 = $53,000
Conv: 12,000 EUS * $4.06 = $48,720
EWIP = $101,720
Under FIFO
20,000 * 100% * $3 + 20,000 * 0.6 * $3.77 = $105,240

Q3. The Insurance Plus Company has two service departments — actuarial and premium rating, and two production departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below:   

The operating costs of the departments were as follows:
Actuarial $50,000.
Premium Rating $40,000.
Marketing $60,000.
Sales $70,000.
The total cost accumulated in the marketing department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar): 

Solution:

30/50 x 50,000=$30,000
40/70 x 40,000= $22,857
Thus, the total cost accumulated in the marketing department = $52,857 + $60,000 = $112,857

Q5. Using the information in Q4, the total cost accumulated in the marketing department using the step method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar): Step 1

First allocating Actuarial department since it provides 50% (50%>30%) to the rating department. $50,000*0.5 = $25,000  $25,000+40,000=$65,000
 Total allocated amount of Rating Dep’t
$50,000*0.3=$15,000  $15,000+$60,000=$75,000
 Total allocated amount of Marketing Dep’t
$50,000*0.2 = $10,000  $10,000 + $70,000=$80,000
 Total allocated amount of Sales Dep’t
Step 2
Allocating the cost in Rating department to the Marketing department using Direct method: $65,000 * 40/70 = $37,143  $37,143 + $75,000 = $112,143
Q4. Using the information in Q4, the total cost accumulated in the marketing department using the reciprocal method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):  Solution:

Actuarial costs = Initial allocation in Actuarial + costs allocated from Rating Rating costs = Initial allocation in Rating + costs allocated from Actuarial

Denote Actuarial Costs = x and Rating costs = y
x=$50,000+0.3y...
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