Ch7 Practice Leader Answeronly

Topics: Costs, Cost, Cost accounting Pages: 5 (357 words) Published: May 2, 2015
1.
Hochberg Corporation uses an activity-based costing system with the following three activity cost pools:

  

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs:

  

The distribution of resource consumption across activity cost pools is given below:

  

The activity rate for the Fabrication activity cost pool is closest to:   

A. 
$5.30 per machine-hour

B. 
$3.60 per machine-hour

C. 
$7.20 per machine-hour

D. 
$4.80 per machine-hour
Solution: A
After doing all the Activity Cost Pools
159,000 / 30,000 = 5.30

2.1.
Lindsey Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 5,000 units and of Product B is 2,000 units. There are three activity cost pools, with total cost and activity as follows:

  

The activity-based costing cost per unit of Product A is closest to:   

A. 
$14.11

B. 
$13.77

C. 
$7.00

D. 
$17.70
Solution: A
Activity Rate:
1. 24,000 / 1,000 = 24
2. 36,900 / 900 = 41
3. 63,000 / 1,800 = 35
Product Total Cost:
1. 24 * 200 = 4,800
2. 41 * 750 = 30,750
3. 25 * 1,000 = 35,000
4,800 + 30,750 + 35,000 = 70,550
70,550 / 5000 units = 14.11 per unit

3.
Radakovich Corporation has provided the following data from its activity-based costing system:

  

The company makes 230 units of product F60N a year, requiring a total of 480 machine-hours, 50 orders, and 30 inspection-hours per year. The product's direct materials cost is $12.70 per unit and its direct labor cost is $45.93 per unit. The product sells for $126.60 per unit. According to the activity-based costing system, the product margin for product F60N is:   

A. 
$6,251.70

B. 
$4,490.70

C. 
$6,393.70

D. 
$15,633.10
Solution: B
1. Activity Rate:
Assembly: 436,240 / 28,000 = 15.58
Processing: 60,896 / 1,600 = 38.06
Inspection: 82,767 / 1,410 = 58.70
2. Overhead Cost charged to Product F60N:
Assembly: 15,58 * 480 = 7,478.40
Processing: 38.06 * 50 = 1,903.00
Inspection: 58.70 * 30 = 1,761.00
7,478.40 + 1,903.00 + 1,761.00 = 11,142.40
3. Product Margin for F60N:
Sales (230 * 126.60) = 29,118.00
DM (230 * 12.7) = 2,921.00
DL (230 * 45.93) = 10,563.90
MOH = 11,142.40
29,118.00 – (2,921.00 + 10,563.90 + 11,142.40) = 4,490.70
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