Week 2 problems

Topics: Costs, Cost accounting, Cost Pages: 4 (920 words) Published: May 24, 2015
E17.15

Spear Custom Furniture uses an activity-based cost accounting system to apply overhead to production. The company maintains four overhead cost pools. The four cost pools, and their budgeted amounts for the upcoming period, are as follows:

Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,000 Materials handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Set-ups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Quality control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Four cost drivers are used by Spear to allocate its overhead cost pools to production. The four cost drivers, and their budgeted total levels of activity for the upcoming period, are shown below: Machine hours (to allocate maintenance costs) . . . . . . . . . . . . . . . . . . . . . . . 600 hours Material moves (to allocate materials handling costs) . . . . . . . . . . . . . . . . . . 400 moves Set-ups (to allocate set-up costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 set-ups Number of inspections (to allocate quality control costs) . . . . . . . . . . . . . . . . 300 inspections The company has been asked by Cosmopolitan University to submit a bid for tables to be used in a new computer lab. The plant manager feels that obtaining this job would result in new business in future years. Estimates for the Cosmopolitan University project are as follows: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,000 Direct labor (500 hours) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000 Number of machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Week 2 Ex and Problems Essay
  • Exercises and Problems Week 2 Essay
  • Week 2 Applied Problems Essay
  • ECO 550 WEEK 2 CHAPTER 3 AND CHAPTER 4 PROBLEMS Essay
  • Essay on Week 2 Group Problem 3
  • Week 2 Practice Problems final Essay
  • MAT 540 Week 2 Quiz Essay
  • week 2 problems Essay

Become a StudyMode Member

Sign Up - It's Free