Managerial Accounting ECO 374.

02 Spring 2013 Homework #5 Due date: Mar 23 2013

Question 1: Job 607 was recently completed. The following data have been recorded: Direct materials Direct labor-hours Direct labor wage rate Machine hours $3,405 54 labor hours $13 per labor hour 158 machine hours

The company applies manufacturing overhead on the basis of machine hours. The predetermined overhead rate is $14 per machine-hour. Calculate the total cost that would be recorded for Job 607. Question 2: Matt Company uses activity-based costing. The company has 2 products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are 3 activity cost pools, with estimated total cost and expected activity as follows: Expected Activity Product A Product B 100 400 800 200 800 3000

Activity Cost Pool Activity 1 Activity 2 Activity 3

Estimated Cost $20,000 $37,000 $91,200

Total 500 1000 3800

What is the cost per unit of Product A under activity-based costing? Question 3: Drewniak Corporation has provided the following data from its activity-based costing system:

The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct material cost is $35.72 per unit and its direct labor cost is $29.46 per unit. According to the activity-based costing system, the average manufacturing cost of product O37W is closest to: A. $94.11 per unit B. $89.72 per unit C. $65.18 per unit D. $92.49 per unit

Question 4: The controller of Ferrence Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below:

The total materials handling cost for the year is expected to be $16,486.40. a.) If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost would be allocated to the wall mirrors? b.) If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost would be allocated to the specialty windows? Question 5: Cosgrove Company manufactures two products, Product K-7 and Product L-15. Product L-15 is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product K-7. Product L-15 is the more complex of the two products, requiring 2.0 hours of direct labor time per unit to manufacture compared to 1.0 hour of direct labor time for Product K-7. Product L-15 is produced on an automated production line. Overhead currently is applied to the products on the basis of direct labor-hours. The company estimated it would incur $510,000 in manufacturing overhead costs and produce 10,000 units of Product L-15 and 40,000 units of Product K- 7 during the current year. Unit costs for materials and labor are:

Required: a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year. b. The company is considering the use of activity-based costing as an alternative to its traditional costing method for manufacturing overhead. Data relating to the company's activity cost pools for the current year are given below:

Using the data above, determine the unit product cost of each product for the current year. c. What items of overhead cost make Product L-15 so costly to produce according to the activitybased costing system? What influence might the activity-based costing data have on management's opinions regarding the profitability of Product L-15?