1. (multiple choice)
Logan and Phillips, an accounting firm, provides consulting and tax planning services. A recent analysis found that 55% of the billable hours to clients resulted from tax planning and for many years, the firm's total administrative e cost (currently $270,000) has been allocated to services on this basis.
The firm, contemplating a change to activity based costing has identified three components of administrative cost, as follows:
Staff support 200,000
In-house computing charges 50,000
Misc. office costs 20,000
Total 270,000
A recent analysis of support staff found a strong correlation with the number of clients served. In contrast, in-house computing and misc. office cost varied directly with the number of computer hours logged and number of client transactions, respectively. Consulting clients served totaled 35% of the total client transactions.
If Logan and Phillipsswitched firm its current accounting method to an activity based costing system, the amount of admin cost chargeable to consulting services would:
a- Decrease by 32,500
b- Increase by 32,000
c- Decrease by 59,500
d- Other
e- Change but amount cannot be calculated with present info
2, (Multiple choice)
The following data relate toABC Corporation for the year just ended:
Sales revenue: 750,000
Cost of goods sold:
Variable portion: 370,000
Fixed portion: 110,000
Variable selling and administrative: 50,000
Fixed selling and administrative: 75,000
Which of the following statements is correct?
A. ABC's variable-costing income statement would reveal a gross margin of $270,000
B. ABC's variable-costing income statement would reveal a contribution margin of $330,000
C. ABC's absorption-costing income statement would reveal a contribution margin of $330,000
D. ABC's absorption-costing income statement would reveal a gross margin of $330,000
E. ABC's absorption-costing income statement would reveal a gross margin of $145,000
3. Seneca Hardwoods produces handcrafted jewelry boxes. A standard-size box requires 7 board feet of hardwood in the finished product. In addition, 1.5 board feet of scrap lumber is normally left from the production of one box. Hardwood costs $5.00 per board foot, plus $1.20 in transportation charges per board foot.
Question: Compute the standard direct-material cost of a jewelry box.
4. Canandaigua Container Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. These following standards have been set by the production-engineering staff and the controller.
Direct labor: Direct material:
Quantity, .25 hour Quantity, 4 kilograms
Rate, $12 per hour Price, $0.60 per kilogram
Actual material purchases amounted to 240,000 kilograms at $0.62 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:
Direct labor: $158,600 for 13,000 hours
Direct material: $130,200 for 210,000 kilograms
Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show how the solution will change if the following information changes: the standard direct labor rate is $14 per hour, and the standard direct-material price is $0.59 per kilogram.
5. Boundaries, a chain of retail stores, sell books and music CDs. Condensed monthly income data are presented in the following table for November 20X6. (ignore income taxes)
Downtown store Mall store Total
Sales $240,000- $360,000- $600,000-
less: variable expenses $96,000= $252,000= $348,000=
Contribution margin $144,000- $108,000- $252,000-
less: fixed expenses $60,000= $120,000= $180,000=
Operating income $84,000 ($12,000) $72,000
Additional information:
Management estimates that closing the mall store would result in a 10% decrease in downtown store sales, while closing the downtown store would not affect mall store sales. one-fourth of each store's fixed expenses would continue through December 31, 20x7, if either store were closed.
Build a spreadsheet: Construct an excel spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following information changes: the downtown store's sales amounted to $235,000, and its variable expenses were $90,000.