1. Offshore Company makes 2 different types of boats, sail and fishing boats. The company consists of two different departments, design & engineering and production. The company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead follows:
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Activity:
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Driver
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Estimated Overhead Cost
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Sail Estimate
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Fish Estimate
|
|
Design
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# of designs
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$180,000
|
22 designs
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23 designs
|
|
Production
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Labor hours
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$994,000
|
4,500 hours
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2,500 hours
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a. What PDOR rates will be used in each department to assign costs to the sail boats?
2. Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May:
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Cost Pool
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MOH Costs
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Allocation Base
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Estimated Quantity of Allocation Base
|
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Materials handling
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$3,500
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Number of parts
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5,000 parts
|
|
Assembling
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$12,000
|
Number of parts
|
5,000 parts
|
|
Packaging
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$5,750
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Number of bread boxes
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1,250 bread boxes
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Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. There is no direct labor. What is the total product cost (DM, DL, MOH) per breadbox?
3. Pitt Jones Company had the following activities, allocated costs, and allocation bases:
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Cost Pool
|
MOH Costs
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Allocation Base
|
|
Account inquiry (hours)
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$60,000
|
2,000 hours
|
|
Account billing (lines)
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$30,000
|
20,000 lines
|
|
Account verification (accounts)
|
$15,000
|
20,000 accounts
|
|
Correspondence (letters)
|
$10,000
|
1,000 letters
|
The above activities are carried out at two of their regional offices. Below is the actual activity.
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Cost Pool
|
Northeast Office
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Midwest Office
|
|
Account inquiry (hours)
|
100 hours
|
200 hours
|
|
Account billing (lines)
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10,000 lines
|
7,000 lines
|
|
Account verification (accounts)
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1,000 accounts
|
600 accounts
|
|
Correspondence (letters)
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50 letters
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100 letters
|
a. Calculate the PDOR for each cost pool.
b. How much MOH was assigned to the Northeast Office? Midwest Office?
4. Which of the following statements is true?
A) Many traditional costing systems can distort product costs and profitability.
B) Traditional costing systems tend to be more costly than activity-based costing systems.
C) Activity-based costing systems tend to combine various costs into a single cost pool.
D) Activity-based costing systems tend to use fewer cost pools than does a traditional costing system
5. Quality Stereo Company has provided the following information regarding its activity-based costing system:
• Purchasing department costs are allocated based on the number of purchase orders and the cost allocation rate is $75 per purchase order.
• Assembly department costs are allocated based on the number of parts used and the cost allocation rate is $1.00 per part.
• Packaging department costs are allocated based on the number of units produced and the allocation rate is $2.00 per unit produced.
Each stereo produced has 50 parts, and the direct materials cost per unit is $70. There are no direct labor costs. Quality Stereo has an order for 1,000 stereos which will require 50 purchase orders in all. What is the total cost of the 1,000 stereos?
A) $125,750
B) $55,750
C) $123,750
D) $122,000