Manson Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
| Overhead costs: |
|
| Equipment depreciation |
$78,200 |
| Supervisory expense |
$6,500 |
Distribution of Resource Consumption Across Activity Cost Pools:
| |
Activity Cost Pools
|
| |
Machining |
Order Filling |
Other |
| Equipment depreciation |
0.50 |
0.30 |
0.20 |
| Supervisory expense |
0.50 |
0.20 |
0.30 |
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:
| Activity: |
|
|
| |
MHs (Machining) |
Orders |
| Product Y7 |
1,090 |
1,220 |
| Product V2 |
9,410 |
1,640 |
| Total |
10,500
|
2,860
|
The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:
$86.60 per order$8.66 per order$6.09 per order$5.66 per order
Brownley Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing system with three activity cost pools. The activity rate for the Size-Related activity cost pool is $1.15 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $36.42 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $86.41 per order. (Each wedding involves one order for a cake.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
Euertz
Wedding |
Sparacio
Wedding |
| Number of reception guests |
76 |
254 |
| Number of tiers on the cake |
4 |
5 |
| Cost of purchased decorations for cake |
$17.85 |
$73.45 |
Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Euertz wedding cake to just break even?
$388.93 $17.85 $337.34 $86.41
Lodic Corporation has budgeted sales and production over the next quarter as follows:
| July |
August |
September |
| Sales in units |
47,000 |
59,000 |
? |
| Production in units |
62,200 |
59,300 |
63,650 |
The company has 5,400 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 78,500 units. Budgeted sales for September would be (in units):
69,550 units
71,500 units
71,000 units
62,000 units
Away Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,000 direct labor-hours will be required in May. The variable overhead rate is $1.10 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,350 per month, which includes depreciation of $9,000. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
$91,350 $8,800 $109,150 $100,150