Question 1 - Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about these products follow.

Additional data from its two production departments follow.

Required -

1. Determine the cost of each product line using ABC.

2. What is the cost per bottle for PowerPunch and SlimLife?

3. Assume if PowerPunch sells for $7.25 per bottle, how much profit does the company earn per bottle of PowerPunch that it sells?

4. What is the minimum price that the company should set per bottle of SlimLife?

rev: 02_10_2012

$0.49 per bottle

$0.69 per bottle

$0.84 per bottle

Question 2 - Craftmore Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Additional information on the drivers for its production activities follows.

Required:

1. Classify each activity as unit level, batch level, product level, or facility level.

Grinding              

Polishing             

Product modification     

Providing power              

System calibration          

2. Compute the activity overhead rates using ABC. Form cost pools as appropriate.

3. Determine overhead costs to assign to the following jobs using ABC.

4. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286?

5. Assume if the company used a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?

Question 3 - The following data are for the two products produced by Shakti Company.

The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.

Required:

1.1- Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.

1.2- What is the gross profit per unit?

2.1- How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?

2.2- What is the cost of providing customer service to each customer?

3.1- Determine the manufacturing cost per unit of each product line using ABC.

3.2- What is the gross profit per unit?

4.1- How much gross profit is generated by each customer of Product A and Product B using ABC?

4.2- Is the gross profit per customer adequate for Product A?

4.3- Is the gross profit per customer adequate for Product B?

5. Which method of product costing gives better information to managers of this company?

Joborder costing

Activity based costing

Process costing

Question 4 - Tent Master produces two lines of tents sold to outdoor enthusiasts. The tents are cut to specifications in department A. In department B the tents are sewn and folded. The activities, costs, and drivers associated with these two manufacturing processes and its production support activities follow.

Additional production information on the two lines of tents follows.

Required:

1. Using a plantwide overhead rate based on direct labor hours, compute the overhead cost that is assigned to each pup tent and each pop-up tent.

2. Using the plantwide overhead rate, determine the total cost per unit for the two products if the direct materials and direct labor cost is $19 per pup tent and $22 per pop-up tent.

3.1- Assume the market price of the pup tent is $85 and the market price of the pop-up tent is $170, determine the gross profit / loss per unit for each tent.

3.2- What will be the management decide about the product Pup-tent?

Eliminate pup-tent

Retain pup-tent

4. Using ABC, compute the total cost per unit for each tent if the direct labor and direct materials cost is $19 per pup tent and $22 per pop-up tent.

5. Assume if the market price is $85 per pup tent and $170 per pop-up tent, determine the gross profit / loss per unit for each tent.