Question 1
Maxx Inc. has provided the following data from its activity-based costing system:
Activity Cost Pools Total Cost Total Activity
Designing products $378,600 6,420 product design hours
Setting up batches $52,678 7366 batch set-ups
Assembling products $25,122 4,018 assembly hours
The activity rate for the "designing products" activity cost pool is:
Question 2
Sasha Company allocates the estimated $196,300 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:
Department Employees
Accounting 4
Production 37
Sales 17
How much of the accounting department costs will be allocated to the production?
Question 3
Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below:
Number of Number of Square
Department Costs Employees Feet Occupied
Payroll (S1) $149,000 2 2,000
Maintenance (S2) $220,000 8 64,000
Molding (P1) 60 100,000
Finishing (P2) 43 60,000
Packaging (P3) 17 40,000
Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar. What amount of the payroll department costs will be allocated to the molding department?
Question 4
The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,200, they could be sold for $19,200. Alternatively, the keyboards could be sold "as is" for $8,000. What is the net advantage or disadvantage of re-working the keyboards?
Question 5
Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped.
The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:
Cost Pool Total Costs Cost Driver Annual Activity
Packaging and shipping $167,500 Number of boxes shipped 20,300 boxes
Final inspection $195,800 Number of individual items shipped 98,600 items
General operations and supervision $81,400 Number of orders 9,100 orders
During the period, the Far East sales office generated 666 orders for a total of 6,040 items. These orders were shipped in 1,466 boxes. What amount of shipping department costs should be allocated to these sales.