1. Exercise 5-26 ( Page 184)

Activity-based costing, manufacturing. Decorative Doors, Inc., produces two types of doors, interior and exterior. The companys simple costing system has two direct-cost categories (materials and labor) and one indirect-cost pool. The simple costing system allocates indirect costs on the basis of machine-hours. Recently, the owners of Decorative Doors have been concerned about a decline in the market share for their interior doors, usually their biggest seller. Information related to Decorative Doors production for the most recent year follows:

	Interior	Exterior
Units Sold	3,200	1,800
Selling Price	$125	$200
Direct material cost per unit	$30	$45
Direct manufacturing labor cost per hour	$16	$16
Direct manufacturing labor-hours per unit	1.50	2.25
Production runs	40	85
Material moves	72	168
Machine setups	45	155
Machine-hours	5,500	4,500
Number of inspections	250	150

The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system would affect their product costing decisions. After analyzing the indirect-cost pool for Decorative Doors, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection, and marketing. Decorative Doors collected the following data related to the indirect-cost activities:

Activity	Activity Cost	Activity Cost Driver
Production scheduling	$95,000	Production runs
Material handling	$45,000	Material moves
Machine Setup	$25,000	Machine setups
Assembly	$60,000	Machine-hours
Inspection	$8,000	Number of inspections

Marketing costs were determined to be 3% of the sales revenue for each type of door.

1. Calculate the cost of an interior door and an exterior door under the existing simple costing system.

2. Calculate the cost of an interior door and an exterior door under an activity-based costing system.

3. Compare the costs of the doors in requirements 1 and 2. Why do the simple and activity-based costing systems differ in the cost of an interior door and an exterior door?

4. How might Decorative Doors, Inc., use the new cost information from its activity-based costing system to address the declining market share for interior doors?

2. Exercise 17-24 (Page 710)

Weighted-average method, equivalent units. The assembly division of Quality Time Pieces, Inc. uses the weighted-average method of process costing. Consider the following data for the month of May 2017:

	Physical Units (Watches)	Direct Materials	Conversion Costs
Beginning work in process (May 1)a	100	$459,888	$142,570
Started in May 2017	510
Completed during May 2017	450
Ending work in process (May 31)b	160
Total costs added during May 2017		$3,237,000	$1,916,000

Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule.

3. Exercise 17-26 ( Page 710)

FIFO method, equivalent units. Refer to the information in Exercise 17-24. Suppose the assembly division at Quality Time Pieces, Inc. uses the FIFO method of process costing instead of the weighted-average method.

Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule.

4. Exercise 17-27 ( Page 711)

FIFO method, assigning costs (continuation of 17-26).

For the data in Exercise 17-24, use the FIFO method to summarize the total costs to account for, calculate the cost per equivalent unit for direct materials and conversion costs, and assign costs to units completed (and transferred out) and to units in ending work in process.