24

Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects cash sales of $27,000 and $43,500, respectively. It also expects credit sales of $53,500 and $63,500, respectively. The company expects to collect 45% of its credit sales in the month of the sale, 50% in the following month, and 5% is deemed uncollectible. What amount of cash collections would appear in the companys cash budget for the first month?

Garrison 17e Rechecks 2020-07-14

Multiple Choice

• $43,500

• $24,075

• $67,575

• $51,075

23

Assume that company makes only two products: Product A and Product B. The companys activity-based costing system has allocated $72,000 to an activity called machine setups. It is considering allocating the machine setups cost its products using either the number of setups or setup hours as the activity measure. It gathered the following data with respect to these two potential activity measures:

	Product A	Product B
Number of machine setups	30	45
Number of setup hours per setup	6	6

If the company uses number of setup hours as the activity measure, how much machine setup activity cost would be allocated to Product A?

Multiple Choice

• $37,000

• $28,800

• $25,800

• $36,000

22

Assume a company produces and sells only two products14,000 units of Product A and 6,000 units of Product B. The selling prices are $65 per unit for Product A and $96 per unit for Product B. Product As direct materials and direct labor costs per unit are $30 and $12, respectively. Product Bs direct materials and direct labor costs per unit are $34 and $15, respectively. The company is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products A and B:

Activity Cost Pool	Activity Measure	Estimated Overhead Cost	Expected Activity
Machining	Machine-hours	$ 300,000	12,000	MH
Machine setups	Number of setups	$ 150,000	200	Setups
Product design	Number of products	$ 78,000	2	Products

Activity Measure	Product A	Product B
Machine-hours	9,000	6,000
Number of setups	50	150
Number of products	1	1

Using the ABC system, what is the product margin for Product A?

Multiple Choice

• $73,500

• $20,500

• $45,500

• $54,500