7 Harvey Chemicals Pty Ltd manufactures a product called Hartik Direct materials are added at the beginning of the process and conversion activity occurs uniformly throughout the process The following data pertains to the month of October Using the weighted average method of process costing, calculate the equivalent units of direct materials and conversion costs for the month of October A Direct Material 75 000 Conversion Cost 69,400 B Direct Material 75 000 Conversion Cost 60,400 C Direct Material 60 000 Conversion Cost 60,400 D Direct Material 68 000 Conversion Cost 69,400 2 Questions 8 and 9 relate to the following information The Singleton Boot Company has four departments in its factory with two service departments, S1 and S2, and two production departments Assembly and Finishing The current costs of each department are Service Departments S1 S2 $308 000 $256 000 Production Departments Assembly $505 000 Finishing $495 000 The distribution and consumption of services is given in the following table Services provided to S1 S2 Assembly Finishing Services provided by S1 35 45 20 S2 15 60 25 8 Using direct method how much overhead costs will be allocated from S1 to Assembly A $138,600 B $213,231 C $115,200 D $177,231 9 Using step down method how much overhead costs will be allocated from S2 to Assembly A $153,600 B $218,280 C $256,800 D $180,706 3 10 Nala Corporation uses direct labour hours in its predetermined overhead rate At the beginning of the year, the estimated direct labour hours were 14,400 hours and the total estimated manufacturing overhead was $355,680 At the end of the year, actual direct labour hours for the year were 15,200 hours and the actual manufacturing overhead for the year was $350,680 Overhead at the end of the year was $24,760 underapplied $24,760 overapplied $19,760 underapplied $19,760 overapplied A collection of costs that are to be allocated to cost objects is referred to as a A Cost pool B Costallocation C Directcost D Indirect cost A special order generally should be accepted if A Its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order B Excess capacity exists and the revenue exceeds all variable costs associated with the order C Excess capacity exists and the revenue exceeds allocated fixed costs D The revenue exceeds variable costs, regardless of available capacity For a manufacturing company, the cost of factory insurance is classified as a A Direct material cost B Direct manufacturing labour cost C Manufacturing overhead cost D Period cost 4 14 Kaiser Ltd uses the high low method to estimate the cost function The information for 2018 is provided below Month Machine hours Labour costs ($) January 130 5,124 February 250 7,611 March 180 6,208 April 165 6,300 May 240 9,800 June 80 3,200 July 155 6326 August 190 7,200 September 230 8,138 October 250 8,600 November 260 10,004 December 190 7,400 What is the estimate of Kaisers cost function when 120 machine hours are used (to the nearest dollar) A $4,347 B $4,712 C $4,744 D $4,797 15 Crimson Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory In 2018, the company expects to make 2,000 comforters With respect to the comforters how would the fabric used to make the comforters be classified A Direct and variable costs B Direct and fixed costs C Indirect and variable costs D Indirect and fixed costs 5 16 McDonnell Industries estimated manufacturing overhead for the year at $290,000 Manufacturing overhead for the year was underapplied by $12,000 The company applied $235,000 to Work in Process The amount of actual overhead would have been A $278,000 B $247,000 C $223,000 D None of these 17 The benefits arising from the introduction of activity based costing are likely to be greater where i Overhead is a large proportion of total cost ii Implementation costs are not high due to the support of advanced IT systems iii Batches are of a similar size A i and ii B i and iii C ii and iii D None of the above 18 Lawler Manufacturing Co has three divisions which are in competition with each other, selling slightly different products Annual results (including per unit sales) show Sales price per unit Variable cost per unit Total Fixed costs Predicted unit sales Division A $250 $160 $110,000 10,000 Division B $280 $210 $85,000 5,000 Division C $330 $220 $105,000 3,000 The company believes that if it drops Division B, sales of Division A will increase by 3000 units and sales of Division C will increase by 1000 units Analysis reveals that $50,000 of fixed costs relating to Division B are avoidable for the company if Division B is closed The incremental effect on the income of the company if it closes Division B will be A An increase of $30,000 B An increase of $50,000 C A decrease of $70,000 D An increase of $80,000 6 19 When the step down method is used to allocate support department costs, a common way to select the first support department in the sequence is to choose the support department which Obtains the highest yield Serves no other support department Serves the greatest number of other support departments Obtains the highest yield AND serves no other support department 20 Franklin has received a special order for 10,000 units of its product at a special price of $15 The product normally sells for $20 and has the following manufacturing costs Per unit Direct materials $6 Direct labour 3 Variable manufacturing overhead 2 Fixed manufacturing overhead 6 Unit cost $17 Franklin is currently operating at full capacity and cannot fill the order without harming normal production and sales If Franklin accepts the order, what effect will the order have on the companys short term profit A $40,000 decrease $40,000 increase $50,000 decrease D $10,000 increase

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7. Harvey Chemicals Pty Ltd manufactures a product called Hartik. Direct materials are added at the beginning of the process and conversion activity occurs uniformly

7. Harvey Chemicals Pty Ltd manufactures a product called Hartik. Direct materials are added at the beginning of the process and conversion activity occurs uniformly throughout the process. The following data pertains to the month of October.

Using the weighted average method of process costing, calculate the equivalent units of direct materials and conversion costs for the month of October.

A. Direct Material 75 000; Conversion Cost 69,400 B. Direct Material 75 000; Conversion Cost 60,400 C. Direct Material 60 000; Conversion Cost 60,400 D. Direct Material 68 000; Conversion Cost 69,400

Questions 8 and 9 relate to the following information.

The Singleton Boot Company has four departments in its factory with two service departments, S1 and S2, and two production departments Assembly and Finishing.

The current costs of each department are:

Service Departments

S1 S2

$308 000 $256 000

Production Departments

Assembly $505 000 Finishing $495 000

The distribution and consumption of services is given in the following table:
Services provided to:	S1	S2	Assembly	Finishing
Services provided by:
S1	-	35%	45%	20%
S2	15%	-	60%	25%

8.Using direct method how much overhead costs will be allocated from S1 to Assembly:

A. $138,600 B. $213,231 C. $115,200 D. $177,231

9.Using step-down method how much overhead costs will be allocated from S2 to Assembly:

A. $153,600 B. $218,280 C. $256,800 D. $180,706

10. Nala Corporation uses direct labour-hours in its predetermined overhead rate. At the beginning of the year, the estimated direct labour-hours were 14,400 hours and the total estimated manufacturing overhead was $355,680. At the end of the year, actual direct labour hours for the year were 15,200 hours and the actual manufacturing overhead for the year was $350,680.

Overhead at the end of the year was:

$24,760 underapplied
$24,760 overapplied
$19,760 underapplied
$19,760 overapplied

A collection of costs that are to be allocated to cost objects is referred to as a:

A. Cost pool B. Costallocation C. Directcost D. Indirect cost
A special order generally should be accepted if:

A. Its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order B. Excess capacity exists and the revenue exceeds all variable costs associated with the order.

C. Excess capacity exists and the revenue exceeds allocated fixed costs D. The revenue exceeds variable costs, regardless of available capacity
For a manufacturing company, the cost of factory insurance is classified as a:

A. Direct material cost.

B. Direct manufacturing labour cost. C. Manufacturing overhead cost. D. Period cost.

14. Kaiser Ltd. uses the high-low method to estimate the cost function. The information for 2018 is provided below.

Month	Machine hours	Labour costs ($)
January	130	5,124
February	250	7,611
March	180	6,208
April	165	6,300
May	240	9,800
June	80	3,200
July	155	6326
August	190	7,200
September	230	8,138
October	250	8,600
November	260	10,004
December	190	7,400

What is the estimate of Kaisers cost function when 120 machine hours are used (to the nearest dollar)?

A. $4,347 B. $4,712 C. $4,744 D. $4,797

15. Crimson Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. In 2018, the company expects to make 2,000 comforters. With respect to the comforters how would the fabric used to make the comforters be classified?

A. Direct and variable costs B. Direct and fixed costs C. Indirect and variable costs D. Indirect and fixed costs

16. McDonnell Industries estimated manufacturing overhead for the year at $290,000. Manufacturing overhead for the year was underapplied by $12,000. The company applied $235,000 to Work in Process. The amount of actual overhead would have been:

A. $278,000. B. $247,000. C. $223,000. D. None of these

17. The benefits arising from the introduction of activity-based costing are likely to be greater where:

i. Overhead is a large proportion of total cost. ii. Implementation costs are not high due to the support of advanced IT systems. iii. Batches are of a similar size.

A. i and ii B. i and iii C. ii and iii D. None of the above

18. Lawler Manufacturing Co. has three divisions which are in competition with each other, selling slightly different products. Annual results (including per unit sales)

show:

Sales price per unit Variable cost per unit Total Fixed costs Predicted unit sales

Division A $250 $160 $110,000 10,000

Division B $280 $210 $85,000 5,000

Division C $330

$220 $105,000

3,000

The company believes that if it drops Division B, sales of Division A will increase by 3000 units and sales of Division C will increase by 1000 units. Analysis reveals that $50,000 of fixed costs relating to Division B are avoidable for the company if Division B is closed. The incremental effect on the income of the company if it closes Division B will be:

A. An increase of $30,000 B. An increase of $50,000 C. A decrease of $70,000 D. An increase of $80,000

19. When the step-down method is used to allocate support department costs, a common way to select the first support department in the sequence is to choose the support department which:

Obtains the highest yield
Serves no other support department
Serves the greatest number of other support departments
Obtains the highest yield AND serves no other support department

20. Franklin has received a special order for 10,000 units of its product at a special price of $15. The product normally sells for $20 and has the following manufacturing costs:

Per unit Direct materials $6

Direct labour 3 Variable manufacturing overhead 2 Fixed manufacturing overhead 6 Unit cost $17

Franklin is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Franklin accepts the order, what effect will the order have on the companys short-term profit?

A. $40,000 decrease