Ch 6 HW

Question 2

Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $20 per unit and $35 is used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $55 per unit. Box Springs estimates it will make 5,000 twins and 10,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows:

Activity Cost Pools	Driver	Estimated Overhead	Use per Twin	Use per Double
Framing	Square Feet of Pine	$150,000	4,000	2,000
Padding	Square Feet of Quilting	220,000	110,000	110,000
Filling	Square Feet of Filling	280,000	450,000	250,000
Labeling	Number of Boxes	115,000	800,000	350,000
Inspection	Number of Inspections	198,000	12,000	6,000

How much does each unit cost to manufacture? Do not round intermediate computations but round final answers for the fields below to the nearest whole number.

Total Cost per Unit	Twin	Double
Direct Material	$	$
Direct Labor Cost
Overhead
Total per Unit	$	$

Question 3

Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC:

	Brass		Gold
Units Planed	750		125
Material Moves	500		125
Machine Setups	300		450
Direct Labor Hours	800		1,200

The estimated overhead for the material cost pool is estimated as $17,500, and the estimate for the machine setup pool is $24,750.

A. Calculate the allocation rate per unit of brass and per unit of gold using the traditional method? Round intermediate calculations and final answers to two decimal places.

	Allocation Rate per Unit
Brass	$
Gold	$

B. Calculate the allocation rate per unit of brass and per unit of gold using the activity-based costing method? Round intermediate calculations and final answers to two decimal places.

	Allocation Rate per Unit
Brass	$
Gold	$

Question 4

A local picnic table manufacturer has budgeted these overhead costs:

Purchasing	$72,000
Handling Materials	34,580
Machine Setups	75,200
Inspections	26,000
Utilities	27,000

They are considering adapting ABC costing and have estimated the cost drivers for each pool as shown:

Cost Driver	Activity
Orders	800
Material Moves	1,330
Machine Setups	16,000
Number of Inspections	5,000
Square Feet	180,000

Recent success has yielded an order for 1,100 tables. Assume direct labor costs per hour of $20.

	Activity
Order, Units	1,100
Direct Materials	112,800
Machine Hours	15,200
Direct Labor Hours	5,300
Number of Purchase Orders	50
Number of Material Moves	850
Number of Machine Setups	90
Number of Inspections	450
Number of Square Feet Occupied	8,000

Determine how much the job would cost given the following activities: Do not round intermediate computations and round final answers to nearest whole number.

	Cost Assigned
Direct Materials		$
Direct Labor
Number of Material Moves
Number of Machine Setups
Number of Inspections
Number of Square Feet Occupied
Total Order Cost		$

Question 5

Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is as follows:

Direct Material	$16
Direct Labor	$24
Variable Overhead	$6
Fixed Overhead	$40,200

Selling expenses are $5 per unit and are all variable. Administrative expenses of $30,000 are all fixed. Grainger produced 6,000 units; sold 4,800; and had no beginning inventory.

A. Compute net income under

i. Absorption Costing $________

ii. Variable Costing $________

B. Which costing method provide higher net income? By how much?

The absorption costing method provided more net income by $_______

Question 6

Five Card Draw manufactures and sells 25,000 units of Diamonds, which retails for $170, and 27,000 units of Clubs, which retails for $200. The direct materials cost is $26 per unit of Diamonds and $31 per unit of Clubs. The labor rate is $25 per hour, and Five Card Draw estimated 183,000 direct labor hours. It takes 3 direct labor hours to manufacture Diamonds and 4 hours for Clubs. The total estimated overhead is $915,000. Five Card Draw uses the traditional allocation method based on direct labor hours.

A. What is the gross profit per unit for Diamonds and Clubs?

	Gross Profit
Diamonds	$fill in the blank 1	$____
Clubs	$fill in the blank 2

B. What is the total gross profit for the year?

Total gross profit $________