Munoz Inc. produces a special line of plastic toy racing cars in batches. To manufacture a batch of the cars Munoz Inc. must setup the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and molds for different styles of car.

Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup hours. The following information pertains to July.

Actual Amounts

Static-budget Amounts

Units produced and sold

15,000

11,250

Batch size (number of units per batch)

250

225

Setup hours per batch

5

5.25

Variable overhead cost per setup hour

$40

$38

Total fixed setup overhead costs

$14,400

$14,000

1.Calculate the rate variance for variable setup overhead costs.

a.$400 favourable

b.$600 unfavourable

c.$1,900 unfavourable

d.$1,900 favourable

2.Calculate the rate variance for fixed setup overhead costs

a.$400 unfavourable

b.$600 unfavourable

c.$600 favourable

d.$1,600 unfavourable

3.

4.R&R Manufacturing Company processes raw material up to the split off point, where two products (Dibs and Drabs) are obtained and sold. The following information was collected for the month of July.

Raw material processed:

10,000 kilograms yielding 9,500 kilograms of good product and 500 kilograms of shrinkage.

Production:

Dibs 5,000 kilograms

Drabs 4,500 kilograms

Sales:

Dibs 4,750 at $150 per kilogram

Drabs 4,000 at $100 per kilogram

The cost of purchasing 10,000 kilograms of direct materials and processing it up to the split off point to yield a total of 9,500 kilograms of good products was $975,000.

The beginning inventories totaled 50 kilograms for Dibs and 25 kilograms for Drabs. Ending inventory amounts reflected 300 kilograms of Dibs and 525 kilograms of Drabs. June costs per unit were the same as July.

What is the approximate amount of joint costs in Drabs' ending inventory if the physical volume method is used and the company uses the FIFO inventory method?

a.$30,789

b.$53,882

c.$60,145

d.$84,671

4.Costs which are assignable beyond the splitoff point at which individual products emerge are called

a.Byproduct costs

b.Joint costs

c.Separable costs

d.Splitoff costs

5.

5.The owner of Hi-Tech Fiberglass Fabricators Inc. is interested in using the reciprocal allocation method. The following data from operations were collected for analysis.

Budgeted manufacturing overhead costs:

Plant Maintenance

PM (Support Dept.)

$350,000

Data Processing

DP (Support Dept.)

$75,000

Machining

M (Operating Dept.)

$225,000

Capping

C (Operating Dept.)

$125,000

Service furnished:

By Plant Maintenance (budgeted labour hours)

Data Processing

3,500

Machining

5,000

Capping

8,200

By Data Processing (budgeted computer time)

Plant Maintenance

600

Machining

3,500

Capping

600

Which of the following linear equations best represents the reciprocated cost of the Data Processing department?

a.DP = $75,000 + (600/4,700)PM

b.DP = $75,000 + (3,500/16,700)PM

c.DP = $75,000 (600/4,800) + $350,000 (3,340/16,700)

d.PM = $350,000 + (600/16,700)DP