Question
QUESTION 1 30 marks Sutherland University offers only high-tech graduate-level programs. It has two principal operating departments, Engineering and Computer Sciences, and two support departments,
QUESTION 1
30 marks
Sutherland University offers only high-tech graduate-level programs. It has two principal operating departments, Engineering and Computer Sciences, and two support departments, Facility and Enrolment Services. The base used to allocate Facility is budgeted total maintenance hours. The base used to allocate Enrolment Services is number of credit hours for a department. The following chart summarizes budgeted amounts and allocation-base amounts used by each department:
Support Departments
Operating Departments
Budgeted costs Maintenance hours Credit hours
Required:
Facility
$350,000 Zero 16,000
Enrolment
$950,000 1,000 Zero
Engineering
$1,500,000 2,000 24,000
Computer Sciences $2,000,000 5,000 36,000
- (a)Using the direct method, what amount of support department costs will be allocated to the Engineering department?
- (b)Using the step-down method, what amount of support department costs will be allocated to the Engineering department if the service department with the highest dollar amount is allocated first?
- (c)Describe the key features of the reciprocal method and express support department costs and reciprocal relationships in the form of linear equations.
- (d)What is conceptually the most defensible method for allocating support- department costs? Why?
(10 marks) (10 marks)
(5 marks) (5 marks)
QUESTION 2
40 marks
Amber Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labour hours. The following data are taken from the company's budget for the current year.
Denominator activity
Variable manufacturing overhead (9,000 direct labour hours @$3.80) Fixed manufacturing overhead cost
Predetermined overhead rate ( $97,2009,000 direct labour hours)
The standard cost card for the company's only product is given below:
4,500 units $34,200 $63,000 $10.80
Standard cost Per Unit
$10.40 18.00 7.60 14.00 $50.00
Standard Quantity or hours
Direct materials 4 kilograms
Standard price or rate
$2.60 per kilogram $9 per direct labour hour $3.80 per direct labour hour $7 per direct labour hour
Direct labour Variable overhead Fixed overhead
Total standard cost
2 direct labour hours 2 direct labour hours 2 direct labour hours
During the year, the company produced 4,800 units of product and incurred the following costs:
Direct materials purchased
Direct materials used.
Direct labour
Variable manufacturing overhead cost Fixed manufacturing overhead cost
Required:
Quantity 30,000 kilograms 20,000 kilograms 10,000 hours
Amount $75,000
$86,000 $35,900 $64,800
(12 marks) (18 marks)
(10 marks)
- (a)Prepare an analysis of the variances for materials and labour for the year.
- (b)Prepare an analysis of the variances for variable and fixed overhead for the year.
- (c)Based on the results from your analysis above, comment on the cost control efficiency of the company.
QUESTION 3
Yokohama Company produces baseball bats for kids that it sells for $36 each. At capacity, the company can produce 50,000 bats a year although company is currently producing and selling 40,000 bats. The costs of producing and selling 50,000 bats are as follows:
30 marks
Direct materials
Direct manufacturing labour Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses
Fixed selling expenses
Total costs
Required:
Cost per Bat
$13 5 2 6 3 2 $31
Total costs
$650,000 250,000 100,000 300,000 150,000 100,000
$1,550,000
- (a)Bench Company wants to place a one-time special order for 10,000 bats at $23 each. Yokohama Company will incur no variable selling costs for this special order. Should Yokohama Company accept this one-time special order? Show your calculations.
- (b)If Yokohama Company is currently producing and selling 50,000 bats, on financial consideration alone should Yokohama Company accept this one-time special order?
- (c)Identify and briefly discuss other factors Yokohama Company should consider in deciding whether to accept the one-time special order
(15 marks)
(10 marks) (5 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started