Question 1

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders.

Model	Annual Sales in Units
High F	12,000
Great P	17,000

National uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime costs of each product were as follows:

	High F			Great P
Direct materials	$	40.00		$	27.40
Direct labor	$	19.60		$	15.20

Budget factory overhead:
Engineering and Design	2,800	engineering hours	$	420,000
Quality Control	13,230	inspection hours		326,000
Machinery	34,110	machine hours		610,560
Miscellaneous Overhead	26,790	direct labor hours		133,000
Total			$	1,489,560

National's controller had been researching activity-based costing and decided to switch to it. A special study determined National's two products have the following budgeted activities:

	High F	Great P
Engineering and design hours	1,160	1,640
Quality control inspection hours	5,840	7,390
Machine hours	20,480	13,630
Labor hours	12,200	14,590

Using the firm's volume-based costing, applied factory overhead per unit for the High F model is: (Rounded to the nearest cent.)

Multiple Choice

• $59.15.

• $63.11.

• $47.53.

• $45.87.

• $60.21.

Sheen Co. manufacturers laser printers. It has outlined the following overhead cost drivers:

Overhead Costs Pool	Cost Driver	Overhead Cost				Budgeted Level for Cost Driver
Quality control	Number of inspections	$	60,000				1,200
Machine operation	Machine hours		140,000				1,400
Materials handling	Number of batches		1,200				30
Miscellaneous overhead cost	Direct labor hours		51,000				5,100

Sheen Co. has an order for 1,000 laser printers that has the following production requirements:

Number of inspections	205
Machine hours	195
Number of batches	6
Direct labor hours	680

Using activity-based costing, applied quality control factory overhead for the 1,000 laser printers order is:

Multiple Choice

• $6,800.

• $9,810.

• $10,250.

• $240.

• $19,500.