Question 1.Detroit Foundry, a large manufacturer of heavy equipment components, has determined the following activity cost pools and cost driver levels for the year:

Machine setup	$ 660,000	12,000	setup hours
Material handling	100,000	2,000	tons of materials
Machine operation	450,000	10,000	machine hours

The following data are for the production of single batches of two products, C23 Cams and U2 Shafts:

Units produced	500	300
Machine hours	4	5
Direct labor hours	200	400
Direct labor cost	$ 5,000	$ 10,000
Direct materials cost	$ 30,000	$ 20,000
Tons of materials	12.5	8
Setup hours	3	7

Determine the unit costs of C23 Cams and U2 Shafts using ABC. (Round answers to the nearest cent.) C23 Cams $Answer

U2 Shafts

$Answer

Questin 2.Hystandard Services, Inc. provides residential painting services for three home building companies, Alpine, Blue Ridge, and Pineola, and it uses a job costing system for determining the costs for completing each job. The job cost system does not capture any cost incurred by Hystandard for return touchups and refinishes after the homeowner occupies the home. Hystandard paints each house on a square footage contract price, which includes painting as well as all refinishes and touchups required after the homes are occupied. Each year, Hystandard generates about one-third of its total revenues and gross profits from each of the three builders. TheHystandard ownerhas observed that the builders, however, require substantially different levels of support following the completion of jobs. The following data have been gathered:

Major refinishes	Hours on jobs	$ 75
Touchups	Number of visits	$ 120
Communication	Number of calls	$ 30

Apline	80	150	360
Blue Ridge	35	110	205
Piola	42	115	190

(a) Assuming that each of the three customers produces gross profits of $100,000, calculate the profitability from each builder after taking into account the support activity required for each builder. Alpine $Answer

Blue Ridge $

Answer

Piola $

Answer

(b) Which of the following is not a reasonable action for Hystandard to consider as a result of his analysis?

a.Sharing some of these data with the Alpine Company to demonstrate to them that they are not in line with the other builder/customers in terms of the level of support required. b.If Apline cannot be brought in line, Hystandard may consider replacing Alpine, possibly by seeking another builder as a third customer. c.Seek to make improve the efficiency of its activities and lower the cost of each activity performed in support of Alpine. d.Inform Alpine that if it does not come into line with other customers, it will be discontinued as a customer. e.None of the above.