Question 21

Use the following costs per unit to identify the prime cost, total production cost and total cost for a product:

	$ per unit
Direct materials	12
Indirect materials	6
Direct labor	24
Indirect labor	8
Variable production overhead	10
Variable selling & admin expense	5
Fixed production overhead	12
Fixed selling & admin expense	8

Question 21 options:

a)

Prime cost	Total production cost	Total cost of product
36	85	85

b)

72	72	85

c)

36	72	85

d)

36	22	72

Question 22

Marx Products makes parts for car engines. Three departments (A, B and C) are involved in the manufacturing process. The budgets for departmental overhead costs are $25,000, $45,000 and $30,000 respectively, which are allocated to products based on direct labor hours. Estimates of direct labor hours for each department are 5,000 7,000 and 10,000 hours respectively. The business-wide overhead absorption rate is:

Question 22 options:

a)

$5.00

b)

$4.81

c)

$4.55

d)

$3.00

Question 23

Bingo Holdings has overheads of $1,200,000 per year. It uses activity-based costing and has estimated the following cost pool and driver information for the year:

	Cost pool	Cost driver
Purchasing	300,000	5,000 purchase orders
Material issues	400,000	10,000 stock issues
Scheduling	300,000	10,000 production orders
Delivery	200,000	5,000 deliveries

A customer has ordered a custom-made product that will require 5 purchase orders, 6 material issues, 2 production orders and 4 deliveries. The overhead to be allocated to the product is:

Question 23 options:

a)

$840

b)

$760

c)

$680

d)

$40