Question 3: Activity-Based Costing Time: 35 minutes - Total: 20 marks A company manufactures household items sold at trade shows. The items, classified as either Tables or Frames are manufactured on a common assembly line. Although different direct materials are used, the direct labour cost is the same for each product line. The plant wide rate for allocating manufacturing overhead to its products is no longer acceptable. The wroduction manager has heard about activity based costing and has assembled some information for use in changing the cost wstem to a cost driver concept With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for July, along with the production data for the two product lines: Activity Cost Driver Number of parts $100 per part A Material handling Machining Assembly Inspection Machine hours Units began Number tested S500 per hour S160 per unit $2.00 per unit 1.000 Direct costs: 1 Tables $12.000 I Labour Materials Frames $12.000 Required: Using activity-based costing deterinine the total production cost of each of the two product lines for July and the cost per unit assuming all units started were completed Question 5: Master Budgeting Time: 30 minutes Total 16 marks Guava Inc. has the following information: ending inventor Net sales. is 30% of Gob Month February Budgeted Sales $60,000 51,000 40,000 20,000 March | April May 72.000 June In addition, the cost of goods sold rate is 70% of previous month and the desired ending inventory level is 30% of next month's cost of sales. ofen eventy for month of April 10710 Required: Prepare a purchases budget for April through June and summarize the total purchases for the quarter. 104 Question 3: Activity-Based Costing Time: 35 minutes - Total: 20 marks A company manufactures household items sold at trade shows. The items, classified as either Tables or Frames are manufactured on a common assembly line. Although different direct materials are used, the direct labour cost is the same for each product line. The plant wide rate for allocating manufacturing overhead to its products is no longer acceptable. The wroduction manager has heard about activity based costing and has assembled some information for use in changing the cost wstem to a cost driver concept With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for July, along with the production data for the two product lines: Activity Cost Driver Number of parts $100 per part A Material handling Machining Assembly Inspection Machine hours Units began Number tested S500 per hour S160 per unit $2.00 per unit 1.000 Direct costs: 1 Tables $12.000 I Labour Materials Frames $12.000 Required: Using activity-based costing deterinine the total production cost of each of the two product lines for July and the cost per unit assuming all units started were completed Question 5: Master Budgeting Time: 30 minutes Total 16 marks Guava Inc. has the following information: ending inventor Net sales. is 30% of Gob Month February Budgeted Sales $60,000 51,000 40,000 20,000 March | April May 72.000 June In addition, the cost of goods sold rate is 70% of previous month and the desired ending inventory level is 30% of next month's cost of sales. ofen eventy for month of April 10710 Required: Prepare a purchases budget for April through June and summarize the total purchases for the quarter. 104
