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Question No. 1

Gem Potato Processors produces three products: fries, nuggets and crunchy peels. They are all made from a cull potatoes they purchase from sorting sheds. Follow is information about each product.

Fries	Nuggets	Peelings
Pounds Produced	50,000	40,000	10,000
Pounds Sold at Retail Point	45,000	35,000	10,000
Sales Price at Split-off	$3.00	$2.00	$1.00
Retail Sales Price	$5.00	$4.00	$1.00
Separate Costs	$50,000	$20,000	$0

Joint Costs before Split-off Point is $200,000.

Required:

1.Allocate the joint costs using the NRV method.

2.Allocate the joint costs using the physical units method.

3.What is the other acceptable method used to allocate joint costs?

4.Which is the best method and why?

Question No. 2

Community Recovery Clinic offers two types of services: inpatient and outpatient. They have two types of service departments: administration and housekeeping. Direct costs of nursing care and supplies can be traced directly to the patient.

Number of	Square
Departments	Employees	Footage
Inpatient	40	20,000
Outpatient	20	10,000
Administration	10	5,000
Housekeeping	5	5,000

Overhead costs for each department are as follows:

Administration $500,000

Housekeeping $200,000

Administration is allocated based on number of employees and housekeeping is based on square footage. Carry out calculations to four decimal places.

Required:

1.Allocate service department costs using the direct method.

2.Allocate service department costs using the reciprocal method.

3.What is the other method of allocation?

4.Briefly discuss the pros and cons of each method and select the best one.

Question No. 3

Tots Toys Inc. manufactures a wooden model wagon. The departments are cutting, assembly and painting. Following is the information for the assembly department for the month of September 2013.

Costs:

Beginning WIP: Transferred In $1,000
Direct materials	2,000
Conversion costs	6,000
Total	$9,000

Added during the Month:

Transferred In 10,000

Direct materials 15,000

Conversion costs 25,000

Total $50,000

Total Costs Incurred $59,000

Units:

Beginning WIP 200 units

Started 1000 units

Completed 950 Units

Ending WIP ? units

Ending WIP was 50% complete for direct materials and 40% for conversion cost.

Required:

1.Calculate the equivalent units.

2.Compute the cost per unit.

3.Price the inventories (Reconciliation)

4.In what industries might one find process costing being used?

5.Define an equivalent unit.

Question No. 4

Central Redi-Mix Concrete, Inc. applies manufacturing overhead based on number of yards of concrete produced. At the beginning of 2014 management estimated the plant would produce 100,000 yards of concrete during the coming year. At the same time manufacturing overhead was budgeted to be $500,000. At the end of the year the firm had produced 110,000 yards of concrete and incurred $550,000 of manufacturing overhead.

Required:

1.Compute the overhead application rate for 2014.

2.Calculate the amount of overhead applied to work-in-process during the year.

3.Compute the overhead variance. Was it favorable or unfavorable and why?

4.Explain why we use a predetermined rate to apply manufacturing overhead to work-in-processversus the way a company accounts for direct labor and direct material.

Question No 5

Pacific Sports, Inc. makes surf boards. Following are inventory and cost figures relative to the year ended June 30 2013:

Beginning inventory 1,000 units

Produced 10,000 units

Sold 8,000 units

Sales price per unit $500

Variable production costs per unit $200

Fixed production costs unit $100

SG&A Expenses $1,000,000

Required:

1.Compute the operating income using the absorption method.

2.Compute the operating income using the variable costing method.

3.Reconcile the difference.

4.Why might a company choose to use variable costing for management purposes?

Question No. 6

Summer Fun Products makes a large beach umbrella. It consists of a canvas top that is sewn together from precut pieces plus a wood pole and arch structure. Below is information relative to the canvas process for the month of June 2014.

Standard material cost per yard $5.00

Standard labor rate per hour $25.00

Standard variable overhead rate per DLH $2.00

Standard Material to make one umbrella 3 Yards Standard Labor Hours to make one umbrella 2 Hours

During the month of June, the firm made 1,000 umbrellas. They paid $57,600 in direct labor for 1800 hours of labor. They actually purchased 3,500 yards of material for $15,995. Actual variable overhead was $4,500. They actually used 3,200 yards of material.

Required:

1.Compute the material quantity and price variances.

2.Compute the labor rate and efficiency variances.

3.Compute the actual variable overhead rate.

4.Compute the variable overhead spending and efficiency variances.

5.To what general ledger account does a company close variances?

6.Discuss any relationships you might see between the various components of the direct labor and direct material variances.

Question No 7

Chicago Computing Corporation manufactures two remote Internet communication devices: Personal and DeLuxe. Below is the information relative to their costs:

Name of Pool	Dollars in Pool	No. of Drivers	Driver
Purchasing	$1,000,000	10,000	Purch. Orders
Soldering	500,000	100,000	Inches
General Factory	250,000	40,000	Labor Hours
$1,750,000

Labor rate is $20.00 per hour.

Following is information relative to the two products:

Description	Personal	DeLuxe
Direct Material	$500,000	$800,000
Number of Units	10,000	5,000
Purchase Orders	6,000	4,000
Inches	50,000	50,000
Direct Labor Hours	25,000	15,000

Required:

1.Compute the total cost of making the personal device and the deluxe device using the singledriver approach with labor hours being the cost driver. Also, compute the unit cost of each device.

2.Compute the total cost of making the personal device and the deluxe device using the ABCapproach. Also, compute the unit cost of each device.

3.What are the three environmental factors that normally exist where a company is using ABCcosting?

4.Discuss some of the reasons firms have not adopted ABC costing.

Question No. 1 Gem Potato Processors produces three products: fries, nuggets and crunchy peels. They are all made from a cull potatoes they purchase from sorting sheds. Follow is information about each product. Fries Pounds Produced 50,000 Pounds Sold at 45,000 Retail Point Sales Price at $3.00 Split-off Retail Sales Price $5.00 Separate Costs $50,000 Nuggets 40,000 35,000 Peelings 10,000 10,000 $2.00 $1.00 $4.00 $20,000 $1.00 $0 Joint Costs before Split-off Point is $200,000. Required: 1.Allocate the joint costs using the NRV method. 2.Allocate the joint costs using the physical units method. 3.What is the other acceptable method used to allocate joint costs? 4.Which is the best method and why? Question No. 2 Community Recovery Clinic offers two types of services: inpatient and outpatient. They have two types of service departments: administration and housekeeping. Direct costs of nursing care and supplies can be traced directly to the patient. Number of Employees Departments Inpatient Outpatient Administration Housekeeping 40 20 10 5 Square Footage 20,000 10,000 5,000 5,000 Overhead costs for each department are as follows: Administration $500,000 Housekeeping $200,000 Administration is allocated based on number of employees and housekeeping is based on square footage. Carry out calculations to four decimal places. Required: 1.Allocate service department costs using the direct method. 2.Allocate service department costs using the reciprocal method. 3.What is the other method of allocation? 4.Briefly discuss the pros and cons of each method and select the best one. Question No. 3 Tots Toys Inc. manufactures a wooden model wagon. The departments are cutting, assembly and painting. Following is the information for the assembly department for the month of September 2013. Costs: Beginning WIP: Transferred In $1,000 Direct materials Conversion costs Total 2,000 6,000 $9,000 Added during the Month: Transferred In 10,000 Direct materials 15,000 Conversion costs 25,000 Total $50,000 Total Costs Incurred $59,000 Units: Beginning WIP 200 units Started 1000 units Completed 950 Units Ending WIP ? units Ending WIP was 50% complete for direct materials and 40% for conversion cost. Required: 1.Calculate the equivalent units. 2.Compute the cost per unit. 3.Price the inventories (Reconciliation) 4.In what industries might one find process costing being used? 5.Define an equivalent unit. Question No. 4 Central Redi-Mix Concrete, Inc. applies manufacturing overhead based on number of yards of concrete produced. At the beginning of 2014 management estimated the plant would produce 100,000 yards of concrete during the coming year. At the same time manufacturing overhead was budgeted to be $500,000. At the end of the year the firm had produced 110,000 yards of concrete and incurred $550,000 of manufacturing overhead. Required: 1.Compute the overhead application rate for 2014. 2.Calculate the amount of overhead applied to work-in-process during the year. 3.Compute the overhead variance. Was it favorable or unfavorable and why? 4.Explain why we use a predetermined rate to apply manufacturing overhead to work-inprocessversus the way a company accounts for direct labor and direct material. Question No 5 Pacific Sports, Inc. makes surf boards. Following are inventory and cost figures relative to the year ended June 30 2013: Beginning inventory 1,000 units Produced 10,000 units Sold 8,000 units Sales price per unit $500 Variable production costs per unit $200 Fixed production costs unit $100 SG&A Expenses $1,000,000 Required: 1.Compute the operating income using the absorption method. 2.Compute the operating income using the variable costing method. 3.Reconcile the difference. 4.Why might a company choose to use variable costing for management purposes? Question No. 6 Summer Fun Products makes a large beach umbrella. It consists of a canvas top that is sewn together from precut pieces plus a wood pole and arch structure. Below is information relative to the canvas process for the month of June 2014. Standard material cost per yard $5.00 Standard labor rate per hour $25.00 Standard variable overhead rate per DLH $2.00 Standard Material to make one umbrella 3 Yards Standard Labor Hours to make one umbrella 2 Hours During the month of June, the firm made 1,000 umbrellas. They paid $57,600 in direct labor for 1800 hours of labor. They actually purchased 3,500 yards of material for $15,995. Actual variable overhead was $4,500. They actually used 3,200 yards of material. Required: 1.Compute the material quantity and price variances. 2.Compute the labor rate and efficiency variances. 3.Compute the actual variable overhead rate. 4.Compute the variable overhead spending and efficiency variances. 5.To what general ledger account does a company close variances? 6.Discuss any relationships you might see between the various components of the direct labor and direct material variances. Question No 7 Chicago Computing Corporation manufactures two remote Internet communication devices: Personal and DeLuxe. Below is the information relative to their costs: Name of Pool Purchasing Soldering General Factory Dollars in Pool $1,000,000 500,000 250,000 $1,750,000 No. of Drivers 10,000 100,000 40,000 Driver Purch. Orders Inches Labor Hours Labor rate is $20.00 per hour. Following is information relative to the two products: Description Direct Material Number of Units Purchase Orders Inches Direct Labor Hours Personal $500,000 10,000 6,000 50,000 25,000 DeLuxe $800,000 5,000 4,000 50,000 15,000 Required: 1.Compute the total cost of making the personal device and the deluxe device using the singledriver approach with labor hours being the cost driver. Also, compute the unit cost of each device. 2.Compute the total cost of making the personal device and the deluxe device using the ABCapproach. Also, compute the unit cost of each device. 3.What are the three environmental factors that normally exist where a company is using ABCcosting? 4.Discuss some of the reasons firms have not adopted ABC costing