solutions of these problems mention in th ehandouts are required urgently

EXERCISE 1 XYZ Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Material-handling costs.............. Machine costs............................ Order costs................................. Receiving costs.......................... Setup costs................................. Activity Driver $45,000 80,000 15,000 30,000 50,000 Activity Capacity Number of moves.................... Machine hours......................... Number of orders..................... Number of parts....................... Number of setups..................... 450 20,000 750 50,000 250 Assume that each activity corresponds to a process. XYZ's normal activity is 5,000 direct labor hours. The following two jobs were completed during March: Direct materials........................................... Direct labor ($15 per hour).......................... Units completed.......................................... Number of moves........................................ Machine hours............................................. Number of orders........................................ Number of parts.......................................... Number of setups........................................ Required: 1. 2. 3. Job X-1 Job Y-4 $1,500 $750 200 3 125 3 200 1 $2,000 $750 200 6 75 12 800 4 Determine the unit cost for each job using direct labor hours to apply overhead. Determine the unit cost for each job using the activity drivers to apply overhead. Which method produces the more accurate cost assignment? Why? EXERCISE 2 Required: Classify the following activities as unit-level, batch-level, product-level, or facility-level. 1. Marketing a product 2. Paying rent 3. Drilling a hole 4. Lighting the factory 5. Running the machines 6. Moving a batch 7. Engineering a product 8. Inspecting a machined part when it is completed 9. Ordering a purchased part 10. Setting up a machine 11. Using janitorial services 12. Paying insurance Four general activity categories include: Unit-level activities are those that are performed each time a unit is produced. Batch-level activities are those that are performed each time a batch is produced. Examples:Setup, inspections (if done by sampling units from a batch), purchasing, material handling Product-level activities are those performed that enable the various products of a company to be produced. Examples:Engineering changes to products, developing product-testing procedures, introducing new products, expediting goods Facility-level activities are those that sustain a factory's general manufacturing processes. Examples:Providing facilities, maintaining grounds, providing plant security EXERCISE 3 Acme Enterprises is a custom manufacturer of specialty circuit boards. The boards are produced in batches in a single manufacturing facility. Each board requires an engineer to prepare the speci fications and schematic drawings. Once this design is complete, the equipment is set up for the batch production. As each batch is completed, a sample of the units is inspected for quality and tolerances. Costs have been assigned as follows: Engineering.................................... Setups............................................. Labor.............................................. Inspection....................................... Factory lease.................................. Factory utilities.............................. $75,000 60,000 50,000 75,000 30,000 12,000 The following activity drivers have been identified and their capacities determined: Activity Driver Practical Capacity Labor hours.................................... Setup hours..................................... Engineering hours.......................... Inspection hours............................. Machine hours................................ 5,000 2,000 2,500 6,000 10,000 The costs of the facility-level activities are assigned using machine hours. Required: 1. Identify each activity as unit-level, batch-level, product-level, or facility-level. 2. Create homogeneous cost pools. Identify the activities that belong to each pool and the activity driver that will be used for computing pool rates. (Use machine hours as the activity driver for the factory lease and factory utilities cost pools.) 3. Compute the pool rate for each pool you have identified in Requirement 2. EXERCISE 4 Alcatraz Company makes two models of an antitheft device. The portable model is relatively small and is primarily for use in automobiles. The standard model is much larger and is designed for houses and buildings. The Fabricating Department cuts, bends, and welds sheet metal to produce the external box of the device. The box is also painted in this department. The Assembly Department uses purchased parts to produce the internal workings and fit them into the prepared metal boxes. Alcatraz has conducted a special study to determine if an activity-based costing system would be beneficial in determining the costs of the two products. The Fabricating Department is a more complex department than the Assembly Department and has been chosen for a pilot test of an ABC system. The following activities have been identified, along with their associated costs: Depreciation................................................ Factory lease............................................... Inspection.................................................... Factory maintenance................................... Materials handling....................................... Power.......................................................... Product engineering changes....................... Setups.......................................................... Department manager salaries...................... $250,000 125,000 75,000 150,000 100,000 50,000 25,000 125,000 60,000 The analysts have identified the following potential activity drivers and the capacity of each: Direct labor ($10 per hour)........................ Machine hours............................................. Materials..................................................... Number of moves........................................ Number of products.................................... Number of setups........................................ Units produced............................................ Portable Standard $75,000 4,000 $450,000 1,500 1 150 15,000 $90,000 6,000 $650,000 1,500 1 350 17,500 Required: 1.Classify each activity according to activity level and identify an appropriate driver for each. 2.Create homogeneous cost pools and calculate pool rates. (Use the number of setups as the activity driver for both inspection and setups costs. Machine hours serve as the activity driver for depreciation, factory lease, factory maintenance, and department manager salaries.) 3. Use the pool rates to compute per unit overhead costs for the two products. Question No.1 Laraib Distributions have been accused of discriminating against its small-order customers (25 to 50 cases) in southern territory when compared with same class of customers in other territory. The company has classified its marketing costs by territories. It now plans to allocate the territorial costs to different categories of customers within each territory. Tabulation of the average distribution costs per year in southern territory shows: Advertising; Direct to customers Radio and newspapers Sales salaries Sales commission Delivery Sales travel cost Collection cost Rs.36,000 90,000 360,000 480,000 288,000 108,000 84,000 Rs.1446,000 The sales department has furnished the following data to assist prorating costs in southern territory between small, medium and large order customers. Net sales (Rs.) Number of sales order taken Number of cases of product sold Relative shipping cost (per order) (Rs.) Number of customers Relative number of kilometers Travelled (per day per salespersons) Number of salespersons Small order customers Medium order customers 1500,000 2,500 1,000,000 10 1,500 2,220,000 2,000 1,500,000 20 1,500 4 13 10 6 Large order customers 3,500,000 1,500 2,500,000 30 2,000 16 5 In the collection department, the bookkeeping cost per order handled is about one rupee. Each customer is mailed a statement at month end. The customers make single month remittances on account. All salespersons are paid the same salary and each salesperson works with a single class of customer. Required: Prepare a statement showing allocation of the distribution costs of southern territory to the three classes of customers. Indicate the base or bases on which each allocation is made. (round off all computations suitably). Question No.2 Having the attention in ICMA course on activity based costing (ABC) you decide to experiment by applying the principle of ABC to the four products currently made and sold by your company. Details of the four products and relevant information are given below for one period; Product Output in units Cost per unit: Direct material Direct labor Machine hour per unit A 120 Rs. 40 28 4 B 100 Rs. 50 21 3 C 80 Rs. 30 14 2 D 120 Rs. 60 21 3 The four products are similar and are usually produced in production runs of 20 units and sold in batches of 10 units. The production overheads are currently absorbed by using a machine hour rate the total of production overheads for the period are analyzed as follows: Rs. Machine department costs (rent, business rates, depreciation, and supervision) Setup costs Stores receiving Inspection / Quality control Material handling and dispatch 10,430 5,250 3,600 2,100 4,620 You have ascertained that the 'Cost Drivers' to be used are listed below for the overhead costs shown: Costs Set up costs Stores receiving Inspection / Quality control Material handling and dispatch Cost Driver Number of production runs Requisitions raised Number of production runs Orders executed The number of requisitions raised on the store was 20 for each period product and the number of orders executed was 42, each order being for a batch of a product. You are required: a) To calculate the total costs of each product if all overhead costs are absorbed on machine hour basis. b) To calculate the total costs for each product using activity based costing. c) To calculate and list the unit product costs from your figures in (a) and (b) above to show the difference and to comment briefly on any conclusions which may be drawn and which could have profit and pricing implications. Question No.3 AJ manufacturing company produces about one hundred products. Its largest selling product is product X and its smallest is product Y. relevant data is given below: Particulars Units produced per annum Material cost per unit Direct labor per unit Machine time per unit No. of set ups per unit No. of purchase orders for material No. of times material handled Direct labor cost per hour Overhead Costs: Set up Purchasing Material handling Machines Total Machine hours are 600,000 hours. Required: Product Product Total X Y product 5000 1000 50,000 Rs.1 Rs.1 15 min 15 min 1 hour 1 hour 24 2 500 36 6 2800 200 15 12000 Rs.5.00 280,000 145,000 130,000 660,000 1,215,000 a) Find out the production unit cost of product X and product Y. b) Using conventional product costing machine hour overhead absorption rate. c) Using ABC (Activity Base Costing ) compare the results of methods and comment. Question No.4 The Jewell plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: Maintenance Rs.360,000 Inspection 750,000 The plant currently applies overhead using direct labor hours and expected capacity of 100,000 direct labor hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus a 20% mark-up. Direct materials Rs.2,100 Direct labor 5,625 Machine hours 450 Number of inspections 4 Direct labor hours 550 Total expected machine hours for all jobs during the year are 60,000, and the total expected number of inspections is 4,000. Required: a) Compute the total cost of the potential job using direct labor hours to assign overhead. Determine the bid price for the potential job. b) Compute the total cost of the job using activity-based-costing and the appropriate activity drivers. Determine the bid price if activity-based-costing is used. c) Prepare a memorandum to the plant manager recommending a bid price for the potential job. Support your recommendation by explaining which costing method best reflect the actual cost of the job. Question No.5 Ivory Corporation manufactures two products (A and B). The overhead costs have been divided into four cost pools that use the following activity drivers: Product A B Cost per pool Number of Orders Number of Set-ups 20 5 Rs.15,000 35 70 Rs.8,400 Number of Labor Transactions 1,000 1,500 Rs.120,000 Labor Hours 75 125 Rs.40,000 Required: a) Compute the allocation rates for each of the activity drivers listed. b) Allocate the overhead cost to Product A and B using activity-based-costing. c) Compute the overhead rate using machine hours under the functional based costing system. d) Allocate the overhead cost to Product A and B using the functional-based costing system overhead rate calculated in part . Question No.6 Hunter Company manufactures two products (XX and YY). The overhead costs have been divided into four cost pools that use the following activity drivers. Product XX YY Cost per pool Number of Orders Number of Set-ups 60 20 Rs.16,000 20 80 Rs.13,000 Number of Labor Transactions 50 70 Rs.2,400 Labor Hours 2,000 500 Rs.20,000 Required: a) Compute the allocation rates for each of the activity drivers listed. b) Allocate the overhead costs to product XX and product YY using activity-based costing. c) Compute the overhead rate using machine hours under the functional-based costing system. d) Allocate the overhead cost to Product XX and YY using the functional-based costing system overhead rate calculated in part . Question No.7 Lyon Corporation has identified the following overhead costs and activity drivers for next year: Overhead Items Expected Costs Activity Drivers Set-up costs Rs.150,000 Number of set-ups Ordering costs 40,000 Number of orders Maintenance 200,000 Machine hours Power 20,000 Kilowatt hours The following are two of the jobs completed during the year: Job XX Job YY Direct materials Rs.2,250 Rs.2,500 Direct labor Rs.3,000 Rs.1875 Units completed 375 300 Direct labor hours 90 110 Number of set-ups 6 8 Number of orders 8 15 Machine hours 180 150 Kilowatt hours 90 120 The company's normal activity is 20,000 direct labor hours. Expected Qty. 1,000 10,000 16,000 100,000 Required: a) Determine the unit cost for each job using direct labor hours to apply overhead. b) Determine the unit cost for each job using the four activity drivers. (Round amounts to 2 decimals). c) Which method produces the more accurate cost assignment? Why? Question No.8 King manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows. Maintenance Rs.70,000 Material Handling 30,000 Set-ups 25,000 Inspection 50,000 Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours, 50,000 direct labor hour are budgeted for next year? The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually, bids are based upon full manufacturing cost plus 30 percent. Estimates for the proposed job are as follows: Direct material Direct labor (750 hours) Number of machine hours Number of material moves Number of Set-ups Number of inspections Rs.2,500 Rs.3,750 300 8 3 5 In past, full manufacturing cost has been calculated by allocating overhead using volume-based activity drivers, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used is: Machine hour Material moves Set-ups Quality inspections 16,000 4,000 2,000 8,000 Required: a) Determine the amount of overhead that would be allocated to the proposed job if direct labor hours are used as the volume-based activity driver. Determine the total cost of the proposed job. Determine company's bid if the bid id based upon full manufacturing cost plus 30 percent. b) Determine the amount of overhead that would be applied to the proposed project if activity-based costing is used. Determine the total cost of the proposed job if activity-based costing is used. Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent. c) Which product costing method produces the more competitive bid