Use the information below to answer the following question(s):

Walter Inc. manufactures two products- Carriages and Wagons. The annual production and sales of Carriages is 2,000 units, while 1,800 units of Wagons are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Carriages require 1.0 direct labour hours per unit, while Wagons require 0.5 direct labour hours per unit. The total estimated overhead for the period is $117,500. The company is looking at the possibility of changing to an activity-based costing system for its products. If the firm used an activity-based costing system, it would have the following three activity cost pools:

Expected Activity

Activity Cost Pool Estimated Overhead Cost Carriages Wagons Total

Setups $6,000 200 batches 400 batches 600 batches

Engineering $68,000 900 engineering hours 800 engineering hours 1,700 engineering hours

Maintenance $43,500 2,000 direct labour hours 900 direct labour hours 2,900 direct labour hours

Total $117,500

1. The predetermined overhead allocation rate using the traditional costing system would be closest to

$40.52 per direct labour hour.

$130.56 per direct labour hour.

$58.75 per direct labour hour.

$30.92 per direct labour hour.

2.The overhead cost per Wagon using the traditional costing system would be closest to

$65.28.

$40.52.

$20.26.

$18.01.

3.The cost pool activity rate for engineering costs would be closest to

$10.00 per engineering hour.

$15.00 per engineering hour.

$40.00 per engineering hour.

$75.56 per engineering hour.

4.The overhead cost per Wagon using an activity-based costing system would be closest to

$27.50.

$65.00.

$65.28.

$24.75.

5.Goods available for sale that are not in ending inventory

are included in goods available for sale in the next year.

are included in the work-in-process inventory at the end of the year.

are not accounted for until the next year.

are incorporated in the cost of goods sold amount.

re included in beginning inventory.

6.What is the appropriate journal entry if direct materials of $40,000 and indirect materials of $5,000 are sent to the manufacturing plant floor?

Work-in-Process Control 40,000

Materials Control 40,000

Work-in-Process Control 45,000

Materials Control 45,000

Manufacturing Overhead Control 5,000

Materials Control 40,000

Work-in-Process Control 45,000

Work-in-Process Control 40,000

Manufacturing Overhead Control 5,000

Materials Control 45,000

Work-in-Process Control 40,000

Manufacturing Overhead Allocated 5,000

Materials Control 45,000