Business Assignment- Traditional costing

Business Assignment- Traditional costing

Instructions:  Designate the best answer for each of the following questions.

 

____     1.  Given the following data, compute equivalent units of production for conversion costs:

                        Beginning Work in Process—8,000 units, 40% complete

                        Units Completed and Transferred Out—90,000 units

                        Ending Work in Process—6,000 units, 20% complete.

1. 88,000
2. 91,200
3. 94,400
4. 96,000

 

____     2.  When there is beginning work in process, units transferred out can be computed by subtracting

1. ending work in process units from the units accounted for.
2. ending work in process units from the units started into production.
3. beginning work in process units from the units to be accounted for.
4. beginning work in process units from the units started into production.

 

____     3.  Given the following data, compute equivalent units of production for materials costs. Materials are added at the beginning of the process.

                        Beginning Work in Process—8,000 units, 40% complete

                        Units Completed and Transferred Out—90,000 units

                        Ending Work in Process—6,000 units, 20% complete.

1. 88,000
2. 91,200
3. 94,400
4. 96,000

 

____     4.  Which of the following does not describe a characteristic of process costing?

1. Job cost sheets must pass from one production department to the next on a daily basis.
2. Once production begins, it continues until the finished product emerges.
3. All units of production receive precisely the same amount of material, labor, and overhead.
4. Work in process accounts are maintained for each production department.

 

____     5.  Which of the following is not an important element of JIT (just in time) processing?

1. A company must have dependable suppliers who are willing to deliver on short notice exact quantities of raw materials according to precise quality specifications.
2. A company must have a multiskilled work force, so that one worker can have the responsibility to operate and maintain several different types of machines.
3. A process cost accounting system must be in place.
4. A total quality control system must be established throughout the manufacturing operations.

 

 

 

____     6.  In a JIT cost accounting system,

1. reduced product quality is offset by reduced cost.
2. manufacturing overhead is applied in the traditional manner.
3. Raw Materials and Work in Process Inventory accounts are replaced by Raw and In-Process Inventory.
4. conversion costs are eliminated.

 

____     7.  The number of purchase orders would be an appropriate cost driver for

1. inspecting and testing cost.
2. machining cost.
3. ordering and receiving materials cost.
4. supervising cost.

 

____     8.  All of the following are true about low-volume products except

1. they often require more special handling than high-volume products.
2. the overhead costs incurred by low-volume products are often disproportionate to a traditional allocation base.
3. they are frequently responsible for more overhead costs per unit than a high-volume product.
4. direct labor hours is usually a better cost driver for assigning overhead costs to low-volume products.

 

____     9.  The primary benefit of activity-based costing is that it leads to

1. more cost pools used to assign overhead costs to products.
2. more accurate product costing.
3. enhanced control over overhead costs.
4. better management decisions.

 

____   10.  All of the following are value-added activities in a manufacturing operation except

1. assembly.
2. engineering design.
3. inspections.
4. machining

____   11.  ABC costing is an approach for allocating

1. direct materials to products.
2. direct labor to products.
3. manufacturing overhead to products.
4. direct materials and direct labor to products.

 

____   12.  The first step in activity-based costing is to

1. assign overhead costs for each activity cost pool to products.
2. compute the activity-based overhead rate.
3. identify cost drivers that accurately measure each activity's contribution to the finished product.
4. identify and classify the major activities involved in the manufacture of specific products.

 

 

 

 

 

Instructions: Using the following data, complete the requirements given below. When you are given amounts to assume as the answers to previous requirements, be careful to use such assumed amounts rather than your answers (in order to minimize carry-through errors).

 

The Finishing Department of Curtis Corporation reports the following for January 2011:

 

Production: All materials are added at the beginning of the process. Beginning work in process 20,000 units, 60% complete. Units started into production 240,000 units. Ending work in process 10,000 units, 30% complete.

 

Manufacturing Costs: Beginning work in process, $40,000, comprised of $15,000 of materials and $25,000 of conversion costs. Materials added $160,000; labor and overhead added $465,000.

 

(a)     Required: Compute equivalent units of production for (1) materials and (2) conversion costs.

                                                Materials                     Conversion

 

 

 

 

 

(b)    Assume your answers to (a) above were 250,000 units for materials and 245,000 for conversion costs.

         Required: Compute the unit costs for the month.

 

                                                            Materials                     Conversion

 

 

 

 

 

 

(c)     Assume your answers to (b) above were $.90 for materials and $2.10 for conversion costs. Required: Determine the costs to be assigned to the 240,000 units transferred out.

 

 

 

 

 

 

(d)    Assume the same unit costs as given in (c) above.

         Required: Determine the costs assigned to the 10,000 units in ending work in process.

 

 

 

 

 

 

 

 

Bright Window Company designs and builds custom windows for luxury homes. Most of the windows are custom made but occasionally the company does mass production on order.  Its budgeted manufacturing overhead costs for the year 2011 are as follows:

 

                        Overhead Cost Pools                                                     Amount 

            Purchasing                                                                               $   180,000

            Production (cutting, milling, finishing)                                        400,000

            Setting up machines                                                                     135,000

            Inspecting                                                                                    160,000

            Utilities                                                                                        300,000

                  Total budget overhead costs                                             $1,175,000

 

For the last three years, the company has been charging overhead to products on the basis of machine hours.  For the year 2011, 100,000 machine hours are budgeted.

 

Susan Craft, owner-manager of Bright Window, recently directed her accountant to implement the activity-based costing system she has repeatedly proposed. At Susan's request, the accountant and production foreman identify the following cost drivers and their usage for the previously budgeted overhead cost pools.

 

                  Overhead Cost Pools                                  Activity Cost Drivers            Total Drivers

         Purchasing                                                          Number of orders                          500

         Production (cutting, milling, finishing)              Direct labor hours                    80,000

         Setting up machines                                           Number of setups                       1,000

         Inspecting                                                          Number of inspections               5,000

         Utilities                                                              Square feet occupied               75,000

 

During this month, the company received an order for 50 window sets from a housing development contractor. The accountant prepares cost estimates for producing components for 50 window sets so Susan can submit a contract price per window set to the contractor. The following data for the production of 50 window sets is accumulated:

 

            Direct materials                                                        $120,000

            Direct labor                                                              $135,000

            Machine hours                                                              12,000

            Direct labor hours                                                        10,000

            Number of purchase orders                                                 50

            Number of machine setups                                                 80

            Number of inspections                                                      380

            Number of square feet occupied                                    7,000

 

Instructions

(a)   Compute the predetermined overhead rate using traditional costing with machine hours as the basis.

(b)   Compute the manufacturing cost per window set under traditional costing.

(c)   Compute the manufacturing cost per window set under the proposed activity-based costing.