Maxx Inc. has provided the following data from its activity-based costing system:

Maxx Inc. has provided the following data from its activity-based costing system:

Activity Cost Pools      Total Cost                  Total Activity

 

Designing products       $377,800                  6,320 product design hours

 

Setting up batches        $52,678                    7366 batch set-ups

 

Assembling products    $25,122                    4,018 assembly hours

 

The activity rate for the “designing products” activity cost pool is:

 

Round to two decimal places.

 

Question 2Sasha Company allocates the estimated $184,800 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:

 

Department       Employees

 

Accounting         4

 

Production          29

 

Sales      16

 

How much of the accounting department costs will be allocated to the production?

 

Question 3Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory.  Information about the departments is presented below:

 

                                Number of          Number of Square

 

Department       Costs     Employees          Feet Occupied

 

Payroll (S1)         $133,000              2              2,000

 

Maintenance (S2)            $220,000              8              64,000

 

Molding (P1)                     67           100,000

 

Finishing (P2)                    40           60,000

 

Packaging (P3)                  25           40,000

 

Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar.

 

What amount of the payroll department costs will be allocated to the molding department?

 

 

 

Question 4The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600.  If these keyboards are upgraded at a cost of $7,800, they could be sold for $18,600.  Alternatively, the keyboards could be sold “as is” for $7,600.  What is the net advantage or disadvantage of re-working the keyboards?

 

Question 5Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:

 

Cost Pool             Total Costs          Cost Driver          Annual Activity

 

Packaging and shipping $163,300              Number of boxes shipped           23,200 boxes

 

Final inspection $196,000              Number of individual items shipped        97,600 items

 

General operations and supervision        $81,200 Number of orders           8,400 orders

 

During the period, the Far East sales office generated 682 orders for a total of 6,140 items. These orders were shipped in 1,328 boxes. What amount of shipping department costs should be allocated to these sales?

 

Question 6Criteria used to allocate fixed costs to a department include:

 

Relative benefits

 

Relative benefits

 

Ability to bear

 

Equity

 

All of the above

 

Question 7Sosa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs.  Demand is estimated to be 138,000 units annually.  What is the price if a markup of 35% on total cost is used to determine the price?

 

Round to two decimal places.

 

Question 8Bob’s Company sells one product with a variable cost of $5 per unit.  The company is unsure what price to charge in order to maximize profits.  The price charged will also affect the demand.  If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits?

 

              Units Sold                            Price

 

                 30,000                                $10

 

                 40,000                                 $9

 

                 50,000                                 $8

 

                 60,000                                 $7

 

$10

 

$9

 

$8

 

$7

 

Question 9A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold.  Which of the following is a sunk cost in this situation?

 

the original selling price

 

the anticipated profit

 

the original purchase price

 

the current selling price

 

Question 10An example of an indirect cost is:

 

Labor costs

 

Material cost

 

Office supplies

 

Administrative cost

 

Question 11Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order?

 

Profits would increase $40,000.

 

Profits would increase $60,000.

 

Profits would decrease $200,000.

 

Profits would increase $80,000

 

Question 12A company has $7.30 per unit in variable costs and $3.60 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.40, what price should be charged if 66,000 units are expected to be sold?

 

Round to two decimal places.

 

Question 13Customer profitability analysis might result in:

 

dropping some customers that are unprofitable.

 

lowering price or offering incentives to profitable customers.

 

giving incentives to all customers to place orders online.

 

All of the above.

 

 

 

Question 14The goal of cost-plus pricing is to add a markup to estimated product costs so that a reasonable profit can be made.

 

                True

 

                False

 

Question 15A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $132.00 per unit. The company requires a profit of 0.30 of selling price. How much is the target cost per unit?

 

Round to two decimal places.

 

Question 16From the following list, which is the best example of a mixed cost?

 

Monthly rent

 

Raw materials

 

Wage costs for employees paid a monthly salary plus commission

 

Depreciation

 

Question 17Activity-based pricing:

 

Is used to provide prices per service options

 

Uses activity-based costing techniques to determine indirect costs associated with the various service options

 

May reduce costs to suppliers, since customers are selecting services a la carte

 

All of the above

 

Question 18The Break-Even point is the

 

number of units sold that allow the company to neither a profit nor a loss

 

number of units sold that allow the company to pay labor their wages

 

dollar revenues that allows the firm to pay the required rate of return to its investors

 

dollar profits that allows the firm to pay the required rate of return to its investors

 

Question 19Which of the following is not part of the Process of Cost Allocation

 

Select an allocation base to relate the cost pools to the cost objectives

 

Form cost pools

 

Identify the cost objectives

 

Allocate revenues to different products of the firm

 

Question 20Opportunity costs are:

 

Never incremental costs

 

Always incremental costs

 

Sometimes sunk costs

 

Greater than sunk costs

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