Reference no: EM131659249

Q1. Voltaire Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Finishing

	Service Department		Operating Department
	Administrative	Facilities	Assembly	Finishing
Departmental costs	$ 32,200	$ 39,071	$ 125,940	$ 417,730
Employee time (hours)	3,900	1,130	29,000	29,000
Space occupied - square feet	8,900	1,130	41,000	2,900

Administrative Department costs are allocated on the basis of employee hours and Facilities Department costs are allocated on the basis of space occupied.

Required: Allocate the service department costs to the operating departments using the direct method.

Q2. Kindschuh Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.09 direct labor-hours. The direct labor rate is $7.60 per direct labor-hour. The production budget calls for producing 5,000 units in June and 5,500 units in July.

Required: Construct the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.

Q3. Freet Inc. is preparing its cash budget for November. The budgeted beginning cash balance is $25,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $95,000. The desired ending cash balance is $75,000. The company can borrow up to $90,000 at any time from a local bank, with interest not due until the following month.

Required: Prepare the company's cash budget for November in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

Q4. Pressler Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs, which consist of equipment depreciation and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.

Equipment depreciation (total)	$29,700
Indirect labor (total)	$7,390

 

Distribution of Resources Consumption Across Activity Cost Pools
	Machining	Setting up	Other
Equipment depreciation	0.20	0.50	0.30
Indirect labor	0.40	0.50	0.10

Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.

	MHs	Batches
Product S4	15,800	1,400
Product V6	10,200	1,700
Total	26,000	3,100

Additional data concerning the company's products appears below:

	Product S4	Product V6
Sales (total)	$83,700	$73,900
Direct materials (total)	$28,400	$23,700
Direct labor (total)	$34,000	$27,800

Required

a. Assign overhead costs to activity cost pools using activity-based costing.

b. Calculate activity rates for each activity cost pool using activity-based costing.

c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.

d. Determine the product margins for each product using activity-based costing.

Q5. Capp Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

• Sales are budgeted at $280,000 for November, $290,000 for December, and $270,000 for January.
• Collections are expected to be 60% in the month of sale, 38% in the month following the sale, and 2% uncollectible.
• The cost of goods sold is 80% of sales.
• The company desires an ending merchandise inventory equal to 40% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
• The November beginning balance in the accounts receivable account is $63,000.
• The November beginning balance in the accounts payable account is $250,000.

Required:

a. Prepare a Schedule of Expected Cash Collections for November and December.

b. Prepare a Merchandise Purchases Budget for November and December.

Q6. Spendlove Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool	Total Cost	Total Activity
Assembly	$1,341,408	62,800	machine-hours
Processing orders	$67,522.00	2,450	orders
Inspection	$123,120	1,620	inspection-hours

The company makes 440 units of product S78N a year, requiring a total of 1,830 machine-hours, 106 orders, and 37 inspection-hours per year. The product's direct materials cost is $52.67 per unit and its direct labor cost is $12.32 per unit. The product sells for $181.00 per unit.

According to the activity-based costing system, the product margin for product S78N is:

$6,222.24

$51,044.40

$9,143.60

$9,034.24