Reference no: EM132575434
Problem 1: Last year, QSZW, Inc. decided to fine-tune the costing system at its factory. The old system included two direct cost pools (direct materials and direct labor) and just one pool of indirect costs (factory overhead). The overhead was allocated to the products based on the direct labor hours at the rate of 300%.
The new system kept the direct costs unchanged but introduced two indirect cost pools:
- Materials handling was allocated based on the planned number of parts in the product
- Manufacturing overhead was allocated based on the planned manufacturing time used for each product
For both pools the management calculated the corresponding cost allocation rates (CAR's) using the most recent data:
- For materials handling CAR = $2 per each part used
- For manufacturing overhead CAR = $50 per hour of manufacturing time
Given below is the data for the three products manufactured by QSZW.
Product ? B C
Direct materials $1,680 $1,250 $2,070
Direct labor (labor hours) 7.2 4.3 6.1
Number of parts 128 86 260
Manufacturing time (hours) 4.8 3.9 18.5
- Direct labor costs last year were estimated at $30 per labor hour of direct labor.
What is the total manufacturing cost of Product A under the old costing system?
$648
$1,896
$2,544
None of the above
Problem 2: In terms of Question 1, the total manufacturing cost of Product A under the new costing system (compared to the old system) will:
Decrease by 23.5%
Increase by 6.4%
Decrease by 6.0%
Not change
Problem 3: In terms of Question 1, the total direct cost for making Product B under the new costing system is:
$1,746
$129
$1,250
$1,379
Problem 4: In terms of Question 1, the total direct cost of making Product B under the new costing system (compared to the old system) will:
Increase by 32.0%
Increase by 10.3%
Not change
Decrease by 1%
Problem 5: In terms of Question 1, what is the total indirect cost of making Product C under the new costing system?
$520
$925
$549
$1,445
Problem 6: In terms of Question 1, the change in the total indirect cost for Product C under the new costing system (compared to the old system) will be:
An increase by 163.2%
An increase by 64.1%
An increase by 68.5%
A decrease by 5.3%
Problem 7: In terms of Question 1, what is the product whose indirect costs grew most significantly under the new system (compared to the old system)?
Product A
Indirect costs grew equally for all products
Product C
Product B
Problem 8: In terms of Question 1, which of the following requirements/costs contributed mostly to the percentage change in the total manufacturing cost for Product C under the new system (compared to the old system)?
Direct materials
Manufacturing time
Direct labor
All of the above