Activity based costing, labour variances

Question 1: There are five steps that must be followed in preparing a cost of production report. Which of the following is the correct sequence of steps?
a) Calculation of equivalent units, Computation of unit cost, Analysis of the flow of
physical units, Valuation of inventories (goods transferred out and ending work in process), Cost reconciliations the administrative expense budget
b) Analysis of the flow of physical units, Calculation of equivalent units, Cost reconciliations the pro-forma income statement, Computation of unit cost, Valuation of inventories (goods transferred out and ending work in process)
c) Analysis of the flow of physical units, Calculation of equivalent units, Computation of unit cost, Valuation of inventories (goods transferred out and ending work in process), Cost reconciliations
d) Calculation of equivalent units, Analysis of the flow of physical units, Computation of unit cost, Cost reconciliations,Valuation of inventories (goods transferred out and ending work in process)

Question 2: If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be:
Labor Rate Variance Labor Efficiency Variance
a) Favorable Favorable
b) Favorable Unfavorable
c) Unfavorable Favorable
d) Unfavorable Unfavorable

Question 3: Yang Manufacturing Company manufactures two products (A and B). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:

Number of Labor

Product Number of Orders Transactions Labor Hours
A 15 50 500
B 10 150 2,000

Cost per pool $10,000 $8,000 $40,000

What is the allocation rate per labor transaction using ABC?

a) $8,000
b) $16
c) $29,000
d) $40

Question 4: Newman Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed:
$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour

Two products are produced by Newman Company: X and Y. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X goes through Process 1 while Product Y goes through Process 2. The product relational table for Newman Company is as follows:
Product X:
Activity Driver # and Name Activity Usage
1 Units 200,000
2 Purchase orders 250
3 Machine hours 80,000
4 Engineering hours 1,250

Product Y:
Activity Driver # and Name Activity Usage
1 Units 25,000
2 Purchase orders 125
3 Machine hours 10,000
4 Engineering hours 1,500

Refer to Figure 4-6. How much overhead cost will be assigned to Product Y using Process 2?
a) $2,400,000
b) $1,920,000
c) $240,000
d) $300,000

Question 5: Figure 4-6
Newman Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed:

$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour

Two products are produced by Newman Company: X and Y. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X goes through Process 1 while Product Y goes through Process 2. The product relational table for Newman Company is as follows:
Product X:
Activity Driver # and Name Activity Usage
1 Units 200,000
2 Purchase orders 250
3 Machine hours 80,000
4 Engineering hours 1,250

Product Y:
Activity Driver # and Name Activity Usage
1 Units 25,000
2 Purchase orders 125
3 Machine hours 10,000
4 Engineering hours 1,500

Refer to Figure 4-6. How much overhead cost will be assigned to Product Y using engineering hours?
a) $100,000
b) $120,000
c) $2,000,000
d) $801,000

Question 6: Newman Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed:
$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour

Two products are produced by Newman Company: X and Y. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X goes through Process 1 while Product Y goes through Process 2. The product relational table for Newman Company is as follows:
Product X:
Activity Driver # and Name Activity Usage
1 Units 200,000
2 Purchase orders 250
3 Machine hours 80,000
4 Engineering hours 1,250

Product Y:
Activity Driver # and Name Activity Usage
1 Units 25,000
2 Purchase orders 125
3 Machine hours 10,000
4 Engineering hours 1,500

Refer to Figure 4-6. How much overhead cost will be assigned to Product X using the number of purchase orders?
a) $100,000
b) $50,000
c) $80,000,000
d) $133,500

Question 7: Michael Corporation has the following sales forecasts for the first three months of 2010:
Month Sales
January $36,000
February 24,000
March 40,000

Sixty-five percent of sales are collected in the month of the sale and the remainder are collected in the following month.
Accounts receivable balance (January 1, 2009) $22,800
Cash balance (January 1, 2009) 22,000
Minimum cash balance needed 20,000

What is the cash balance at the end of January, assuming that cash is received only from customers and that $48,000 is paid out during January?
a) $19,400
b) $20,200
c) $20,600
d) $21,000

Question 8: Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:

The June 30th balance sheet follows:
Cash $ 25,000 Accounts payable $ 45,000
Accounts receivable 110,000 Capital stock 300,000
Inventory 54,000 Retained earnings 94,000
Building and equipment (net) 250,000

Actual sales for June and budgeted sales for July, August, and September are given below:
June $137,500
July 360,000
August 400,000
September 320,000

Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts.

The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.

The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.

What is the balance of the accounts payable at the end of July?
a) $55,500
b) $93,000
c) $120,000
d) $166,500

Question 9: Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below:
The June 30th balance sheet follows:
Cash $ 25,000 Accounts payable $ 45,000
Accounts receivable 110,000 Capital stock 300,000
Inventory 54,000 Retained earnings 94,000
Building and equipment (net) 250,000

Actual sales for June and budgeted sales for July, August, and September are given below:
June $137,500
July 360,000
August 400,000
September 320,000

Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts.

The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.

The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.

What is the balance of the inventory account at the end of July?
a) $54,000
b) $60,000
c) $124,000
d) $216,000

Question 10: Activity-based costing assigns cost to cost objects by first
a) tracing costs to products and then tracing costs to cost objects.
b) tracing costs to departments and then tracing costs to products.
c) tracing costs to activities and then tracing costs to cost objects.
d) tracing costs to customers and then tracing costs to products.