Accountancy 3200 Spring 2002 2nd Exam
Following is the second exam given in the spring 2002 semester. We ar
an idea of the kinds of problems you can expect. Do not assume, howev
one or that these are the only topics to be covered.

1. Addy Company has two products A and B. The annual production and sales of Product A is
1,700 units and of Product B is 1,100 units. The company has traditionally used direct labor-hours
as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct
labor hours per unit and Product B requires 0.6 direct labor hours per unit. The total estimated
overhead for the next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of
computing unit product costs. The new activity-based costing system would have three overhead
activity cost pools: Activity 1, Activity 2, and Activity 3--with estimated overhead costs
and expected activity as follows:
		Estimated Activity
Activity Cost Pool	Estimated Overhead Cost	Product A	Product B	Total
Activity 1	$ 30,528	1,000	600	1,600
Activity 2	$ 17,385	1,700	200	1,900
Activity 3	$ 50,872	510	660	1,170
Total	$ 98,785
Required: (Round your ansers to the nearest whole cent.)
1.1	What is the predetermined overhead rate under the traditional costing system?
1.2	How much overhead cost will be allocated to one unit of Product B under the
	traditional costing system?
1.3	What is the predetermined overhead rate (i.e., the activity rate) for Activity 2
	under the activity-based costing system?
1.4	Assume, contrary to fact, the following activity rates:
	Activity 1	$ 20.00
	Activity 2	$ 6.00
	Activity 3	$ 18.00
	What is the total overhead cost per unit of Product B under the
	activity-based costing system?

2. Grodt Catering uses activity-based costing for its overhead costs. The company has
provided the following data concerning the activity rates in its activity-based costing system:
		Activity Cost Pools
		Preparing Meals	Arranging Events
	Wages	$0.85	$110.00
	Supplies	$0.50	$310.00
	Other	$0.30	$120.00
The measure of activity for the Preparing Meals activity cost pool is the number of meals.
The measure of activity for the Arranging Events activity cost pool is the number of events
(i.e., each event is charged with an arranging events cost.)
Management would like to know whether the company made any money on a recent event at
which 60 meals were served. The company catered the event for a fixed price
of $19.00	per meal. Raw materials for the meals cost $8.60 per meal.
Required:(Round your answers to the nearest whole dollar.)
2.1	According to the activity-based costing system, what was the total cost (including the
	cost of raw ingredients) of the event mentioned above.
2.2	Did the company make or lose money on the event and how much did they make or
	lose in total?
3. The PDQ Company makes collections on credit sales according to the following schedule:
	25%	in the month of sale
	70%	in the month following sale
	4%	in the second month following sale
	1%	uncollectible
The following sales have been budgeted:
	Month	Sales
	April	$100,000
	May	$120,000
	June	$110,000
Required: (Round your answer to the nearest whole dollar.)
	3.1	What is the total amount of cash collections PDQ will budget for June?

4. Roberts Enterprises has budgeted sales in units for the next five months as follows:
	June	4,500	units
	July	7,100	units
	August	5,300	units
	September	6,700	units
	October	3,700	units
Past experience has shown that the ending inventory for each month must be equal to
10%	of the next month's sales in units. The inventory on May 31 contained 450 units.
The company needs to prepare a production budget for July -September.
Required: (Round your answer to the nearest whole unit.)
	4.1	What is the beginning inventory in units for September?
	4.2	What is the total number of units to be produced in July?
	4.3	What is the desired ending inventory for August?

5. The International Company makes and sells only one product. The company is in the process of
preparing its Selling and Administrative Expense Budget for the last half of the year. The following
budget data are available:
				Variable Cost per Unit Sold	Monthly Fixed Cost
	Sales commissions			$0.70
	Shipping			$1.10
	Advertising			$0.20	$14,000
	Executive salaries			--	$34,000
	Depreciation on office equipment			--	$11,000
	Other			$0.25	$19,000
	All expenses, other than Depreciation, are paid in cash in the month they are incurred.
Required:
	5.1	If the company has budgeted to sell			25,000 units of the
		product in July, what will the total budgeted selling and administrative
		expenses for July be? (Round your answer to the nearest whole dollar)
	5.2	If the budgeted cash disbursements for selling and administrative
		expenses for November total $123,250, then how many units of the product
		does the company plan to sell in November? (Round your answer to
		the nearest whole dollar.)

6. Teas Bottle Company produced 1,000 bottles during June. The following data apply to
June's production:
	Standard variable overhead cost:			$24.00 per pound of glass.
	Total actual variable overhead cost:			$22,400
	Standard variable overhead cost allowed for units produced: $24,000
	Variable overhead efficiency variance was: $480 Unfavorable.
Variable overhead is applied on the basis of standard pounds of clay.
Required:
	6.1 What is the variable overhead spending variance and is it favorable or unfavorable?
	(Round your answer to the nearest whole dollar.)
	6.2 How many pounds of glass did the company actually use in June?
	(Round your answer to the nearest whole pound.)

7. The Cup Company makes coffee cups for which the following standards have been developed for
the direct labor and direct materials to produce one cup:

		Standard Quantity		Standard Price
Direct materials		5	ounces	$2.00	per ounce
Direct labor		1.5	hours	$8.00	per hour
The company expected to produce 400 cups in April, but 440 cups were actually
completed.
Direct materials purchased and used were 2,100 ounces, at an actual price of $2.20 per ounce.
Direct labor cost for the month was			$5,310,	and the actual pay per hour was $9.00.
						.
Required: (You must indicate both the amount of a variance and whether it is
favorable (F) or unfavorable (U) to receive any credit for a question.)
(Round your answers to the nearest whole cent.)
	7.1	What was the standard direct material cost for each cup produced?
	7.2	What was the direct material price variance for April?
	7.3	What was the direct material quantity variance for April?
	7.4	What was the standard labor cost for each cup produced?
	7.5	What was the direct labor rate variance for April?
	7.6	What was the direct labor efficiency variance for April?

8. The following information pertains to the service department costs and operating department
overhead costs for the Garrison Company:
	Service Departments		Operating Departments
	Personnel	Maintenance	Fabrication	Assembly
Budgeted Overhead	$80,000	$144,000	$280,000	$320,000
Direct labor hours	8,000	10,000	32,000	40,000
Machine hours			24,000	16,000
Number of employees	8	10	30	50

The company does not divide costs into fixed and variable components. Personnel costs
are allocated based on the number of employees and Maintenance costs are allocated
on the basis of machine hours. Predetermined overhead rates for Fabrication and Assembly
are allocated based on direct labor hours.

If the step-method is used to allocate service department costs (starting with
Personnel ) what is the amount of Maintenance Department costs that will be
allocated to Assembly?