ACCOUNTING

1)Heara Ltd manufactures metal sheets, and uses the weighted average method process costing. On 1 May the Rolling Department had 3000 units work in progress, which were 50 per cent completed as to conversion costs. During May 8000units were completed and transferred out. The remaining work in progress on 30 May was 2000 units, at 50 per cent complete in terms of conversion rate. What is the equivalent unit of conversion?

A. 1000 units

B. 2000 units

C. 7500 units

D. 9000 units

2) Carvell Cabinates set the following standard cost per unit for 2008:

Fixed overhead (4 machine hours at $10) $40

Variable overhead (4 machine hours at $8) $32

The standards were set based on a capacity of 20,000 machine hours.

During the year 5,100 units were produced.

Fixed overhead $205 000

Variable overhead $165 750

Machine hours worked $19 800

What was Carvell fixed overhead volume variance?

A. $4000 unfavorable

B. $1,000 unfavorable

C. $4000 favorable

D. $2,000 favorable

Glaser Health Products of Ranier Falls, Georgia, is organized functionally into three divisions: Operations,

Sales, and Administrative. Purchasing, receiving, materials and production control, manufacturing, factory

personnel, inventory stores, and shipping activities are under the control of the vice-president for

operations, George Gottlieb. Advertising, market research, and sales are the responsibility of the vice-

president for sales, Jake Bogan. Accounting, budgeting, the firm’s computer center, and general office

management are delegated to the corporate controller (Administrative), Charlie Kaplan. The following

cost categories are found in the company as a whole:

(a) Depreciation on factory equipment.

(b) Depreciation on office equipment.

(c) Depreciation on factory building.

(d) Advertising manager’s salary.

(e) Assembly foreman’s salary.

(f) Salespersons’ salaries.

(g) Salespersons’ travel expenses.

(h) Supplies for the Machining Department.

(i) Advertising supplies used.

(j) Electricity for the Assembly Department.

(k) Lost materials (scrap) in a Machining Department.

(l) Direct labor in the Assembly Department.

(m) Supplies for the sales office.

(n) Sales commissions.

(o) Packing supplies.

(p) Cost of hiring new employees.

(q) Payroll fringe benefits for workers in the Shipping Department.

(r) Supplies for Production Scheduling.

(s) Cost of repairing parts improperly manufactured in the Machining Department.

(t) Paint for the Assembly Department.

(u) Heat, light, and power for the factory.

(v) Leasing of computer equipment for the Accounting Department.

Required:

1. Identify each of the costs with the appropriate division: Operations, Sales, Administrative.

2. Identify each of the costs with one of the following:

(a) Unit-level activities. (c) Product-level activities.

(b) Batch-level activities. (d) Facility-level activities.

Organize these classifications by division: Operations, Sales, Administrative.

3. Specify an appropriate cost driver for tracing costs associated with the various levels of activities to

the next cost objective or products, whichever is appropriate.

4. Glaser Health Products is interested in using activity-based costing to identify as many costs as

possible with the products. These costs will be used for planning and control decisions rather than for

inventory valuation. The controller decided that all operation costs will be related to products but only

those sales and administrative costs that are classified as unit-level, batch-level, or product-level costs

should be related to products. Using preliminary stage cost drivers, explain how individual items of

costs will be traced to activity groupings.

5. Using primary stage cost drivers, show how the costs should be related to products.

6. Explain why it is necessary to use preliminary stage and primary stage cost drivers.

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