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Cost Accounting Chapters 9,10,11 and 12 homework
Questions Complete Answer

Cost Accounting Chapters 9,10,11, & 12 homework_Questions_Complete_Answer

Cost Accounting Chapters 9,10,11, & 12 homework_Questions_Complete_Answer
Munoz Sporting_Rodent Corporation_ We-CleanInc_LastCall Enterprises_Delta
Parts_Inc_Accounting Answer
Gundy Press_Cathy and Tom Specialty Ice Cream_JFI Foods_Accounting Answer
Kyle Company_Warren Ltd_Not-A-Mega Bank_Accounting Answer
Packages-2-Go_Cost_Accounting Answer

CHAPTER 9
1.)
Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department
B produces the baseball bats, and Department T produces the tennis rackets. Munoz
currently uses plantwide allocation to allocate its overhead to all products. Direct labor
cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year,
revenue, materials, and direct labor were as follows:
Baseball Bats Tennis Rackets
Revenue $ 1,610,000 $ 1,150,000
Direct labor 340,000 170,000
Direct materials 566,000 294,000
________________________________________
Required:
(a) Compute the profit for each product using plantwide allocation. (Round your
intermediate calculations to nearest whole dollar amount. Omit the $ sign in your
response.)

Profit
Baseball Bats $
Tennis Rackets $
________________________________________
(b) Maria, the manager of Department T, was convinced that tennis rackets were really
more profitable than baseball bats. She asked her colleague in accounting to break
down the overhead costs for the two departments. She discovered that had department
rates been used, Department B would have had a rate of 150 percent of direct labor cost
and Department T would have had a rate of 300 percent of direct labor cost. Recompute
the profits for each product using each departments allocation rate (based on direct
labor cost). (Round your intermediate calculations to nearest whole dollar amount.
Omit the $ sign in your response.)
Profit
Baseball Bats $
Tennis Rackets $
2.) Rodent Corporation produces two types of computer mice, wired and wireless. The
wired mice are designed as low-cost, reliable input devices. The company only recently
began producing the higher-quality wireless model. Since the introduction of the new
product, profits have been steadily declining. Management believes that the accounting
system is not accurately allocating costs to products, particularly because sales of the
new product have been increasing.
Management has asked you to investigate the cost allocation problem. You find that
manufacturing overhead is currently assigned to products based on their direct labor
costs. For your investigation, you have data from last year. Manufacturing overhead
was $1,300,000 based on production of 310,000 wired mice and 116,000 wireless mice.
Direct labor and direct materials costs were as follows:
Wired Wireless Total
Direct labor $ 1,037,000 $ 402,000 $ 1,439,000
Materials 730,000 673,000 1,403,000
________________________________________
Management has determined that overhead costs are caused by three cost drivers.
These drivers and their costs for last year are as follows:
Activity Level
________________________________________
Cost Driver Costs Assigned Wired Wireless Total
Number of production runs $ 550,000 40 10 50
Quality tests performed 620,000 13 18 31
Shipping orders processed 130,000 80 50 130

________________________________________ __________________
________________________________________
Total overhead $ 1,300,000
________________________________________________________
_________________________________________________
__________________________________________________________
________________________________________
Requirement 1:
(a) How much overhead will be assigned to each product if these three cost drivers are
used to allocate overhead? (Omit the $ sign in your response.)
Overhead
Wired $
Wireless $
________________________________________
(b) What is the total cost per unit produced for each product? (Round your answers to 2
decimal places. Omit the $ sign in your response.)
Cost per unit
Wired $
Wireless $
________________________________________
Requirement 2:
(a) How much overhead will be assigned to each product if direct labor cost is used to
allocate overhead? (Do not round your intermediate calculations. Round your answers
to the nearest dollar amount. Omit the $ sign in your response.)
Overhead
Wired $
Wireless $
________________________________________
(b) What is the total cost per unit produced for each product? (Do not round your
intermediate calculations. Round your answers to 2 decimal places. Omit the $ sign in
your response.)

Cost per unit

Wired $
Wireless $
________________________________________
Requirement 3:
By allocating overhead on the basis of direct labor, Rodent has been understating the
cost to manufacture Wireless mice thereby overstating the profits on the Wireless
model.
3.) We-Clean, Inc., is a home-cleaning service. It originally specialized in serving small
residential clients but recently started contracting for work in large apartment and
office buildings. Julie Lodge, the owner, believes that the commercial sector has more
growth opportunities and is considering dropping the residential service.
Twenty cleaning employees worked a total of 44,000 hours last year, 27,000 on
residential jobs and 17,000 on commercial jobs. Wages were $16 per hour for all work
done. Any materials used are included in overhead as supplies. All overhead is allocated
on the basis of labor-hours worked, which is also the basis for customer charges.
Because of increased competition for commercial accounts, Julie can charge $37 per
hour for residential work, but only $27 per hour for commercial work.
Required:
(a) If overhead for the year was $133,350, what were the profits of the commercial and
the residential services using labor-hours as the allocation base? (Do not round
intermediate calculations.Round the answers to the nearest dollar amount. Input all
amounts as positive values. Omit the $ sign in your response.)
Commercial Residential Total
Revenue $
$
$
Direct Labor
Overhead
________________________________________
________________________________________
Profit $
$
$
_______________________________________________
______________________________________________________

_____________________________________________________
________________________________________
(b) Overhead consists of costs of traveling, using equipment, and using supplies, which
can be traced as follows:
Cost Driver Volume
Activity Cost Driver Cost Commercial Residential
Traveling Number of clients served $ 16,000 15 49
Using equipment Equipment hours 35,750 3,300 2,200
Using supplies Area serviced in square yards 81,600 160,000 80,000
________________________________________ ______________________
________________________________________
Total overhead $ 133,350
_______________________________________________
___________________________________________________________
________________________________________________________
________________________________________
Recalculate profits for commercial and residential services based on these activity bases.
(Round the Rate to 2 decimal places and rest of the answers to the nearest dollar
amount. Input all amounts as positive values. Omit the $ sign in your response.)
Rate Commercial Residential Total
Revenue $
$
$
________________________________________
________________________________________
________________________________________
Direct Labor
________________________________________
________________________________________
________________________________________
Overhead
Traveling $
$
$
$
Equipment
Supplies

________________________________________
________________________________________
________________________________________
Total overhead $
$
$
________________________________________
________________________________________
________________________________________
Profit $
$
$
______________________________________________
___________________________________________________
_______________________________________________________
________________________________________
(c) Ms. Lodge should reconsider dropping residential services in favor of the
commercial business.
4.) The personnel department at LastCall Enterprises handles many administrative
tasks for the two divisions that make up LastCall: LaidBack and StressedOut.
LaidBack division manages the companys traditional business line. This business,
although lucrative, is currently not growing. StressedOut, on the other hand, is the
companys new business, which has experienced double-digit growth for each of the last
three years.
The cost allocation system at LastCall allocates all corporate costs to the divisions based
on a variety of cost allocation bases. Personnel costs are allocated based on the average
number of employees in the two divisions.
There are two basic activities in the personnel department. The first, which is called
employee maintenance, manages employee records. Virtually all of this activity occurs
when employees are hired or leave the company. The other activity is payroll, which is
an ongoing activity and requires the same amount of work for each employee regardless
of the employees salary.
Assorted data for LastCall for the last year follow:
LaidBack StressedOut Total
Number of employees (average) 105 32 137
Employees hired/leaving 5 25 30
________________________________________
The personnel department incurred the following costs during the year:
Employee maintenance $ 192,000
Payroll 24,660

________________________________________
Total $ 216,660
Required:
(a) Under the current allocation system, what are the costs that will be allocated from
personnel to LaidBack? To StressedOut? (Do not round Allocation rate per employee.
Round your final answers to the nearest dollar amount. Omit the $ sign in your
response.)
LaidBack StressedOut
Allocated costs $
$
________________________________________
(b) Suppose the company implements an activity-based cost system for personnel with
the two activities, employee maintenance and payroll. Use the number of employees
hired/leaving as the cost driver for employee maintenance costs and the average number
of employees for payroll costs. What are the costs that will be allocated from personnel
to LaidBack? To StressedOut? (Omit the $ sign in your response.)
LaidBack StressOut
Employee maintenance $
$
Payroll
5.) Delta Parts, Inc., recently switched to activity-based costing from the department
allocation method. The Fabrication Department manager has estimated the following
cost drivers and rates:
Activity Centers Cost Drivers Rate per
Cost Driver Unit
Materials handling Pounds of material handled $ 17 per pound
Quality inspections Number of inspections $ 210 per inspection
Machine setups Number of machine setups $ 2,800 per setup
Running machines Number of machine-hours $ 20.00 per hour
________________________________________
Direct materials costs were $315,000 and direct labor costs were $137,000 during July,
when the Fabrication Department handled 3,900 pounds of materials, made 750
inspections, had 40 setups, and ran the machines for 16,000 hours.
Required:
Use T-accounts to show the flow of materials, labor, and overhead costs from the four
overhead activity centers through Work-in-Process Inventory and out to Finished
Goods Inventory. (Omit the $ sign in your response.)

Work in Process (WIP) Inventory

Fabrication Department
________________________________________
Direct Materials
Direct Labor
Material Handling OH
Quality Inspections OH
Machine Setup OH
Running Machines OH
Cost of Goods Manufactured
Finished Goods Inventory
________________________________________
Cost of Goods Manufactured
CHAPTER 10
1.) Gundy Press reports the following information about resources:
Cost Driver Rate Cost Driver Volume
Resources used
Setups $ 240 per run 174 runs
Clerical 30 per page 500 pages typed
Resources supplied
Setups $ 48,000
Clerical 25,000
________________________________________
Required:
Compute unused setup and clerical resource capacity for Gundy Press. (Omit the $
sign in your response.)
Unused Resource
Capacity
Setups $
Clerical $
2.) Cathy and Toms Specialty Ice Cream Company operates a small production facility
for the local community. The facility has the capacity to make 17,100 gallons of the
single flavor, GUI Chewy, annually. The plant has only two customers, Chucks Gas &
Go and Marcees Drive & Chew DriveThru. Annual orders for Chucks total 8,900

gallons and annual orders for Marcees total 3,500 gallons. Variable manufacturing
costs are $1.10 per gallon, and annual fixed manufacturing costs are $27,100.
Required:
What cost per gallon should the cost system report? (Round your intermediate
calculations and final answers to 2 decimal places. Omit the $ sign in your response.)
Cost per gallon at capacity $
Cost per gallon at demand $
3.) JFI Foods produces processed foods. Their basic ingredient is a feedstock that is
mixed with other ingredients to produce the final packaged product. JFI purchases the
feedstock from two suppliers, Rex Materials and Red Oak Chemicals. The quality of the
final product depends directly on the quality of the feedstock. If the feedstock is not
correct, JFI has to dispose of the entire batch. All feedstock in this business is
occasionally bad, so JFI measures what they call the yield, which is measured as,
Yield = Good output Input
where the output and inputs are both measured in tons. As a benchmark, JFI expects to
get 8 tons of good output for every 10 tons of feedstock purchased for a yield of 80
percent (= 8 tons of output 10 tons of feedstock).
Data on the two suppliers for the past year follow:
Rex
Materials Red Oak
Chemicals Total
Total inputs purchased 1,300.00 2,500.00 3,800.00
Good output (tons) 1,144.00 1,625.00 2,769.00
Average price (per ton) $ 98.00 $ 72.00 $ 80.89
________________________________________
Required:
Assume that the average quality, measured by the yield, and prices from the two
companies will continue as in the past. What is the effective price for feedstock from the
two companies when quality is considered? (Do not round your intermediate
calculations. Round your answers to 2 decimal places. Omit the $ sign in your
response.)
Rex Materials Red Oak Chemicals
Effective price $
$
CHAPTER 11
1.) The following questions relate to Kyle Company, which manufactures products KA,
KB, and KC from a joint process. Joint product costs were $119,000. Additional
information follows:

If Processed Further
_______________
Product Units
Produced Sales Value
at Split-Off Sales
Values Additional
Costs
KA 58,000 $ 180,000 $ 220,000 $ 34,000
KB 35,000 110,000 160,000 28,000
KC 13,000 80,000 140,000 20,000
________________________________________
Required:
(a) Assuming that joint product costs are allocated using the physical quantities (units
produced) method, what was the total cost of product KA (including $34,000 if
processed further)? (Do not round intermediate calculations. Round final answer to the
nearest dollar amount. Omit the $ sign in your response.)
Total cost of product KA $
(b) Assuming that joint product costs are allocated using the sales value at split-off (net
realizable value method), what was the total cost of product KB (including the $28,000 if
processed further)? (Do not round intermediate calculations. Round final answer to the
nearest dollar amount. Omit the $ sign in your response.)
Total cost of product KB $
2.) Warren Ltd. has two production departments, Building A and Building B, and two
service departments, Maintenance and Cafeteria. Direct costs for each department and
the proportion of service costs used by the various departments for the month of June
follow:
Proportion of Services Used by
________________________________________
Department Direct Costs Maintenance Cafeteria Building A Building B
Building A $ 480,000
Building B 317,000
Maintenance 200,000 0.2 0.6 0.2
Cafeteria 143,000 0.2 0.4 0.4
________________________________________
Assume that both Building A and Building B work on just two jobs during the month of
June: RW-12 and RW-13. Costs are allocated to jobs based on labor-hours in Building A
and machine-hours in Building B. The number of labor- and machine-hours worked in
each department are as follows:
Building A Building B
Job RW-12: Labor-hours 150 20

Machine-hours 30 40
Job RW-13: Labor-hours 20 20
Machine-hours 10 190
________________________________________
Required:
How much of the service department costs allocated to Building A and Building B in the
direct method should be allocated to Job RW-12? How much should be allocated to Job
RW-13? (Note: Due to rounding, the cost allocations to the various jobs may not add up
to the total service department costs being allocated.) (Do not round intermediate
calculations, but round your final answers to the nearest dollar amount. Omit the $ in
your response.)
Job RW-12 Job RW-13
Building A $
$
Building B $
$
3.) A company processes a patented chemical, D-12, and produces two outputs, C-30 and
C-40. In March, the costs to process D-12 are $200,000 for materials and $480,000 for
conversion costs. C-30 has a sales value of $1,000,000 and C-40 has a sales value of
$250,000.
Required
Using the net realizable value method, assign costs to C-30 and C-40 for March. (Do not
round intermediate calculations. Round final answers to the nearest dollar amount.
Omit the $ sign in your response.)
Cost Assigned
C-30 $
C-40 $
4.) Not-A-Mega Bank has three service departments (Administration, Communications,
and Facilities), and two production departments (Deposits and Loans). A summary of
costs and other data for each department prior to allocation of service department costs
for the year ended December 31 follows:
Administration Communications Facilities Deposits Loans
Direct costs $330,000 $450,000 $409,400 $13,320,000 $9,500,000
Employee hours 18,500 24,000 15,000 273,750 218,750
Number of employees 6 12 5 140 90
Square footage occupied 3,400 9,200 3,900 183,000 149,000
________________________________________

The costs of the service departments are allocated on the following bases:
Administration, employee hours; Communications, number of employees; and
Facilities, square footage occupied. (Do not round your intermediate calculations.
Round your answer to the nearest dollar amount. Leave no cells blank, be certain to
enter 0 wherever required. Omit the $ sign in your response.)
Required:
(a) Assume that Not-A-Mega Bank elects to distribute service department costs directly
to production departments using the direct method. What amount of Communications
Department costs is allocated to the Deposits Department?
Amount $
(b) Assume the same method of allocation as in part (a). What amount of
Administration Department costs is allocated to the Loans Department?
Amount $
(c) Assuming that Not-A-Mega Bank elects to distribute service department costs to
other departments using the step method (starting with Facilities and then
Communications), what amount of Facilities Department costs is allocated to the
Communications Department?
Amount $
(d) Assume the same method of allocation as in part (c). What amount of
Communication Department costs is allocated to Facilities?
Amount $
5.) GB Service Corporation has two service departments, Administration and
Accounting, and two operating departments, East and West. Administration costs are
allocated on the basis of employees, and Accounting costs are allocated on the basis of
number of transactions. A summary of GB operations follows:
Administration Accounting East West
Employees 25 15 60
Transactions 50,000 10,000 40,000
Department direct costs $58,000 $22,000 $155,500 $599,000
________________________________________
GB estimates that the cost structure in their operations is as follows:
Administration Accounting East West
Variable costs $ 25,000 $ 5,200 $ 114,500 $ 434,000
Fixed costs 33,000 16,800 41,000 165,000

________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
Total costs $ 58,000 $ 22,000 $ 155,500 $ 599,000
Avoidable fixed costs $ 11,000 $ 4,300 $ 22,500 $ 114,500
________________________________________
Required:
(a) If GB outsources the Administration Department, what is the maximum they can
pay an outside vendor without increasing total costs? (Do not round intermediate
calculations. Round final answer to the nearest dollar amount. Omit the $ sign in your
response.)
Maximum amount $
(b) If GB outsources the Accounting Department, what is the maximum they can pay an
outside vendor without increasing total costs? (Do not round intermediate calculations.
Round final answer to the nearest dollar amount. Omit the $ sign in your response.)
Maximum amount $
(c) If GB outsources both the Administration and the Accounting Departments, what is
the maximum they can pay an outside vendor without increasing total costs? (Do not
round intermediate calculations. Round final answer to the nearest dollar amount. Omit
the $ sign in your response.)
Maximum amount $
CHAPTER 12
1.) Packages-2-Go has two divisions, air express and ground service, that share the
common costs of the companys communications network, which are $5,180,000 a year.
You have the following information about the two divisions and the common
communications network:
Calls
(thousands) Time on
Network (hours)
Air express 134,000 80,000
Ground service 102,000 495,000
________________________________________

Required:
Determine the cost allocation if $2.27 million of the communications network costs are
fixed and allocated on the basis of time on network, and the remaining costs, which are
variable, are allocated on the basis of the number of calls. (Enter your answers in
dollars not in millions. Do not round intermediate calculations. Round final answers to
the nearest dollar amounts. Omit the $ sign in your response.)
Air Express Ground
Service
Fixed $
$
Variable
________________________________________
Total $
$
2.) Packages-2-Go has two divisions, air express and ground service, that share the
common costs of the companys communications network, which are $5,020,000 a year.
You have the following information about the two divisions and the common
communications network:
Calls
(thousands) Time on
Network
(hours)
Air express 152,000 123,000
Ground service 99,000 500,000
________________________________________
Required:
(a) What is the communications network cost that is charged to each division if the
number of calls is used as the allocation basis? (Do not round intermediate calculations.
Round final answers to the nearest dollar amounts. Omit the $ sign in your response.)
Division Network cost
Air express $
Ground service $
________________________________________
(b) What is the communications network cost to each division using time on network as
the allocation basis? (Do not round intermediate calculations. Round final answers to
the nearest dollar amounts. Omit the $ sign in your response.)

Division Network cost

Air express $
Ground service $
________________________________________
(c) The cost of the communications network is necessary regardless of which division
uses it. Is the method of allocation important?

Cost Accounting Chapters 9,10,11 and 12 homework

Questions Complete Answer