QUIZ

COST ACCOUNTING

PROBLEM 1
Harry Corp. manufactures Products J, K, L, and M from a joint process. Additional information is as
follows:

Market If Processed Further

Units Value at Additional Market
Product Produced Split-Off Costs Value
J 6,000 $ 80,000 $ 7,500 $ 90,000
K 5,000 60,000 6,000 70,000
L 4,000 40,000 4,000 50,000
M 3,000 20,000 2,500 30,000
18,000 $ 200,000 $ 20,000 $ 240,000

Assuming that total joint costs of $160,000 were allocated using the market value at split-off approach,
what joint costs were allocated to each product?

PROBLEM 2
Micro Corp. uses 1,000 units of Chip annually in its production. Order costs consist of $10 for placing a
long-distance call to make the order and $40 for delivering the order by truck to the company
warehouse. Each Chip costs $100, and the carrying costs are estimated at 15.625% of the inventory
cost.

Required:
Compute the economic order quantity for Chip!

PROBLEM 3
Orleans Corp. operates two producing departments, C and D, and two service departments, E and F.
The overhead before allocation of service department costs, together with the usage of services from
the service departments, is:

Overhead Before
Allocation of Service Services Provided by
Department Department Costs E F
Producing:
C ............................................................................ $18,000 30% --
D ............................................................................ 29,000 30% 80%
Service:
E ............................................................................ 8,000 -- 20%
F ............................................................................ 1,400 40% --
.............................................................................. $56,400
Required: Prepare the overhead distribution, using the simultaneous method to allocate the service
departments' costs to the producing departments.

PROBLEM 4
Blaine Company produces two products, Nifty and So-So, and uses a costing system in which all
overhead is accumulated in a single cost pool and allocated based on machine hours. Blaine's
management has decided to implement ABC because a cost study has revealed significant amounts of
overhead cost related to setup activity and design activity. The number of setups and the number of
design hours will be the activity drivers for the two new cost pools, and machine hours will continue as
the base for allocating the remaining overhead. Selected information follows for Blaine Company's most
recent year of operations:

.......................................................................................... Nifty So-So Total

Units produced ...................................................................... 500 15,500 16,000

Direct material cost:

Per unit .................................................................................. $ 200 $ 20
Total ....................................................................................... $100,000 $ 310,000 $ 410,000

Machine hours ....................................................................... 3,000 47,000 50,000

Direct labor cost..................................................................... $ 50,000 $ 350,000 $ 400,000
Setups .................................................................................... 120 80 200
Design hours .......................................................................... 6,000 4,000 10,000

Overhead:
Setup-related ......................................................................... $ 250,000
Design-related........................................................................ 350,000
Other ...................................................................................... 900,000
Total overhead ....................................................................... $1,500,000

Required:
(1) Calculate the total and per-unit costs reported for the two products by the existing costing
system.
(2) Calculate the total and per-unit costs reported for the two products by the ABC system.