1. Banc Corp. Trust is considering either a bankwide overhead rate or department
ID: 2517022 • Letter: 1
Question
1.
Banc Corp. Trust is considering either a bankwide overhead rate or department overhead rates to allocate $396,000 of indirect costs. The bankwide rate could be based on either direct labor hours (DLH) or the number of loans processed. The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period:
If Banc Corp. Trust uses a bankwide rate based on the number of loans processed, what would be the total costs for the Consumer Department?
$280,000.
$256,800.
$576,000.
$557,200.
2.
Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information:
What is the total overhead per unit allocated to Product M using activity-based costing (ABC)?
$2.60.
$2.27.
$2.00.
$1.83.
3.
Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information:
What is the total overhead per unit allocated to Product XY using activity-based costing (ABC)?
$2.60.
$2.27.
$2.00.
$1.83.
4.
The Mega Construction Company recently switched to activity-based costing (ABC) from the department allocation method. The department method allocated overhead costs at a rate of $60 per machine hour. The cost accountant for the Finishing Department has gathered the following data:
During April, Mega purchased and used $100,000 of direct materials at $20 per ton. There were eight (8) production runs using a total of 12,000 machine hours in April. The manager of the Finishing Department needed 12 inspections. Actual overhead costs totaled $820,000 for the month.
How much overhead costs were applied to the Work-in-Process Inventory during April using traditional costing?
$536,000.
$720,000.
$736,000.
$820,000.
5.
Markham Company makes two products: Basic Product and Deluxe Product. Annual production and sales are 1,700 units of Basic Product and 1,100 units of Deluxe Product. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Basic Product requires 0.3 direct labor hours per unit and Deluxe Product requires 0.6 direct labor hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with estimated overhead costs and expected activity as follows:
The overhead cost per unit of Deluxe Product under the traditional costing system is closest to:
$50.66.
$5.49.
$26.09.
$11.45.
6.
Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below. (CMA based)
Under a traditional costing system that allocates overhead on the basis of direct labor hours, the materials handling costs allocated to one unit of specialty windows would be:
$1,500.
$500.
$2,000.
$5,000.
7.
Mission Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below. (CMA based)
Under an activity-based costing (ABC) system, the materials handling costs allocated to one unit of specialty windows would be:
$1,875.00.
$937.50.
$312.50.
$1,500.00.
Department DLH Loans Processed Direct Costs Consumer 14,000 700 $ 280,000 Commercial 8,000 300 $ 180,000Explanation / Answer
SOLUTION
1. Total cost for the Consumer Department is $557,200.
Indirect cost = $396,000 / (700 + 300)
= $396,000 / 1,000 = $396 per loan
Indirect cost for consumer department = $396 * 700 = $277,200
Direct cost for consumer department = $280,000
Total cost = Indirect cost + Direct cost
= $277,200 + $280,000 = $557,200
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