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Assignment Problems-Wk 4-Adnan-N0033642335

This document contains the solutions to practice problems for an accounting class. It addresses multiple choice questions about absorption costing, inventory costing, activity-based costing, and segment reporting. The problems cover concepts such as inventory valuation methods, contribution margin, economic order quantity, reorder points, and allocating joint costs.

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Mohammad Adnan
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50 views

Assignment Problems-Wk 4-Adnan-N0033642335

This document contains the solutions to practice problems for an accounting class. It addresses multiple choice questions about absorption costing, inventory costing, activity-based costing, and segment reporting. The problems cover concepts such as inventory valuation methods, contribution margin, economic order quantity, reorder points, and allocating joint costs.

Uploaded by

Mohammad Adnan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment: Problems -Week 4

Adnan

International American University

ACC 500: Accounting for Managers

Professor Dr. Joseph P. Siegmund

September 24, 2023


Cornerstone Exercise 7-29 Consumption Ratios
1.
Consumption Ratio = Driver for Cowboy / Driver for Cowgirl

a. Cutting Hours:
Consumption Ratio = 2,100 / 3,900
Consumption Ratio = 7/13

b. Assembly Hours:
Consumption Ratio = 1,500 / 2,250
Consumption Ratio = 2/3

c. Inspection Hours:
Consumption Ratio = 675 / 1,575
Consumption Ratio = 3/7

d. Rework Hours:
Consumption Ratio = 75 / 225
Consumption Ratio = 1/3

2.
Yes, there is evidence of product diversification since
consumption ratios for the four operations (cutting, assembly, inspection, and rework) differ
between cowboy and cowgirl footwear. This implies that the two goods demand different
quantities of resources for each activity, reflecting their differences in manufacturing procedures.
Cornerstone Exercise 7-30 Activity Rates

a. Cutting Activity Rate:


Activity Rate = Cutting Costs / Driver for Cutting
Activity Rate = $60,000 / 2,100 hours
Activity Rate ≈ $28.57 per hour

b. Assembly Activity Rate:


Activity Rate = Assembly Costs / Driver for Assembly
Activity Rate = $75,000 / 1,500 hours
Activity Rate = $50 per hour

c. Inspection Activity Rate:


Activity Rate = Inspection Costs / Driver for Inspection
Activity Rate = $18,000 / 675 hours
Activity Rate = $26.67 per hour

d. Rework Activity Rate:


Activity Rate = Rework Costs / Driver for Rework
Activity Rate = $9,000 / 75 hours
Activity Rate = $120 per hour
Cornerstone Exercise 7-31 Calculating ABC Unit Costs
For Classic Credit Cards:
Unit Cost for Classic = (Processing Transactions * 8,000) + (Preparing Statements * 8,000) +
(Answering Questions * 16,000) + (Providing ATMs * 32,000)
Unit Cost for Classic = ($0.15 * 8,000) + ($0.90 * 8,000) + ($3.00 * 16,000) + ($1.20 * 32,000)
Unit Cost for Classic = $1,200 + $7,200 + $48,000 + $38,400
Unit Cost for Classic = $94,800

For Gold Credit Cards:


Unit Cost for Gold = (Processing Transactions * 4,800) + (Preparing Statements * 4,800) +
(Answering Questions * 24,000) + (Providing ATMs * 9,600)
Unit Cost for Gold = ($0.15 * 4,800) + ($0.90 * 4,800) + ($3.00 * 24,000) + ($1.20 * 9,600)
Unit Cost for Gold = $720 + $4,320 + $72,000 + $11,520
Unit Cost for Gold = $88,560

So, the unit cost for Classic credit cards is $94,800, and the unit cost for gold credit cards is
$88,560.
Cornerstone Exercise 7-32 Assigning Costs to Activities
a. Comparing Source Documents:
Cost of Comparing Source Documents = Total Cost * Percentage of Time on Activity
Cost of Comparing Source Documents = $275,000 * 20% = $55,000

b. Resolving Discrepancies:
Cost of Resolving Discrepancies = Total Cost * Percentage of Time on Activity
Cost of Resolving Discrepancies = $275,000 * 55% = $151,250

c. Processing Payment:
Cost of Processing Payment = Total Cost * Percentage of Time on Activity
Cost of Processing Payment = $275,000 * 25% = $68,750

So, the cost of labor for comparing source documents is $55,000, for resolving discrepancies is
$151,250, and for processing payment is $68,750.
Chapter 8 Multiple choices 8-1 through 8-12
MULTIPLE-CHOICE EXERCISES
8-1 Yates Company shows the following unit costs for its product:
Direct materials $40
Direct labor 30
Variable overhead 2
Fixed overhead 5
Yates started the year with 8,000 units in inventory, produced 50,000 units during the year,
and
sold 55,000 units. The value of ending inventory is
Ans: b. Greater under absorption costing than variable costing.

8-2 In a segmented income statement, which of the following statements is true?


Ans: e. Segment margin is equal to contribution margin less direct fixed expenses.

8-3 The EOQ for Part B-22 is 2,500 units, and four orders are placed each year. The total
annual ordering cost is $1,200. Which of the following is true?
Ans: e. It is impossible to calculate the annual carrying cost given the above information

8-4 Which of the following is a reason for carrying inventory?


Ans: e. All of these

8-5 Suppose that a material has a lead time of three days and that the average usage of the
material is 12 units per day. What is the reorder point?
Ans: d. 36

8-6 Suppose that a material has a lead time of three days and that the average usage of the
material is 12 units per day. The maximum usage is 15 units per day. What is the safety
stock?
Ans: c. 9

8-7 A segment could be which of the following?


Ans: d. All of these

8-8 Garrett Company provided the following information:


Product 1 Product 2
Units sold 10,000 20,000
Price $20 $15
Variable cost per unit $10 $10
Direct fixed cost $35,000 $75,000
Common fixed cost totaled $46,000. Garrett allocates common fixed cost to Product 1 and
Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true?
Ans: c. Overall operating income will decrease by $25,000

8-9 Many companies use absorption costing because it


Ans: a. Accords with GAAP.

8-10 Refer to the information for McCartney Company above. Inventory-related cost for
Product C under the current inventory policy is
Ans: c. $3,400.

8-11 Refer to the information for McCartney Company above. The economic order
quantity
(EOQ) for Product C is
Ans: b. 600.

8-12 Refer to the information for McCartney Company above. What is the total inventory
related cost at the EOQ? (Note: Round the number of setups to the nearest whole number.)
Ans: b. $3,330

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