Question :
SHORT ANSWER.
Write the word or phrase that best completes each : 1196250
SHORT ANSWER.
Write the word or phrase that best completes each statement or answers the question. 71) Eastern Star Nursing Home has been using an indirect overhead job cost system for allocating general and nursing overhead charges to all patients. However, during the past few months the facility has been losing patients because a competing nursing home charges much less for some classes of patients. It seems that Eastern Star is keeping the well patients and losing those who require special attention. The facilities manager believes that a refined costing system can improve the allocation of charges to all patients. Hopefully this will reduce the charges to the more ill patients.
The accounting staff provided information for September. The costs have traditionally been allocated to patients based on nursing days. However, the accounting staff can separate nursing days by nursing category. At the request of the facilities manager, the following information was furnished concerning nursing days.
Critical SpecialGeneralDaily
CareCareCareRate
Senior RN1,6001,000 1,600$150
RN 4,0002,600 2,000 135
Senior PN2,0001,400 5,200 120
PN 4001,000 4,400 100
Nurse’s aid 00 1,800 80
Total days8,0006,000 15,000
Overhead charges $110$100$90
per nursing day excluding nursing pay
Hazel Jones, a long-time patient, spent 5 days in critical care, 4 days in special care, and 21 days in general care during September. Her monthly assignment of nursing days was: 2 for Senior RN, 6 for RN, 10 for PN, and 12 for Nurse’s aid.
Required:
a.Determine the total rate to be charged patients if only one rate is used for each care area. What is Hazel Jones’ charge for the Month of September?
b.Determine the amount to be charged Hazel Jones if separate rates are used for care area and nurses. 71)
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72) Cecelia Schell is taking four clients (who are not related) on a tour of her retirement development. The clients incurred the following expenses while on the tour. All tour expenses are paid by Cecelia because she has business discounts for most of her business dealings. These expenses will be billed to the clients by Cecelia.
Expense Anna Jim Frank Bud Totals
Bus ticket$80 $80 $80 $80 $320
Morning break8 10 16 640
Lunch24 20 28 2088
Afternoon break10 48 1032
Cecelia’s overhead 56 56 56 56 224
Totals $178$170 $188$172 $704
Required:
Compute the average costs per client showing direct and indirect charges. 72)
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73) Bottle Company operates many bottling plants around the globe. At its Toronto plant, where nine different brands are bottled, the following costs are incurred in 2007 to produce 10,000,000 cans of soft drink:
1.New-product development costs?costs of adding new products to those being produced. “Soda Plus” was added in 2007 at a cost of $614,000.
2.Incoming material handling costs?costs of inspecting and handling concentrate, bottles, packages, and so on. Driver is hours of materials handling time, which is highly correlated with hours of bottling time ($433,500).
3.Incoming materials purchase costs?can be directly traced to individual products being bottled and packaged. Costs are purely variable with output level ($2,213,000).
4.Energy costs?the cost driver is hours of bottling time ($171,500).
5.Plant supervision and safety costs?these costs are for plant infrastructure management, land rates, and plant insurance ($623,000).
Required:
a.Classify each of the preceding costs as output unit-level, batch-level, product-sustaining, or facility-sustaining.
b.Compute unit costs for (i) the output unit-level costs, and (ii) the total manufacturing costs. 73)
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74) Brewery, Inc. operates many bottling plants around the globe. At its Toronto plant, where six different brands are bottled, the following costs are incurred to produce 5,000,000 cans of beer:
1.New-product development costs?costs of adding new products to those being produced. “Light Beer Plus” was added at a cost of $307,000.
2.Incoming material handling costs?costs of inspecting and handling concentrate, bottles, packages, and so on. Driver is hours of materials handling time, which is highly correlated with hours of bottling time ($216,750).
3.Incoming materials purchase costs?can be directly traced to individual products being bottled and packaged. Costs are purely variable with output level ($1,106,500).
4.Energy costs?the cost driver is hours of bottling time ($85,750).
5.Plant supervision and safety costs?these costs are for plant infrastructure management, land rates, and plant insurance ($311,500).
Required:
a.Classify each of the preceding costs as output unit-level, batch-level, product-sustaining, or facility-sustaining.
b.Compute unit costs for (a) the output unit-level costs, and (b) the total manufacturing costs. 74)
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75) The plant manager has come to you, as the new management accountant, for assistance.
The plant manufactures sailboards, operating two shifts per day.
During March through July, a third shift is added.
The company has to train summer help, new machine operators each summer as the demands for its products are very seasonal.
Training always occurs on the day shift, and the plant has always allocated the costs of training (eg extra supervision required), based on machine-hours.
This year, the three shift managers cannot agree on who should be charged for the training.
The day shift manager is angry because she has discovered that machine hours are highest on the day shift.
The other two managers argue that the hours are higher due to the training, so the day shift should be charged for those costs.
The plant manager wants you to pick either machine hours or labour hours as the new allocation base.
Required:
Provide an explanation for the plant manager; how should you choose the best allocation base? 75)
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76) Pollard and Grant, Dentists, are in the process of changing their costing system. Their system currently uses a single direct-cost pool (professional labour) and a single indirect-cost pool (staff support). The direct categories in the new, refined costing system include:
1.Professional partner labour. Average total annual compensation of the two partners is $100,000 each, and each partner has 2,000 hours of budgeted billable time.
2.Dental assistant labour. Average total annual compensation of the four assistants is $45,000 each, and each assistant has 2,000 hours of budgeted billable time.
3.Office staff. Average total annual compensation of the two staff members is $35,000 each, and each has 2,000 hours of budgeted billable time.
The indirect category in the new refined costing system includes professional liability insurance. The budgeted indirect amount is $200,000, and the allocation base is budgeted professional labour hours. The dentist and dental assistants are considered professional labour hours.
What is the budgeted direct-cost rate per hour for dental assistant labour?
a.$22.50 per hour
b.$16.125 per hour
c.$13.750 per hour
d.$11.250 per hour
e.$ 11.00 per hour 76)
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77) Pollard and Grant, Dentists, are in the process of changing their costing system. Their system currently uses a single direct-cost pool (professional labour) and a single indirect-cost pool (staff support). The direct categories in the new, refined costing system include:
1.Professional partner labour. Average total annual compensation of the two partners is $100,000 each, and each partner has 2,000 hours of budgeted billable time.
2.Dental assistant labour. Average total annual compensation of the four assistants is $45,000 each, and each assistant has 2,000 hours of budgeted billable time.
3.Office staff. Average total annual compensation of the two staff members is $35,000 each, and each has 2,000 hours of budgeted billable time.
The indirect category in the new refined costing system includes professional liability insurance. The budgeted indirect amount is $200,000, and the allocation base is budgeted professional labour hours. The dentist and dental assistants are considered professional labour hours.
What is the budgeted direct-cost rate per hour for office staff?
a.$17.50 per hour
b.$9.625 per hour
c.$7.500 per hour
d.$6.875 per hour
e.$6.259 per hour 77)
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78) Asian Tools, a manufacturer of precision hand tools, is concerned with the apparent lack of controls over cost incurrence in its Hand Tool Division. The division has always used a plant-wide rate for allocating manufacturing overhead to its products. However, some products cost substantially more than competitors’ retail prices while others are substantially less. The division manager believes that a better cost allocation method can be developed.
With the assistance of a plant supervisor, the accounting department has been able to establish the following relationships between production activities and the indirect costs of the activities:
ActivityCost DriverAllocation Rate
Material handling Number of parts$ 2.60 per part
Machine stamping Machine hours$60.00 per hour
FinishingTime Finishing minutes $
4.00 per minute
The traditional allocation method is based upon direct manufacturing labour hours, and if that method is used the rate is $28 per hour.
Required:
Compute the unit indirect manufacturing costs of a batch of 200 tools if the batch required 220 parts, 8 machine hours, 52 minutes of finishing time, and 46 direct labour hours:
a.Using the traditional allocation method, and
b.Using the activity base method. 78)
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79) A company manufactures household items sold at trade shows. The items, classified as either Trinkets or Widgets are manufactured on a common assembly line. Although different direct materials are used, and the machinery is re-tooled for each product, the direct labourers are the same for each product line.
The plant-wide rate for allocating manufacturing overhead to its products is no longer acceptable. The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system to a cost driver concept.
With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for August, along with the production data for the two product lines:
Activity Cost Driver Allocation Rate Trinkets Widgets
Material handling Number of parts $ 1.00 per part 2,0001,300
MachiningMachine hours $15.00 per hour205300
AssemblyUnits began$ 1.60 per unit 1,000 1,300
InspectionNumber tested $ 2.00 per unit100 1,200
Direct costs:
Trinkets Widgets
Labour$12,000 $12,000
Materials$
5,200 $ 2,600
Required:
Determine the total production cost of each of the two product lines for August and the cost per unit assuming all units started were completed. 79)
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80) Cocoa Pet Corporation manufactures two models of grooming stations, a standard and a deluxe model.
The following activity and cost information has been compiled:
Number ofNumber ofNumber of
ProductSetupsComponentsDirect Labor Hours
Standard330650
Deluxe750150
Overhead costs$20,000$60,000
Assume a traditional costing system applies the $80,000 of overhead costs based on direct labor hours.
a.What is the total amount of overhead costs assigned to the standard model?
b.What is the total amount of overhead costs assigned to the deluxe model?
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
c.What is the total amount of overhead costs assigned to the standard model?
d.What is the total amount of overhead costs assigned to the deluxe model?
e.Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?
80)
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