1. Toms Music Ltd. is considering changing its costing approach away from a traditional absorption costing one based on expected units required to an Activity-Based Costing one. It has overheads of $156,000 which are related to taking material deliveries.

The delivery information about each product is given as follows:

Product	Disc	Tape	Vinyl
Total units required (# units)	1,000	2,000	3,000
Delivery size (# units)	200	400	1,000

Total labour costs are $36,000 for 45,000 hours. Each unit of each product takes the same number of direct hours.

Assuming that the company uses the number of deliveries as its cost driver, what is the increase or decrease in unit costs for Vinyl arising from the change from the traditional absorption costing approach to ABC?

a.             $14.00 decrease

b.             $14.00 increase

c.             $0.50 decrease

d.             $0.50 increase

2. Toms brush, Inc. is in the process of setting standard unit costs for next period. A standard batch of 10 Ambassador Hairbrushes uses 8 kg of Ebony and 4 kg of Nylon, at a standard price of $5 per kg and $10 per kg respectively.

To make a batch requires 5 hours of direct labour, at a cost of $20 per hour.

Production overheads are to be recovered at the rate of $6 per direct labour hour, and general overhead is to be absorbed at a rate of ten per cent of production cost.

What is the standard prime cost for one Ambassador brush?

a.             $18

b.             $24

c.             $25

d.             $180

3. You have extracted the following from Joes pillow Ltd.’s records from last period:

	Budget		Actual
Production	1,600	Units	1,900	Units
Variable Production Overhead Cost	$9,600		$11,200
Labour Hours Worked	4,800	Hours	6,100	Hours

What are the variable production overhead variances for last period?

              Expenditure                       Efficiency

a.            1,000 (F)                               400 (A)

b.            1,000 (A)                              400 (F)

c.             1,000 (F)                               800 (A)

d.            1,000 (A)                              800 (F)

Answer rating: 100% (QA)

1 Under Traditional Absorption Costing Each Unit of each product takes the same number of the direct hour Therefore Overheads are apportioned on the b... View the full answer