Chapter 5:

Question 1:

At Deutschland Electronics, product lines are charged for call centre support costs based on sales revenue. Last year's summary of call centre operations revealed the following:

Surveillance Products Specialty Products

Number of calls for information 1,000 4,000

Average call length for information 3 minutes 8 minutes

Number of calls for warranties 300 1,200

Average call length for warranties 7 minutes 15 minutes

Sales revenue $8,000,000 $5,000,000

Deutschland Electronics currently allocates call centre support costs using a rate of 0.5% of sales revenue.

Required:

a. Compute the amount of call centre support costs allocated to each product line under the current system.

b. Assume Deutschland decides to use the average call length for information to assign last year's support costs. Does this allocation method seem more appropriate than percentage of sales? Why or why not?

c. Assume Deutschland decides to use the numbers of calls for information and for warranties to assign last year's support costs of $65,000. Compute the amount of call centre support costs assigned to each product line under this revised ABC system.

d. Deutschland Electronics assigns bonuses based on departmental profits. How might the Specialty Products manager try to obtain higher profits for next year if support costs are assigned based on the average call length for information?

Chapter 6:

Question 2:

Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four metres of framing, one square metre of glass, and two square metres of backing. Beginning inventory includes 1,500 metre of framing, 500 square metres of glass, and 500 square metres of backing. Current prices are $0.30 per metre of framing, $6.00 per square metre of glass, and $2.25 per square metre of backing. Ending inventory should be 150% of beginning inventory. Purchases are paid for in the month acquired.

Required:

a. Determine the quantity of framing, glass, and backing that is to be purchased during August.

b. Determine the total costs of direct materials for August purchases.

Chapter 7:

Question 3:

Samson Equipment Ltd. is a company that manufactures an abdominal exerciser called The Ab Rippler. The following information is for three of the company's activities in 2018:

Rate per Output unit/Batch

Static Actual

Activity Activity Level Cost Driver Budget Cost

Manufacturing Output unit Machine hours $0.90 $1.05

Inspecting Batch Inspection hours $15.00 12.50

Packaging Batch Packaging hours $5.50 $5.25

The output measure is the number of units produced.

Static Actual

Budget Amount

Number of units produced 40,000 44,400

Number of machine hours 16,000 14,800

Batch size in terms of units produced:

Inspection 5 4

Packaging 20 25

Required:

a. Calculate the flexible-budget variance for each activity in 2018.

b. Calculate the price and efficiency variances for each activity in 2018.