Q1. (25 marks) - Activity Based Costing Answer the following questions using the information below: Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Cost Pool Overhead Costs Cost driver Activity level Supervision of direct labour $320,000 Direct labour hours 800,000 Machine maintenance $120,000 Machine hours 960,000 Facility rent $200,000 Square metres of area 100,000 Total overhead costs $640,000 The accounting records show the Mossman Job consumed the following resources: Cost driver Actual level Direct labour-hours 200 Machine-hours 1,600 Square metres of area 50 Required: If Gregory Enterprises uses a simple cost system based on direct labour hours then what amount of indirect costs will be allocated to the Mossman job? What is the activity rate for machine maintenance costs? If Gregory Enterprises uses an ABC system then what amount of indirect costs will be allocated to the Mossman job? When selling prices are based on costs assigned using the single cost driver, direct labour hours, then would the Mossman job be overbilled or underbilled What are the benefits of ABC Page Break

Q2. (25 marks) Job Order costing A distraught employee, Guy Arson, put a torch to a manufacturing plant on February 26. The resulting blaze completely destroyed the plant and its contents. Fortunately, some accounting records were kept in another building. They revealed the following for the period from January 1 to February 26: Direct materials (DM) Inventory Jan 1 19,200 Purchases DM Jan 1 to Feb 26 192,000 Ending DM inventory Feb 26 74,400 Work in Progress (WIP) Jan 1 40,800 Cost of direct labour 216,000 Cost of Overhead used 144,000 Work in Progress Feb 26 33,600 Finished Goods (FG) Jan 1 36,000 Finished Goods Feb 26 60,000 Calculate the following: Cost of DM used Cost of finished goods produced Cost of goods sold Total value of DM, WIP and FG lost due to the fire Where would you classify the cost of Insurance and why?

Q3. (25 marks) Cost-Volume- Profit & Cost Behaviour Analysis Company C makes calculators that sell for $20 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $9 per unit. Calculate the break-even point in units Calculate the break-even point in dollars Calculate the margin of safety, assuming actual sales of $500,000 Calculate the sales required in dollars to earn a net income of $165,000 If company C has a higher operating leverage and if sales are declining what would be the impact on the companys net income and if the sales are increasing what would be the result on the net income Q4. (25 marks) Master Budget & Responsibility Accounting S Company is preparing its master budget for 2019. Relevant data for its sales and production budgets are as follows: Sales for the year are expected to total 1.2 million units. Quarterly sales are expected to be 20%, 25%, 30% and 25%, respectively of the total sales. The sales prices is expected to be $50 per unit for the first three quarters and $55 per unit beginning in the fourth quarter. Sales for the first quarter of 2020 are expected to be 10% higher than the budgeted sales volume for the first quarter of 2019. Production management wants to keep ending finished goods inventories at 25% of next quarters budgeted sales volume. What is the purpose of a budget? Prepare the sales budget and production budget by quarters per format below: Sales Budget Year Ending 2019 Q1 Q2 Q3 Q4 Year Expected unit sales Unit selling price Total sales Production budget Year Ending 2019 Q1 Q2 Q3 Q4 Year Expected unit sales Add: Desired ending finished goods units Total required units Less: Beginning finished goods units Units to be produced