Question 1 Short answer (10 marks)

Show all calculations when answering the following quantitative questions. State your final answer in a sentence (2 marks each)

1. Riverside Studios rents out its studio facilities to local marketing firms to produce advertisements. The cost accountant wants to allocate the costs incurred by the Janitorial department to the Filming and Post Production departments. The manager of the Janitorial department determined at the beginning of the year that the annual fixed costs would be $247,500. She also determined that the cost for labour and cleaning supplies would be classified as variable costs and budgeted at $0.75 per square metre of floor space cleaned. At the end of the year, actual fixed costs were $285,000 and actual cost per square metre cleaned was $0.80. The managers of the Filming and Post Production Departments provided the following information:

	Filming Department	Post Production Department
Budgeted floor space (Square metres)	112,500	25,000
Actual floor space cleaned (Square metres)	107,500	27,500

If a dual-rate cost allocation method is used, what amount of Janitorial department costs will be allocated to the Post Production Department? Use the application methodology that best measures the responsible use of the Janitorial departments services.

2. Pam's Stables used two different predictor variables (trainer hours and number of horses) in two different equations to evaluate the cost of training horses. The most recent results of the two regressions are as follows:

Trainer's hours:

Variable	Coefficient	Standard Error	t-Value
Constant	913.32	2.093	4.44
Predictor Variable	20.90	2.844	3.50

r2 = 0.56

Number of horses:

Variable	Coefficient	Standard Error	t-Value
Constant	4764.50	0.812	4.61
Predictor Variable	864.98	0.294	3.40

r2 = 0.83

What is the estimated total cost for the coming year if 11,000 trainer hours are incurred and the stable has 450 horses to be trained, based on the best cost driver?

3. Damascus Inc. is a large logistics company that focuses on the efficient operations of its warehouses to speed the picking of customer orders for delivery. Through the use of intelligent robots and strategic placement of inventory, Damascuss lead development team has determined the best way to layout its inventory so the amount of movement is limited. As such they have a very good understanding of which costs are variable and which costs are fixed. Explain which cost estimation method is being used by Damascus.

4. Select the best answer to the following multiple choice question. To discourage excessive use of a support department, management might
   1. Allocate a fixed amount to each department regardless of use
   2. Expense fixed costs of support departments directly to the income statement
   3. Allocate costs based on user department usage
   4. Not allocate any costs of the support department

Explain why you made this choice

5. Mills Enterprises processes 18,000 kilograms of raw coffee beans to product two products. The first product is roasted coffee that is sold for $25.00 per kilogram. The second product is the shell of the bean, called the husk. The husk is sold as a fertilizer for plant crops. Because it is sold for only $4.00 per kilogram, it is a by-product of coffee processing. The following information is available for the month of April:

Activity in kilograms	Roasted Coffee	Husks
Production	15,000	2,200
Sales	14,400	2,000
Beginning Inventory (April 1)	190	0

Costs to process the raw coffee beans were $190,000

What is the cost of roasted coffee inventory at the end of April using the Production method of by product costing? (Assume Mills uses first-in-first-out inventory costing)