Unit 4

Question 1(Total: 30 marks)

For its overhead costs, the wholesale distributor JanzCompany uses activity-based costing. In terms of the companys annual overhead costs and its activity-based costing system the following data has been provided:

Overhead Costs:
Wages and salaries	$380,000
Non-wage expenses	90,000
Total	$470,000

Distribution of Resource Consumption:

	Activity Cost Pools
	Filling Orders	Product Support	Other	Total
Wages and salaries	20%	65%	15%	100%
Non-wage expenses	15%	60%	25%	100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. Shown below is the amount of activity for the year:

Activity Cost Pool	Annual Activity
Filling orders	3,100 orders
Product support	32 products
Other	Not applicable

Required:

Compute the activity rates for the Filling Orders and Product Support activity cost pools

Question 2(Total: 40 marks)

Lojay Company produces custom covers for the air conditioning units of homes and businesses. For its overhead costs the company uses an activity-based costing system. The following data has been provided by the Lojay company regarding its annual overhead costs and its activity cost pools:

Overhead Costs:
Production overhead	$89,000
Office expenses	41,500
Total	$130,500

Distribution of Resource Consumption:

	Activity Cost Pools
	Making Covers	Job Support	Other	Total
Production overhead	33%	45%	22%	100%
Office expenses	14%	54%	32%	100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:

Activity Cost Pool	Annual Activity
Making covers	2,500 yards
Job support	200 jobs
Other	Not applicable

Required:

1. Prepare the first-stage allocation of overhead costs to the activity cost pools

2. Compute the activity rates for the Making Covers and Job Support activity cost pools

3. Prepare a revenue report where making 50 yards of covers and DM and DL cost of $950, and revenue is $2,500

Question 3

(Total: 30 marks)

Gandalf and Company makes table tennis equipment for the retailers around the world. Below you will find a number ofactivities and cost at Gandalf Corporation. Please list the activity as either, Batch, Unit, "Product" or Organization-sustaining.

Activity	Level
Factory utilities
A steering wheel is installed in a golf cart.
Machine set-up.
Completed golf carts are individually tested on the companys test track.
Molding and sanding each unit of product
An outside lawyer draws up a new generic sales contract for the company, limiting Go Pros liability in case of accidents that involve its golf carts.
Electricity is used to heat and light the factory and the administrative offices.
A golf cart is painted. cost hierarchy often used to implement ABC, with the exception of
Research and development
The companys engineer modifies the design of a model to eliminate a potential safety problem.