Final Fa2009 Solution

# 22 compute soundwaves plantwide allocation rate

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Unformatted text preview: st driver for Fabrication and direct materials cost as the cost driver for Testing. 22. Compute SoundWave’s plantwide allocation rate. \$625,000 / 400,000 feet = \$1.5625 / foot 23. Suppose SoundWave adopts the activity based costing system. What allocation rate will it use to allocate Testing costs? \$400,000 / \$125,000 = 320% of DM cost 6A:002 Fall 2009 – Final Exam Page 11 24. Is the Deluxe product line overcosted or undercosted when the plantwide overhead rate is used. By how much? State the total amount by which the Deluxe product line is miscosted. Undercosted Plantwide allocation (given) ABC allocation Fabrication \$225,000/10,000 *6,000 Testing \$400,000/125,000 * 80,000 Total allocated by ABC Amount underallocated by plantwide rate \$156,250 \$135,000 256,000 391,000 \$234,750 25. Assume that the activity based costing system reports that the cost of standard wire is \$1.80 per foot. What price per foot must SoundWave charge for standard wire in order to make a profit that is 40% of revenue for the product line? Want Revenue – Cost = 40% of Revenue R - \$1.80 = 40%*R 60% * R = \$1.80 R = \$3.00 per foot 6A:002 Fall 2009 – Final Exam Page 12 Use the following information about Speedee Delivery to answer questions 26 through 27. Speedee Delivery sells two types of package delivery services: two-day and overnight. Information about these services follows. Overnight Two-day Percent of total sales 75% 25% Selling Price \$20 \$36 Variable Cost \$8 \$12 Contribution Margin \$12 \$24 Speedee’s fixed costs total \$240,000 per year. 26. Compute Speedee’s weighted average contribution margin. 75% (\$12) + 25% (\$24) = \$15 per delivery 27. How many two-day deliveries will Speedee sell when it breaks even? Number of total deliveries to break even is \$15 Q - \$240,000 = 0 Q = 16,000\ Number of that total that is two-day deliveries: 75% * 16,000 = 12,000 6A:002 Fall 2009 – Final Exam Page 13 Use the following information about Carville Candies to answer questions 28 through 29. Carville Candies reported the following information for June and July. Cases Sold Revenue Cost Profit June 2,000 \$120,000 130,000 <\$10,000> July 2,500 \$150,000 142,500...
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