Section AMultiple-Choice Questions (20 marks)Section A consists of 20 multiple-choice questions, each worth 1 mark. Indicate the best response for each of the following questions. Use the following information to answer Questions 1 and 2:Fine Cutlery Inc. is a manufacturer of quality carving knives. The company has always used a plant-wide allocation rate for allocating manufacturing overhead to its products. The plant manager believes it is time to change to a better method of cost allocation. The accounting department has established the following relationships between production activities and manufacturing overhead costs:ActivityCost DriverAllocation RateMaterials handlingNumber of parts$4 per partAssemblyLabour-hours$40 per hourInspectionTime spent by item at inspectionstation$6 per minuteThe previous plant-wide allocation rate method was based on direct manufacturing labour-hours, and if that method is used, the allocation rate is $400 per labour-hour.
1.Assume that a batch of 1000 carving knives requires 2,000 parts, 20 direct manufacturing labour-hours, and 30 minutes of inspection time. What are the indirect manufacturing costs per carving knife to produce a batch of 1000 carving knives, assuming the previous plant-wide allocation rate method is used?a. $8.00b. $9.80c. $8000.00d. $9800.002.Assume that a batch of 100 carving knives requires 200 parts, 12 direct manufacturing labour-hours, and 5 minutes of inspection time. What are the indirect manufacturing costs per carving knife to produce a batch of 100 carving knives, assuming the activity-based method of allocation is used?3.Alta Services Company has 30 full-time employees. Actual time for each employee for the last period was as follows:Billable time for clients2,000 hoursVacation time200 hoursProfessional development175 hoursUnbillable time0 hoursSick leave125 hours
Demand for the company’s services is at 100% of the time available. Each employee is paid a salary of $75,000 per year.Management believes that clients should be charged for the employee’s benefits. What should be the total actual indirect-cost rate per billable hour?
- Spring '14
- Cost Accounting, Assembly department