19) Hernandez Company has the following activities in its manufacturing process:ActivityAnnual Overhead CostExpected Annual UseOverhead Rate
Materials handling$60,000600 purchase ordersMachine set-ups$15,00060 batchesProduct testing$28,000875 testsCalculate the overhead rate for each activity.Answer: A) $0.80B) $6.00C) $2.50D) $6.25Answer: AExplanation: A) Calculation of materials handling cost per unit:Number of parts used20Materials handling cost per part$0.04Materials handling cost per unit ($0.04 × 20)$0.80ActivityAnnual OverheadCostExpected AnnualUseOverhead RateMaterials handling$60,000600 purchase orders$60,000/600 = $100 per purchase orderMachine set-ups$15,00060 batches$15,000/60 = $250 per batchProduct testing$28,000875 tests$28,000/875 = $32 per test27) Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan has 20 separate parts. The direct material cost is $90, and each ceiling fan requires 2.50 hours of machine time to manufacture. Additional information is as follows:ActivityAllocation BasePredeterminedOverhead AllocationRateMaterials handlingNumber of parts$ 0.04MachiningMachine hours6.00AssemblingNumber of parts0.20PackagingNumber of finished units2.50What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places.)32) Royal Rotisserie Company, a manufacturer of kitchen ovens, had the following activities, allocated costs, and allocation bases:
ActivitiesAllocated Costs Allocation BaseAccount inquiry (hours)$74,0002400 hoursAccount billing (lines)$38,00019,000 linesAccount verification (accounts)$15,00024,000 accountsCorrespondence (letters)$12,0001600 lettersThe above activities are carried out at two of its regional offices.ActivitiesNortheastOfficeMidwest OfficeAccount inquiry (hours)140 hours200 hoursAccount billing (lines)14,000 lines8000 linesAccount verification (accounts)1600 accounts700 accountsCorrespondence (letters)30 letters120 lettersHow much of the account inquiry cost will be assigned to the Midwest Office? (Round any intermediate calculations to two decimal places and your final answer to the nearest dollar.)Chapter 201)Total variable costs change in direct proportion to changes in the volume of production
Answer: TRUE4) Which of the following is a variable cost?
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- Fall '11