105. Chang Inc. has developed the following unit costs for the production of one of its products,
based on a normal activity of 10,000 units per month:
What is the total amount of overhead included in the overhead budget for a month in which
production is expected to be 11,000 units?
106. Crowley Company has gathered the following data related to its production process of two
of its products for the week ended April 30:
The costs above that appear to be allocated rather than traced are:
10–83
107. Marvin’s Kitchen Supply delivers restaurant supplies throughout the city. Marvin’s adds
4% to the order cost to cover the delivery cost. The delivery fee is meant to just cover the cost of
delivery. A consultant has analyzed the delivery service using activity-based costing methods and
identified four activities. Data on these activities are:
Two of Marvin’s customers are City Diner and Le Chien Chaud. Below are data on orders and
deliveries to these two customers:
Required:
(a) What would be the delivery charge for each customer under the current policy of 4% of order
value?
(b) What would the activity-based costing system estimate as the cost of delivering to each
customer?
10–85
108. Rock Solid Bank and Trust (RSB&T) only offers checking accounts. Customers can write
checks and use a network of automated teller machines. RSB&T earns revenue by investing the
money deposited (subject to reserve requirements). Currently RSB&T averages 6% return annually
on its investments. In order to compete with larger banks, RSB&T pays depositors 1% on all
deposits. A recent study classified the operating costs of the bank into four activities. Data on
these activities are:
Required:
(a) Compute the operating profits of the RSB&T.
(b) Compute the profit of Customer A and Customer B, assuming that customer costs are based
only on deposits.
(c) Compute the profit of Customer A and Customer B, assuming that customer costs are
computed using the information in the activity-based costing analysis.
109. Gunnison Supply provides the following information about resources:
In addition, sales for the period totaled $600,000.
Required:
Compute the unused resource capacity for each preceding item.
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110. The following represents the financial information of Trovatore Corporation, a
manufacturer of electronic components, for two months:
Required:
a. Classify these items into prevention, appraisal, internal failure, or external failure costs.
b. Calculate the ratio of the prevention, appraisal, internal failure, and external failure costs to
sales for March and April.
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111. Leidenheimer Corporation manufactures small airplane propellers. Sales for April totaled
$850,000. Information regarding resources for the month follows:
In addition, Leidenheimer spent $25,000 on 50 engineering changes with a cost driver rate of $500
and $30,000 on eight outside contracts with a cost driver rate of $3,750.
Required:
a. Prepare a traditional income statement.
b. Prepare an activity-based income statement.
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112. Categorize each of the following quality activities by placing an X in the appropriate
column.
Required:
113. Categorize each of the following quality activities by placing an X in the appropriate
column.
Required:
10–96
114. East Grand Grocer Distribution delivers supplies to small grocers throughout the region.
East Grand currently adds 5% to the order cost to cover the delivery cost. The delivery fee is
meant to just cover the cost of delivery. A consultant has analyzed the delivery service using
activity-based costing methods and identified four activities. Data on these activities are:
Three of East Grand’s customers are Rosy’s Corner Market, Katy’s Fine Foods, and Amy’s City
Market. Below are data on orders and deliveries to these three customers:
Required:
(a) What would be the delivery charge for each customer under the current policy of 5% of order
value?
(b) What would the activity-based costing system estimate as the cost of delivering to each
customer?
10–98
115. Boyceville Corporation manufactures motor brackets. Information regarding resources for
the month follows:
In addition, Boyceville spent $25,000 on 40 engineering changes with a cost driver rate of $600.
Required:
a. Prepare an analysis of the unused resource capacity for the month.
116. Moab Supply provides the following information about resources:
Required:
Compute the unused resource capacity for each preceding item.