# acc503-chapter-9-pre-built-assignment

 Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B produces the baseball bats, and Department T produces the tennis rackets. Munoz currently uses plantwide allocation to allocate its overhead to all products. Direct labor cost is the allocation base. The rate used is 200 percent of direct labor cost. Last year, revenue, materials, and direct labor were as follows:
 Baseball Bats Tennis Rackets Sales revenue \$ 1,640,000 \$ 900,000 Direct labor 360,000 180,000 Direct materials 550,000 284,000
 Required: (a) Compute the profit for each product using plantwide allocation.
 (b) Maria, the manager of Department T, was convinced that tennis rackets were really more profitable than baseball bats. She asked her colleague in accounting to break down the overhead costs for the two departments. She discovered that had department rates been used, Department B would have had a rate of 150 percent of direct labor cost and Department T would have had a rate of 200 percent of direct labor cost. Recompute the profits for each product using each department’s allocation rate (based on direct labor cost).

2.

value:
10.00 points

 Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low-cost, reliable input devices. The company only recently began producing the higher-quality wireless model. Since the introduction of the new product, profits have been steadily declining. Management believes that the accounting system is not accurately allocating costs to products, particularly because sales of the new product have been increasing. Management has asked you to investigate the cost allocation problem. You find that manufacturing overhead is currently assigned to products based on their direct labor costs. For your investigation, you have data from last year. Manufacturing overhead was \$1,337,000 based on production of 290,000 wired mice and 87,000 wireless mice. Direct labor and direct materials costs were as follows:
 Wired Wireless Total Direct labor \$ 1,029,000 \$ 406,000 \$ 1,435,000 Materials 730,000 701,000 1,431,000
 Management has determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year are as follows:
 Activity Level Cost Driver Costs Assigned Wired Wireless Total Number of production runs \$ 605,000 40 15 55 Quality tests performed 600,000 13 17 30 Shipping orders processed 132,000 80 40 120 Total overhead \$ 1,337,000
 Required: (a) How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round “Total Cost Per Unit” to 2 decimal places.)
 (b) How much overhead will be assigned to each product if direct labor cost is used to allocate overhead?What is the total cost per unit produced for each product? (Do not round intermediate calculations. Round “Overhead” to the nearest whole dollar and “Total Cost Per Unit” to 2 decimal places.)

3.

value:
10.00 points

 We-Clean, Inc., is a home-cleaning service. It originally specialized in serving small residential clients but recently started contracting for work in large apartment and office buildings. Julie Lodge, the owner, believes that the commercial sector has more growth opportunities and is considering dropping the residential service.
 Twenty cleaning employees worked a total of 34,000 hours last year, 23,000 on residential jobs and 11,000 on commercial jobs. Wages were \$15 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Because of increased competition for commercial accounts, Julie can charge \$34 per hour for residential work, but only \$28 per hour for commercial work.
 Required: (a) If overhead for the year was \$121,540, what were the profits of the commercial and the residential services using labor-hours as the allocation base? (Do not round intermediate calculations. Round “Profit” to the nearest whole dollar.)
 (b) Overhead consists of costs of traveling, using equipment, and using supplies, which can be traced as follows:
 Cost Driver Volume Activity Cost Driver Cost Commercial Residential Traveling Number of clients served \$ 14,740 13 42 Using equipment Equipment hours 40,800 3,900 2,100 Using supplies Area serviced in square yards 66,000 120,000 80,000 Total overhead \$ 121,540

Recalculate profits for commercial and residential services based on these activity bases.(Do not round intermediate calculations. Round “Profit” to the nearest whole dollar.)

 Bob’s Baskets, Inc., manufactures and sells two types of baskets, deluxe and standard. Last year, Bob’s Baskets had the following costs and revenues:
 BOB’S BASKETS, INC.Income Statement Deluxe Standard Total Revenue \$ 147,000 \$ 163,000 \$ 310,000 Direct materials 22,000 20,000 42,000 Direct labor 74,000 46,000 120,000 Overhead costs Administration 18,000 Production setup 40,920 Quality control 18,870 Distribution 14,420 Operating profit \$ 55,790
 Bob’s Baskets currently uses labor costs to allocate all overhead but is considering implementing an activity-based costing system. After interviewing the sales and production staff, management decides to allocate administrative costs on the basis of direct labor costs but to use the following bases to allocate the remaining overhead:
 Activity Level Activity Cost Driver Deluxe Standard Setting up Number of production runs 9 22 Performing quality control Number of inspections 37 37 Distribution Number of units shipped 80,000 126,000
 Required:
 (a) Complete the income statement using the preceding activity bases.(Do not round intermediate calculations.)
 (c) Restate the income statement for Bob’s Baskets using direct labor costs as the only overhead allocation base.(Do not round intermediate calculations. Round “Overhead costs” to the nearest dollar.)

5.

value:
10.00 points

 MTI makes three types of lawn tractors: M3100, M4100, and M6100. In the past, it allocated overhead to products using machine-hours. Last year, the company produced 9,000 units of M3100, 15,500 units of M4100, and 9,000 units of M6100 and had the following revenues and costs:
 MTIIncome Statement
 M3100 M4100 M6100 Total Sales revenue \$ 9,300,000 \$ 15,200,000 \$ 12,900,000 \$ 37,400,000 Direct costs Direct materials 3,100,000 4,900,000 3,200,000 11,200,000 Direct labor 600,000 950,000 1,810,000 3,360,000 Variable overhead Setting up machines 2,303,000 Processing sales orders 1,848,000 Warehousing 2,223,000 Operating machines 1,275,000 Shipping 804,000 Contribution margin \$ 14,387,000 Plant administration 5,500,000 Gross profit \$ 8,887,000

 MTI’s controller has heard about activity-based costing and puts to gether an employee team to recommend cost allocation bases. The employee team recommends the following:
 Activity Cost Driver M3100 M4100 M6100 Setting up machines Production runs 12 19 18 Processing sales orders Sales orders received 190 380 200 Warehousing Units held in inventory 120 190 80 Operating machines Machine-hours 6,500 9,800 8,700 Shipping Units shipped 9,000 15,500 9,000
 The employee team recommends that plant administration costs not be allocated to products.
 Required:
 (a) Using machine-hours to allocate overhead, complete the income statement for MTI. Do not allocate plant administrative costs to products. (Do not round intermediate computations.)
 (b) Complete the income statement using the activity-based costing method suggested by the employee team.

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