The document contains various questions related to cost accounting and budgeting, including cost allocation, budgeting for inventory purchases, and determining relevant costs for alternatives. Key topics discussed include ABC costing information, budgeted indirect cost allocation rates, cost behavior analysis, and the evaluation of production decisions. It also includes calculations for specific scenarios involving department costs and production alternatives for companies.

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1.Question :(TCO1) ABC systems create
2.Question :(TCO 1) Merriamn Company provides the following ABC
costing information:
Activities
Total Costs
Activity-cost drivers
Account inquiry hours
$400,000
10,000 hours
Account billing lines
$280,000
4,000,000 lines
Account verification accounts
$150,000
40,000 accounts
Correspondence letters

2. $ 50,000
4,000 letters
Total costs
$880,000
The above activities are used by Department A and B as follows:
Department A
Department B
Account inquiry hours
2,000 hours
4,000 hours
Account billing lines
400,000 lines
200,000 lines
Account verification accounts
10,000 accounts
8,000 accounts
Correspondence letters
1,000 letters
1,600 letters
How much of the account billing cost will be assigned to Department B?

3. 3.Question :(TCO 2) A master budget
4.Question :(TCO 2) Dalyrymple Company produces a special spray
nozzle. The budgeted indirect total cost of inserting the spray nozzle is
$80,000. The budgeted number of nozzles to be inserted is 40,000. What
is the budgeted indirect cost allocation rate for this activity?
5.Question :(TCO 3) Which cost estimation method analyzes accounts in
the subsidiary ledger as variable, fixed, or mixed using qualitative
methods?
6.Question :(TCO 4) In evaluating different alternatives, it is useful to
concentrate on
7.Question :(TCO 5) The theory of constraints is used for cost analysis
when
8.Question :(TCO 5) Schmidt Corporation produces a part that is used in
the manufacture of one of its products. The costs associated with the
production of 10,000 units of this part are as follows:
Direct materials
$45,000
Direct labor
65,000
Variable factory overhead
30,000
Fixed factory overhead
70,000
Total costs

4. $210,000
Of the fixed factory overhead costs, $30,000 is avoidable.
Phil Company has offered to sell 10,000 units of the same part to
Schmidt Corporation for $18 per unit. Assuming there is no other use for
the facilities, Schmidt should
9.Question :(TCO 3) The cost function + 10X
10.Question :(TCO 4) Sunk costs
1.Question :(TCO 1) For each of the following drivers identify an
appropriate activity.
a. # of machines
b. # of setups
c. # of inspections
d. # of orders
e. # of runs
f. # of bins or aisles
g. # of engineers
2.Question :(TCO 2) Favata Company has the following information:
Month Budgeted Sales
June $60,000
July 51,000
August 40,000

5. September 70,000
October 72,000
In addition, the cost of goods sold rate is 70% and the desired inventory
level is 30% of next month's cost of sales.
Prepare a purchases budget for July through September.
3.Question :(TCO 3) Patrick Ross, the president of Ross's Wild Game
Company, has asked for information about the cost behavior of
manufacturing overhead costs. Specifically, he wants to know how much
overhead cost is fixed and how much is variable. The following data are
the only records available:
Month Machine-hours Overhead Costs
February 1,700 $20,500
March 2,800 22,250
April 1,000 19,950
May 2,500 21,500
June 3,500 23,950
Using the high-low method, determine the overhead cost equation. Use
machine-hours as your cost driver.
4.Question :(TCO 5) Kirkland Company manufactures a part for use in
its production of hats. When 10,000 items are produced, the costs per
unit are:
Direct materials $0.60
Direct manufacturing labor 3.00

6. Variable manufacturing overhead 1.20
Fixed manufacturing overhead 1.60
Total $6.40
Mike Company has offered to sell to Kirkland Company 10,000 units of
the part for $6.00 per unit. The plant facilities could be used to
manufacture another item at a savings of $9,000 if Kirkland accepts the
offer. In addition, $1.00 per unit of fixed manufacturing overhead on the
original item would be eliminated.
a. What is the relevant per unit cost for the original part?
b. Which alternative is best for Kirkland Company? By how much?

7. Variable manufacturing overhead 1.20
Fixed manufacturing overhead 1.60
Total $6.40
Mike Company has offered to sell to Kirkland Company 10,000 units of
the part for $6.00 per unit. The plant facilities could be used to
manufacture another item at a savings of $9,000 if Kirkland accepts the
offer. In addition, $1.00 per unit of fixed manufacturing overhead on the
original item would be eliminated.
a. What is the relevant per unit cost for the original part?
b. Which alternative is best for Kirkland Company? By how much?