Parallel Quiz AML

This is a take home Quiz. Submission time deadline: Sunday, 17 October 2021, 9am. Use the google
form from MAKSI secretariat to submit your answer and according to your teacher’s instruction.

Question #1 – Job Costing (25%)

Buji Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to
products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining
Department and on the basis of direct labor cost in the Assembly Department. At the beginning of 2020,
the following estimates were provided for the coming year:
Machining Assembly
Direct-labor hours 40.000 70.000
Machine-hours 90.000 30.000
Direct labor cost 400.000 800.000
Manufacturing overhead costs 650.000 420.000

At the end of 2020, the following data is recorded for all the jobs of the year
Machining Assembly
Direct-labor hours 30.000 65.000
Machine-hours 110.000 40.000
Direct labor cost 550.000 900.000
Manufacturing overhead costs 714.000 424.000

The accounting records of the company show the following data for Job #165:
Machining Assembly
Direct-labor hours 300 210
Machine-hours 75 25
Direct material cost $500 $400
Direct labor cost $200 $300

Required:
1. For Buji Manufacturing, what is the annual manufacturing overhead cost allocation rate for
Machining Department? (2.5%)
2. For Buji Manufacturing, what is the annual manufacturing overhead cost allocation rate for
Assembly Department? (2.5%)
3. What amount of total manufacturing costs will be allocated to Job #165? What is the per unit cost
for Job #165 assuming that it consists of 500 units? (10%)
4. How much is the under or overallocation of overhead for machining and assembly department?
Prepare the journal entries to write off the under or overallocation to COGS! (10%)

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 Parallel Quiz AML

Question #2 – ABC (25%)

Joeylin Company produces lawn mowers. One of its plants produces two versions of mowers: a Standard
model and a luxury model. The luxury model has a sturdier frame, a higher horsepower engine, a wider
blade, and mulching capability. At the beginning of the year, the following data were prepared for this
plant:
Standard Model Luxury Model
Expected quantity 40,000 20,000
Selling price $180 $360
Prime costs $160 $320
Machine hours 5,000 5,000
Direct labor hours 10,000 10,000
Engineering support (hours) 1,500 4,500
Receiving (orders processed) 250 500
Material handling (number of moves) 1,200 4,800
Purchasing (number of requisitions) 100 200
Maintenance (hours used) 1,000 3,000
Paying suppliers (invoices processed) 250 500
Setting up equipment (number of setups) 16 64

Additionally, the following overhead activity costs are reported:

Maintaining equipment $114,000

Engineering support 120,000
Material handling ???
Setting up equipment 96,000
Purchasing materials 60,000
Receiving goods 40,000
Paying suppliers 30,000
Providing space 20,000
Total $ ?????

Facility-level costs are allocated in proportion to machine hours (provides a measure of time the facility is
used by each product). Material handling uses three inputs:
 Two forklifts
 Gasoline to operate the forklift
 Three operators.
The three operators are paid a salary of $60,000 each. The operators spend 25 percent of their time on the
receiving activity and 75 percent on moving goods (material handling). Gasoline costs $4.50 per move.
Depreciation amounts to $9,000 per forklift per year.

Required:
1. Calculate the cost of the material-handling activity. Label the cost assignments as driver tracing and
direct tracing. Identify the resource drivers. (4%)
2. Calculate the cost per unit for each product using direct labor hours to assign all overhead costs. (4%)
3. Calculate activity rates and assign costs to each product. (8%)
4. Calculate a unit cost for each product using activity-based costing and compare these costs with those
calculated in requirement (2). (4%)
5. What are the implications of the activity-based costing system with respect to
a. The use of direct labor as a basis for applying overhead to products? (2.5%)
b. The use of the existing product-costing system as the basis for pricing? (2.5%)

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 Parallel Quiz AML

Question #3 – CPA & Target Costing (25%)

PT Usaha Maju manufactures processors for computer and telecommunications industries. At the request
of the company’s Vice President of Marketing, the cost management staff has recently completed a
customer-profitability study. The following activity-based costing information was the basis for the
analysis.
Customer-Related
Cost Driver Base Cost Driver Rate ($)
Activities
Delivery activity Shipments 12,500
Order processing Sales orders 10,000
Sales activity Sales visits 25,000

PT Usaha Maju only have two retail and two wholesale customers: Cost-driver data and other related
information for the four customers for the most recent year are:

Customer-Related Wholesale Retail

Activities
PT A PT B PT C PT D
Order processing Sales orders 20 25 12 8
Sales activity Sales visits 12 5 5 3
Quantity Sold Units 200 300 100 90

The processor was sold at the price of $20,000 per unit and had a full product cost of $12,500 per unit.
Delivery to the customer is made per order received.

The following additional information has been compiled for PT Usaha Maju and its four customers, for
the most recent year (in $):
PT A PT B PT C PT D
General Selling Costs 400,000 600,000 200,000 180,000
General Admin Costs 320,000 480,000 160,000 144,000

Required:
1. Prepare a customer profitability analysis for the four customers of PT Usaha Maju (16%)
2. If you are the management of PT Usaha Maju, based on the result from Requirement 1, what is your
response for each of the customer? (6%)
3. If PT Usaha Maju has targeted a 4% Customer Level Operating Income per customer; how does the
previous analysis change? (3%)

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Question #4 – CVP (25%)

PT. Signature produce signature croco bag with specific target market in local and international. The bag
has a selling price of $450 with $260 in variable costs of goods sold. The company has fixed manufacturing
costs of $2,000,000 and fixed marketing costs of $610,000. Sales commissions are paid to each salesperson
at 10% of revenues. The company has an income tax rate of 30%.

Required:
1. How many shirts must PT. Signature sell to break even? (5%)
2. How many shirts must it sell to reach?
a. a target operating income of $1,595,000? How much margin of safety in units if the company
can sell unit to get a target operating income of $1,595,000? (6%)
b. a net income of $1,595,000? (4%)
3. How many shirts would PT. Signature have to sell to earn the net income in part 2b if: (Consider each
requirement independently.)
a. the contribution margin per unit increases by 15%. (3%)
b. the selling price is increased to $550 (3%)
c. the company outsources manufacturing to an overseas company increasing variable costs per
unit by $90 and saving 50% of fixed manufacturing costs (4%)

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