ABC-Classwork Questions

Q.1. Maintenance costs at Sturgeon Company are allocated to the production departments
based on area occupied. Maintenance costs of ₹300,000 are budgeted to maintain a
60,000 square foot production area. If the finishing department occupies 25,000
square feet, how much of the maintenance department costs will be allocated to the
finishing department?

Q.2 Dragon Fire Hot Sauce makes two types of hot sauces—meek and mild. Budgeted
information for the two flavors appears below:

Meek Mild
Sales ₹600,000 ₹400,000
Direct materials 100,000 120,000
Direct labor cost 108,000 180,000
Labor hourly cost 12.00 ₹ 12.00

The company estimates it will incur ₹345,600 in overhead costs for the period.
Dragon Fire allocates overhead cost to products based on the labor hours worked on
each product. What is the overhead application rate to be used when allocating to
Meek?

Q.3. Manufacturing overhead is allocated to products based on the number of

machine hours required. In a year when 40,000 machine hours and 60,000
direct labor hours were anticipated, indirect costs were budgeted at ₹252,000.
If production of wagons requires 9,000 machine hours and 10,800 direct labor
hours, how much manufacturing overhead will be allocated to wagons?

Q.4. Excellence Pastries produces baked goods. Utility costs are allocated to the
products based on the baking time required for the product. Utility costs of
₹291,500 are budgeted in a period when 550,000 total minutes of baking time
and 100,000 minutes of cooling time are anticipated. If a batch of rolls bakes
for 45 minutes, and then cools for 15 minutes, what amount of utility cost will
be allocated to each batch of rolls?

Q.5 Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting.
When the specifications for the new computer system were established, the
audit division needed 50% of the capacity, the tax division required 30%, and
business consulting required 20%. The fixed computer department costs are
 allocated based on computer needs. The variable costs of the computer
department are allocated based on the minutes of computer time that each
department uses. The computer division budget for fixed costs is ₹450,000,
and the budget for variable costs is ₹145,600. The company anticipates using
520,000 minutes of computer time. What amount of the computer department’s
fixed costs will be allocated to the business consulting division?

Q.6. Unique Finds sells fine collectible statues and has implemented activity-based
costing. Costs in the shipping department have been divided into three cost
pools. The first cost pool contains costs that are related to packaging and
shipping. Unique has determined that the number of boxes shipped is an
appropriate cost driver for these costs. The second cost pool is made up of
costs related to the final inspection of each item before it is shipped and the
cost driver for this pool is the number of individual items that are inspected.
The final cost pool is used for general operations of the department and the
cost driver is the number of orders. Information about the activities is
summarized below:

Cost Pool Estimated Cost Driver Estimated

Total Costs Annual Activity
Packaging and shipping ₹ 67,200 Number of boxes shipped 16,000 boxes

Final inspection 200,000 Number of individual items inspected 100,000 items

General operations 85,000 Number of orders 10,000 orders
During June, 2,100 boxes were packed and shipped. During June, 4,000 items were
Inspected and sold reflecting 800 orders that were packed and shipped in 2,100
boxes. What is the cost to be allocated for June?