Cost Allocation Techniques Paper 3

1


The following is taken from Fortech Company’s records for the fiscal year just ended:
Direct materials used $300,000
Direct labor 100,000
Variable manufacturing overhead 50,000
Fixed manufacturing overhead 80,000
Selling and admin. costs--variable 40,000
Selling and admin. costs--fixed 20,000
, If Fortech Company uses variable costing, the inventoriable costs for the fiscal year are






2


The following is taken from Fortech Company’s records for the fiscal year just ended:
Direct materials used $300,000
Direct labor 100,000
Variable manufacturing overhead 50,000
Fixed manufacturing overhead 80,000
Selling and admin. costs--variable 40,000
Selling and admin. costs--fixed 20,000
, Using absorption (full) costing, Fortech Company’s inventoriable costs are






3


"Estimated unit costs for Cole Lab using full absorption costing and operating at a production level of 12,000 units per month:"
Cost Item Estimated Unit Cost
Direct material 32
Direct labor 20
Variable manufacturing overhead 15
Fixed manufacturing overhead 6
Variable selling 3
Fixed selling 4
Cole Lab’s estimated conversion costs per unit are






4


"Estimated unit costs for Cole Lab using full absorption costing and operating at a production level of 12,000 units per month:"
Cost Item Estimated Unit Cost
Direct material 32
Direct labor 20
Variable manufacturing overhead 15
Fixed manufacturing overhead 6
Variable selling 3
Fixed selling 4
Cole Lab’s estimated prime costs per unit are






5

Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the year.
• Total manufacturing costs were $2,500,000.
• Cost of goods manufactured was $2,425,000.
• Applied factory overhead was 30% of total manufacturing costs.
• Factory overhead was applied to production at a rate of 80% of direct labor cost.
• Work-in-process inventory at January 1 was 75% of work-in-process inventory at December 31.
Total cost of direct material used by Farber Company for the year is






6

Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the year.
• Total manufacturing costs were $2,500,000.
• Cost of goods manufactured was $2,425,000.
• Applied factory overhead was 30% of total manufacturing costs.
• Factory overhead was applied to production at a rate of 80% of direct labor cost.
• Work-in-process inventory at January 1 was 75% of work-in-process inventory at December 31.
The carrying value of Farber Company’s work-in-process inventory at December 31 is






7

Farber Company employs a normal (nonstandard) absorption cost system. The following information is from the financial records of the company for the year.
• Total manufacturing costs were $2,500,000.
• Cost of goods manufactured was $2,425,000.
• Applied factory overhead was 30% of total manufacturing costs.
• Factory overhead was applied to production at a rate of 80% of direct labor cost.
• Work-in-process inventory at January 1 was 75% of work-in-process inventory at December 31.
Farber Company’s total direct labor cost for the year is






8

The marketing manager of Ames Company has learned the following about a new product that is being introduced by Ames: Sales of this product are planned at $100,000 for the first year. Sales commission expense is budgeted at 8% of sales plus the marketing manager’s incentive budgeted at an additional 1/2%. The preparation of a product brochure will require 20 hours of marketing salaried staff time at an average rate of $100 per hour, and 10 hours at $150 per hour for an outside illustrator’s effort. The variable marketing cost for this new product will be






9

Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of $5,000,000, fixed manufacturing costs of $2,000,000, variable marketing costs of $1,000,000, and fixed marketing costs of $3,000,000. If Bethany uses the variable cost method to value inventory, the inventory value of the new product will be






10

Using absorption costing, Langdon Company’s income for October was $250,000. Langdon began the month with 10,000 units in finished goods inventory that contained $30,000 of fixed manufacturing overhead costs. During October, the company produced 330,000 units and sold 325,000 units. The fixed manufacturing overhead for October totaled $990,000. If Langdon Company used variable costing, its income for October would be






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