Question

MANAGERIAL ACCOUNTING

Q1:

The Klamath Corp. produces two products, saws and drills. Three activities are used in their manufacture. These activities and their associated costs and bases are as follows:

Activity	Budgeted Costs	Activity Base
Stamping	$200,000	Machine hours
Assembly	$400,000	Labor hours
Setup	$30,000	Number of setups

Activity Base	Saws	Drills	Total
Machine hours	4,000	6,000	10,000
Labor hours	7,000	13,000	20,000
Number of setups	3	12	15
Units produced	500	600

a. Determine the activity rate for each activity.

Stamping	$ per machine hour
Assembly	$ per labor hour
Setup	$ per setup

b. Determine the overhead cost per unit for each product. Round your answers to two decimal places, if necessary.

Saws	$ per unit
Drills	$ per unit

Q2:

Kilbuck Manufacturing operates in a lean manufacturing environment. Kilbuck's actual conversion costs for the month of May follow:

Direct and indirect labor	$150,000
Machine depreciation	85,000
Maintenance and supplies	60,000
Total conversion costs	$295,000

The journal entry to record May's conversion costs will include:

a debit to Raw Materials Inventory

a credit to Work in Process Inventory

a credit to Raw and In Process Inventory

a debit to Raw and In Process Inventory

Q3:

Schedule of Activity Costs

Quality Control Activities	Activity Cost
Process audits	$52,000
Training of machine operators	26,400
Processing returned products	19,600
Scrap processing (disposal)	25,100
Rework	5,500
Preventative maintenance	31,900
Product design	43,000
Warranty work	8,000
Finished goods inspection	22,900

From the above schedule of activity costs, determine the non-value-added costs.

$116,100

$58,200

$234,400

$50,200

Q4:

Schedule of Activity Costs

Quality Control Activities	Activity Cost
Process audits	$50,800
Training of machine operators	27,800
Processing returned products	17,500
Scrap processing (disposal)	26,000
Rework	8,400
Preventative maintenance	28,300
Product design	41,700
Warranty work	9,800
Finished goods inspection	22,800

From the above schedule of activity costs, determine the external failure costs.

$61,700

$89,500

$21,840

$27,300

Q5:

Christmas Express makes wreaths in batch sizes of 15. The cutting & assembly process takes 6 minutes per wreath and the decorating process time is 11 minutes per wreath. It takes 5 minutes to move the wreaths from the cutting & assembly process to the decorating process.

Compute the value-added, non-value-added, and the total lead time of the wreath process.

Value-added lead time:
Non-value-added lead time:
	Move time
	Within batch wait time
Total lead time

Compute the value-added ratio. Round to one decimal place.
%

Answer 1

1a)

stamping	200000/10000=$ 20 per MH
Assembly	400000/20000= $ 20 per DLH
set up	30000/15=$ 2000 per set up

b)

	saw	Drill
stamping	4000*20=80000	6000*20=120000
assembly	7000*20= 140000	13000*20=260000
setup	3*2000=6000	12*2000=24000
Total overhead	154000	404000
unit overhead	154000/500= 308	404000/600=$673.33

2)correct option is "D"

Debit to raw and in process inventory   [work in process will debited and Factorylabor and overhead account will be credited]

3)correct option is "B" - 58200

non value added activity = 19600+25100+5500+8000=58200

4)correct option is "A" -61700

external failure cost =processing returned product + scrap processing +rework +warranty work

    =17500+26000+8400+9800

       = 61700