Module 9

Intermediate
Management
Accounting
Week 3
Quiz

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Module 9 Intermediate Management

Accounting

WEEK 3 QUIZ
1. Arranging for a shipment of a number of different products to a customer is an example of
an activity at which of the following levels?
a)
b)
c)
d)

Unit-level activity
Batch-level activity
Product-level activity
Facility-sustaining activity

Questions 2 and 3 are based on the following information:

Delta Company manufactures a product that is processed through two departments. The
following information was obtained for the first department in January:

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All direct materials are added at the beginning of the process, while conversion costs are
added evenly throughout the process.
Normal spoilage is considered to be 0.85% of good units transferred to the second
department, with inspection occurring when units are complete. All spoiled units are
discarded.
Beginning work-in-process consisted of 20,000 units, 30% complete with respect to
conversion costs.
Costs in beginning inventory included direct materials of $20,920 and conversion costs of
$12,750.
There were 47,400 units started during the month, and costs added to production during
the month totalled $47,930 for direct materials and $62,280 in conversion costs.
A total of 50,000 units were transferred to the second department, and 16,900 units
remained in ending work-in-process, 30% complete.

Module 9 Intermediate Management Accounting

Week 3 Quiz

2. Based on the above information, and assuming Delta Co. uses the FIFO method for
process costing, what were the equivalent units for direct materials (DM) and conversion
costs (CC), respectively, for September?
a)
b)
c)
d)

46,900 for DM, 49,070 for CC

46,975 for DM, 49,145 for CC
47,400 for DM, 49,495 for CC
47,400 for DM, 49,570 for CC

3. Assume that Delta uses the weighted average method for process costing and that the
equivalent units have been correctly calculated as 67,400 for direct materials and 55,570
for conversion. What is the total cost of the units transferred to the second department for
January? (Use four decimal places for the equivalent unit cost calculations.)
a)
b)
c)
d)

$118,585
$118,762
$119,593
$119,771

4. Activity-based management (ABM) involves analyzing activities. Which of the following

would be considered part of activity analysis?
a) Classify all current activities and tasks as either facility-level, batch-level or unit-level
activities.
b) Classify all current activities and tasks as either value added or non-value added.
c) Develop organizational goals.
d) Allocate costs to cost objects.

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Module 9 Intermediate Management Accounting

Week 3 Quiz

5. Sandras Sandwich Boards Inc. creates and prints sandwich boards for advertising outside
restaurants. The sales manager wants to assess the profitability of Larrys Lunch, a longtime customer of Sandras. During the second quarter, Larrys Lunch ordered sandwich
boards from Sandras, and Sandras incurred the following revenue, activities and costs
related to these orders:
Selling price per board
Number of boards sold
Number of orders
Number of shipments
Direct materials per unit
Direct labour hours per unit
Direct labour rate per unit

$350.00
6
2
3
$90
2.5 DLH
$34

The sales manager also wants to assign a portion of the companys overhead costs of
$65,000 for the quarter and has set up the following activity cost pools in order to allocate
the costs:
Activity cost pool

Activity measure

Order processing
Customer support
Shipping
Other

Number of orders
Number of customers
Number of shipments
Not allocated to customers

Overhead
cost
Wages and salaries
Other overhead costs

$30,000
$35,000

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$297
$515
$1,347
$1,803

250 orders
64 customers
50 shipments
N/A

-------------Percent allocation-------------------Order
Customer
processing
support
Shipping Other
50%
35%

What is the customer margin for Larrys Lunch?

a)
b)
c)
d)

Total activity
(for the quarter)

30%
20%

10%
5%

10%
40%

Total
100%
100%

Module 9 Intermediate Management Accounting

Week 3 Quiz

Questions 6 and 7 are based on the following information:

Yardcare Inc. manufactures and distributes two types of gardening tools: rakes and shovels.
The tools are manufactured on a common assembly line by the same direct labourers.
Different direct materials are used in each type of tool, and the machinery is retooled for each
product.
Until now, manufacturing overhead costs have been allocated on the basis of direct labour
hours using a plant-wide rate. However, the production manager wants to implement activitybased costing for Yardcares production operations. To that end, she has assembled the
information below regarding production activities and manufacturing overhead costs for all
units produced for the month of May:
Activity centre

Cost driver

Allocation rate

Activity used
in rakes
Materials handling Number of parts $1.00 per part
2,000 parts
Machining
Machine-hours
$15.00 per hour 205 hours
Assembly
Units assembled $1.60 per unit
1,000 units
Inspection
Number tested
$2.00 per unit
100 units

Activity used
in shovels
1,300 parts
300 hours
1,300 units
1,200 units

Direct costs:

Rakes

Shovels

Labour (600 hours each)

Materials

$12,000
$ 5,200

$12,000
$ 2,600

6. Based on a plant-wide manufacturing overhead rate based on direct labour hours, what are
the total manufacturing costs per unit for rakes for May? (Compute the plant-wide rate to
the nearest $0.01.)
a)
b)
c)
d)

$14.30
$17.83
$19.60
$25.78

7. What are the total manufacturing costs of all shovels produced for May using activity-based
costing?
a)
b)
c)
d)

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$10,280
$21,475
$23,180
$24,880

Module 9 Intermediate Management Accounting

Week 3 Quiz

8. Assume a FIFO system and 5,000 units in beginning work-in-process, 30% complete as to
conversion costs. Conversion costs are incurred evenly throughout. What is the number of
equivalent units for conversion costs if 30,000 units were started during the period and
there are 6,000 units in ending work-in-process that are 20% complete?
a)
b)
c)
d)

26,700 units
28,700 units
33,700 units
34,700 units

9. In February, 2,300 units were completed and transferred out of the mixing process at Tyler
Co. The ending work-in-process inventory was 200 units, 30% complete as to conversion
costs and 100% complete as to materials costs. The months charges were $18,880 for
conversion costs and $12,500 for materials costs. There was no beginning inventory in
February. What is the cost of the units completed and transferred out during February?
Quantity
a) $ 29,900
b) $ 30,680
c) $ 31,380
d) $ 32,500
10. Which of the following has characteristics similar to those of process costing?
a)
b)
c)
d)

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Product life cycle costing

Kaizen costing
Hybrid costing
Opportunity costing