Exam 4: Accumulating and Assigning Costs to Products

If cost driver rates were based on actual short-term usage,periods of lower demand would result in lower cost driver rates.

JB Juice Company uses a manufacturing process that has two distinct stages: the juicing process (P1)and the straining process (P2). Raw material is consumed in P1 at the beginning of the process. No additional raw material is required in the second stage of the process (in P2). The following information pertains to the production of 5,000 units of output in March 2011: Assume 5,000 units are 100% complete with respect to raw materials and conversion costs at the end of March. -The conversion cost per unit of output for stage PI for the JB Juice Company totals:

Sheppard 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 hours in the Assembly Department. At the beginning of 2011, the following estimates were provided for the coming year: The accounting records of the company show the following data for Job #316: -For the Machining Department,what is the annual manufacturing overhead cost driver rate?

Rupe Company has two departments: Machining and Assembly. The following estimates are for the coming year: -A single predetermined manufacturing cost driver rate based on total plant direct labor hours is:

Ocean Technical Services applies manufacturing overhead costs to products at a predetermined rate of $70 per direct labor hour. One customer has requested a bid on a special order of a product. Estimates for this order include: direct materials $50,000; direct labor 900 direct labor hours @ $30 per hour; and a markup rate of 25%. -Estimated total product costs for this special order equal:

When demand for a product is low,a higher markup should be used since a larger share of the fixed costs needs to be allocated to each product.