Exam I

Q1. Altima Company uses an overhead costing system based on direct labor hours for its two products X and Y. The company is considering adopting an activity-based costing system, and collects the following information for the month of October.

(1) Compute the unit manufacturing cost of Product X under a volume-based costing system based on direct labor hours.

(2) Compute the unit manufacturing cost of Product Y under a volume-based costing system based on direct labor hours.

*Note that the direct labor based costing system overcosted the high volume Job B and undercosted the low volume Job A

Q2. Assad Company uses the process costing method with the following data for the month of July.

Required:

(1) Compute cost per equivalent unit under the weighted-average method. EUs for materials = 50,000+20,000 = 70,000 EUS for conversion = 50,000+(20,000*0.6) = 62,000 (2) Compute cost per equivalent unit under FIFO method.
EUs for DM = 50,000 + 20,000 – 30,000 = 40,000
EUs for Conv: 50,000 + 12,000 – 30,000 * 0.3 = 53,000

DM: $120,000/40,000 =$3 per DM EU
Conv: $199,810/53,000=$3.77 per Conv EU
Total: $3+$3.77= $6.77 per EU

(3) Calculate the cost of units completed and transferred out using the weighted-average method.
Under WA
50,000*$6.71 = $335,500
Under FIFO
# of units started & completed this period = 50,000 - 30,000 = 20,000 -
20,000 * $6.77 = $135,400
Let’s calculate the cost incurred to finish BWIP:
6,000 * 0 * $3 = $0
6,000 * 0.7 * $3.77 = $79,170
Total cost of units finished from BWIP = $0 + $79,170 + $65,500 + $51,910 = $196,580
Thus, the cost of completed and transferred out units = $135,400 +$196,580= $331,980

(4) Calculate the cost of ending work in process using the weighted-average method
Under WA
DM : 20,000 EUs *$2.65 = $53,000
Conv: 12,000 EUS * $4.06 = $48,720
EWIP = $101,720
Under FIFO
20,000 * 100% * $3 + 20,000 * 0.6 * $3.77 = $105,240

Q3. The Insurance Plus Company has two service