1) Calculating Variable and Fixed Costs for Montford

School: Wofford College - Course: ACC 345 - Subject: Accounting

1)Montford Manufacturing, Inc. estimates that it will incur variable indirect costs for the month of October of $100,000 and $80,000 of fixed costs.The company uses direct labor hours to calculate the predetermined overhead rate and predicted that 5,000 direct labor hours would be used in October.Actual direct labor hours amounted to 4,200. Required: 1) What is the variable predetermined indirect rate for October? 2) What is the fixed predetermined indirect cost rate for October? 3) What is the total allocation rate per direct labor hour for October? 2)Startech, Inc. manufactures 3-D printers. For each unit, $9,400 of direct material is used and there is $8,600 of direct manufacturing labor at $21 per hour. Manufacturing overhead is applied at $20 per direct manufacturing labor hour. Calculate the profit earned on 46 units if each unit sells for $35,000. 3) Johnson Manufacturing, Inc. provides the following ABC costing information: ActivitiesTotal CostsActivity-cost drivers Account inquiry$750,00015,000 hours Account billing$250,0005,000,000 lines Account verification accounts$173,25070,000 accounts Correspondence letters$42,0007,000 letters Total costs$1,215,250 The above activities are used by Departments A and B as follows: Department ADepartment B Account inquiry hours2,000 hours3,500 hours Account billing lines900,000 lines750,000 lines Account verification accounts9,000 accounts7,000 accounts Correspondence letters1,200letters1,600 letters How much of the total costs will be assigned to Department B? 4) Valkerie Marketing Materials, Inc. produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTSSWEATSHIRTS Production and sales volume72,000 units26,250 units Selling price$15.00$29.00 Direct material$1.50$ 5.00

Direct labor$4.20$ 7.20 Manufacturing overhead$1.80$ 3.00 Gross profit$ 7.50$13.80 Selling and administrative$3.60$ 7.00 Operating profit$3.90$ 6.80 Valkerie Marketing Materials, Inc. managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost information: ActivityActivity costActivity-cost driver Supervision$108,480Direct labor hours (DLH) Inspection$93,000Inspections Activities demanded T-SHIRTSSWEATSHIRTS 0.75 DLH/unit1.60 DLH/unit 54,000 DLHs42,000 DLHs 60,000 inspections17,500 inspections Under the revised ABC system, overhead costs per unit for the T-shirts will be ________. (Do not round interim calculations. Round the final answer to the nearest cent) 5) A plumbing supply company manufactures and sells three styles of kitchen faucets: Gold, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome, and white faucets, respectively. The following additional data apply: GOLDCHROMEWHITE Projected sales in units30,00050,00040,000 PER UNIT data: Selling price$40$20$30 Direct materials$ 8$ 4$ 8 Direct labor$15$ 3$ 9 Overhead cost based on direct labor hours

(traditional system)$12$ 3$ 9 Hours per 1000-unit batch: Direct labor hours401030 Machine hours252510 Setup hours1.00.51.0 Inspection hours302020 Total overhead costs and activity levels for the year are estimated as follows: ActivityOverhead costsActivity levels Direct labor hours2,900 hours Machine hours2,400 hours Setups$465,50095 setup hours Inspections$405,0002,700 inspection hours $870,500 Required: a.Using the traditional system, determine the operating profit per unit for the chrome faucet. b.Determine the activity-cost-driver rate for setup costs and inspection costs. c.Using the ABC system, for the chrome style of faucet: 1. compute the estimated overhead costs per unit (note: you will need to determine hours per unit using the "hours per 1000-unit batch"). 2. compute the estimated operating profit per unit. d.Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate