# ACC – Homework 8 Problem Set

1. The Chinese Teapot Company manufactures plastic and ceramic teapots. The company’s western plant has changed from a labor-intensive operation to a robotics environment. As a result, management is considering changing from a direct-labor based overhead rate to an activity-based cost method. The controller has chosen the following activity cost pools and cost drivers for the factory overhead:ExpectedOverheadCostCost DriverAnnualCost DriverPurchase orders$300,000 Number of orders15,000 ordersSet-up costs$200,000 Number of set-ups 5,000 set-upsTesting costs$320,000 Number of tests8,000 testsMachine maintenance$500,000 Machine hours25,000 hoursREQUIRED:a. Compute the overhead rate for each cost driver.b. An order for 50 ceramic teapots had the following requirements: Number of purchase orders 3 Number of set-ups 20 Number of product tests 7 Machine hours 150 How much overhead would be assigned to this order?2. Catfish Company produces two products, C and F, with the following characteristics: Product C Product FSelling price per unit $10 $15Variable cost per unit $ 8 $10Expected sales (units) 10,000 5,000Total fixed costs for the company are $21,000.REQUIRED:a. What is the anticipated level of profits for the expected sales volume?b. Assuming the product mix would be the same at the break-even point, compute the break-even point in terms of each of the products.c. If only product C were sold, how many units would be needed to break even?d. If only product F were sold, how many units would be needed to break even?e. If the product mix changed so that equal units of C and F were sold, what would be the new break-even point in total units?f. Discuss the accuracy of the above calculations with regards to planning. What types of occurrences could affect the accuracy of the calculations? What assumptions must be made to use the calculations in planning and decision making?3. Multiple Choice Questionsa. Which of the following represent the three major influences on pricing decisions?a. customers, competitors, and costs.b. controls, customer, and competitors.c. costs, competitors, and controls.d. costs, controls, and customers.b. Sebastian Enterprises sells a product for $25 per unit and has the following costs for the productDirect Materials $10Direct Labor 5Variable Overhead 3Fixed Overhead 2Total $20The company received a special order for 100 units of the product. The order would require rental of a special tool which costs $200. What is the minimum price per unit that Sebastian Enterprises should charge for this special order if they wish to earn a $300 profit on this order? Assume there is sufficient idle capacity to accept this order.a. $18b. $20c. $23d. $25c. In considering a special order that will enable a company to make use of presently idle capacity, which of the following costs would be irrelevant?a. Materialsb. Depreciationc. Direct Labord. Variable Overheadd. Which of the following is an operation in which the work to be performed equals or exceed the available capacity?a. capacity inhibitor.b. throughput blocker.c. bottleneck.d. push-pull constraint. Narrative 5-1The following question(s) refer to the equation analyzing the relationship of total cost to changes in machine hours. The following relationship was determined:TC = $2,200 + $3Xe. Refer to Narrative 5-1. Which of the following terms best describes the equation?a. parabolic.b. curvilinear.c. linear.d. probabilistic.f. Refer to Narrative 5-1. The TC in the above equation is an estimate of which of the following?a. total variable costs.b. total costs.c. total fixed costs.d. total machine hours. g. Refer to Narrative 5-1. The above equation was probably found through the use of which of the following mathematical techniques?a. Linear programmingb. Multiple regression analysisc. Simple Regression analysisd. Dynamic programmingh. Refer to Narrative 5-1. The $3 in the above equation is an estimate of which of the following?a. total fixed costs.b. variable costs per machine hour.c. total variable costs.d. fixed costs per machine hour.i. Refer to Narrative 5-1. The dependent variable is which of the following?a. TCb. $2,200c. $3d. Xj. Refer to Narrative 5-1. The independent variable is which of the following?a. TCb. $2,200c. $3d. X4. Are you dedicated to innovation?