Cost Function Estimation, Job Costing, Manufacturing Overhead, Activity-Based Costing, and Budget Va

Question 1 (20 marks) 

The Sugar Ant Bakery uses the high-low method to estimate its cost function. The information for 2021 is provided below: 

                                                                   Machine-hours                              Costs 
Highest observation of cost driver                  4,250                                       $340,000 
Lowest observation of cost driver                   4,000                                       $330,000 
 
Required:  

A.What is the estimated cost equation?  

B.Nuts Company has mostly fixed costs and Bolt Company has mostly variable costs. Which company has the greatest potential of a net profit? Explain why 
 
Question 2 (20 marks) 
 
TackMe Tailor Company uses machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for Company and for Pearl High School Dance Jacket job. 

Required: 
A.Determine the estimated total manufacturing costs for the Pearl High School Job. 

B.Describe with examples the differences between process costing and job costing. 

Question 3 (20 marks) 
 
Sweet tooth Corporation was recently formed to produce fruity ice cream. The direct materials are added at the start of the production process while conversion costs are added uniformly throughout the production process. May is the corporation first month of operations, and therefore, there was no beginning inventory. Direct materials cost for the month totaled $1,700,000, while conversion costs equaled $2,500,000. Accounting records indicate that 1,300,000 ice creams were started in May and 1,200,000 ice creams were completed. 

Ending inventory was 30% complete as to conversion costs.  
 
Required: 

A. What is the total manufacturing cost per ice cream for May? 

B. Allocate the total costs between the completed ice creams and the ice creams in ending inventory.  

Question 4 (20 marks) 
 
Speedy Corporation manufactures two models of cars, a standard and an executive model. The following activity and cost information has been compiled: 

Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used: 
 
Required: 

A.What is the total amount of overhead costs assigned to the executive model?  

B.Explain why and how ABC systems are of great use for service companies. 
 
Question 5 (20 marks) 
Scooby Corporation used the following data to evaluate its current operating system. The company sells pet items for $32 each and used a budgeted selling price of $32 per unit. 

Required:  

A.What is the static-budget variance of operating income? 

B.Provide some reasons as to what may have caused the revenue and cost variances.