Calculating the Operating Cost & Proportions

Question

1.   HulaHug Corp., which manufactures hula hoops, currently has two product lines, the Roundabout and the Sassafras. HulaHug has total overhead of $124,478. HulaHug has identified the following information about its overhead activity pools and the two product lines.

Activity Pools	Cost Driver	Cost Assigned to Pool				Quantity/Amount Consumed Roundabout Line	Quantity/Amount Consumed Sassafras Line
Material handling	Number of   moves		$	21,158		580 moves	470 moves
Quality control	Number of   inspections		$	72,000		5,700 inspections	4,300 inspections
Machine       maintenance	Number of  machine hours		$	31,320		18,000 machine hours	18,000 machine hours

Requirement 1:Suppose HulaHug used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.(Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Omit the "$" sign in your response.)  

	Overhead assigned
Roundabout Model	$
Sassafras Model	$
Total	$

Requirement 2:Calculate the activity proportions for each cost pool in HulaHug's ABC system. (Round your answers to 2 decimal places. Omit the "$" signs in your response.) 

	Activity proportions
	Roundabout Model	Sassafras Model
Material Handling
Quality Control
Maintenance

Requirement 3:Calculate the amount of overhead that HulaHug will assign to the Roundabout line if it uses an ABC system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" signs in your response.)    

Roundabout Model:
Material Handling	$
Quality Control	$
Maintenance	$
Total Overhead Assigned	$

Requirement 4:Determine the amount of overhead HulaHug will assign to the Sassafras line if it uses an ABC system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" signs in your response.)   

Sassafras Model:
Material Handling	$
Quality Control	$
Maintenance	$
Total Overhead Assigned	$

3.   Tweety Company manufactures one model of birdbath, which is very popular. Tweety sells all units it produces each month. The relevant range is 0-2,100 units, and monthly production costs for the production of 1,600 units follow. Tweety's utilities and maintenance costs are mixed with the fixed components shown in parentheses.

Production Costs	Amount
Direct materials	$	2,300
Direct labor		6,900
Utilities ($130 fixed)		590
Supervisor’s salary		2,800
Maintenance ($290 fixed)		490
Depreciation		850

Requirement 1:Express each cost as a rate per month or per unit (or combination thereof). (Round per unit value to 2 decimal places. Omit the "$" sign in your response.)
 

Production Costs	Rate
Direct materials	$		per unit
Direct labor	$		per unit
Utilities	$		per month	$		per unit
Supervisor's Salary	$		per month
Maintenance	$		per month	$		per unit
Depreciation	$		per month

Requirement 2:Determine the total fixed cost per month and the variable cost per unit for Tweety. (Round your variable cost to 2 decimal places. Omit the "$" sign in your response.)

Total Fixed Cost per Month	$
Total Variable Cost per Unit	$

Requirement 3:State Tweety's linear cost equation for a production level of 0-2,100 units. (Round your variable cost to 2 decimal places.Omit the "$" sign in your response.)

Total Cost = $ + $ X

Requirement 4:Calculate Tweety's expected total cost if production increased to 1,800 units per month. (Omit the "$" sign in your response.)

Total Cost

$

Larry's Sporting Goods is a locally owned store that specializes in printing team jerseys. The majority of its business comes from orders for various local teams and organizations. While Larry's prints everything from bowling team jerseys to fraternity/sorority apparel to special event shirts, summer league baseball and softball team jerseys are the company's biggest source of revenue.         

A portion of Larry's operating information for the company's last year follows: 

Month	Number of Jerseys Printed	Operating Cost
January	215	5,835
February	195	5,685
March	230	5,930
April	550	8,575
May	675	9,770
June	655	9,260
July	455	6,230
August	375	6,175
September	310	6,005
October	230	5,960
November	185	4,960
December	175	4,800

 4. Using the high-low method, calculate the store's total fixed operating costs and variable operating cost per uniform.(Round your answers to 2 decimal places. Omit the "$" sign in your response.)       

Variable cost per unit	$
Fixed cost	$

  5.  Using the high-low method results, calculate the store's expected operating cost if it printed 450 jerseys.(Round your answers to 2 decimal places. Omit the "$" sign in your response.)    

Total cost

$

 6. Jason Adams was awarded $3,500,000 in a legal settlement.  He has the option of receiving an annuity payment of $350,000 per year for 10 years.  Or he has the option of taking a lump sum settlement today.  The interest rate used to calculate the lump sum is 5%. What is the present value of the lump sum option?  Set the calculator at begin.