Reference no: EM132741443

Aztec Builders allocates manufacturing overhead to jobs based on machine hours. The company has the following estimated costs for the upcoming year:

Direct materials used                   $25,000
Direct labour costs                      $62,000
Salary of factory supervisor        $49,000
Advertising expense                      $33,000
Heating and lighting costs for factory $11,000
Depreciation on factory equipment   $19,200
Sales commissions                                $8,000

Problem 1: The firm estimates that 1,800 direct labour hours will be worked in the upcoming year, while 792 machine hours will be used during the year. The predetermined indirect allocation rate per machine hour is closest to

a. $56.
b. $36.
c. $100.
d. $45.
e. $40.

Problem 2: Blockbuster Entertainment manufactures digital video equipment. For each unit $1200 of direct material is used and there is $1,350 of direct manufacturing labour at $30 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labour hour. Calculate the cost of each unit.

a. $4,975
b. $4,025
c. $1,750
d. $4,125
e. $4,725

Problem 3:  In an activity-cost pool

a. a measure of the activity performed serves as the cost allocation base.
b. the costs have a cause-and-effect relationship with the cost-allocation base for that activity.
c. the cost pools are homogeneous over time.
d. costs in a cost pool can always be traced directly to products.
e. each pool pertains to a narrow and focused set of costs.