Sterling Archer Spy Agency provides independent intelligence gathering services. The agency has the following data concerning its overhead costs and its activity-based costing system: Overhead costs: Wages and salaries                   $400,000 Administrative expenses             150,000 Total                                           $550,000   Distribution of resource consumption:                                                                                     Activity Cost Pools                                                    Intelligence                          Report                                                  procurement                                                      Writeups                             Other                  Total Wages and salaries                          70%                                 25%                                                           5%                                             100% Administrative expenses                  40%                                 35%                                                          25%                                100%   Activity measure            Intelligence gathering hours            Reports Annual activity                              5,000                                    200   The other activity cost pool should not be assigned to jobs. Compute the OH costs assigned to the intelligence cost pool. (1st stage). Compute the activity rate for the intelligence cost pool.

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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  1. Sterling Archer Spy Agency provides independent intelligence gathering services. The agency has the following data concerning its overhead costs and its activity-based costing system:

Overhead costs:

Wages and salaries                   $400,000

Administrative expenses             150,000

Total                                           $550,000

 

Distribution of resource consumption:

                                                                                    Activity Cost Pools

                                                   Intelligence                          Report                                                  procurement                                                      Writeups                             Other                  Total

Wages and salaries                          70%                                 25%                                                           5%                                             100%

Administrative expenses                  40%                                 35%                                                          25%                                100%

 

Activity measure            Intelligence gathering hours            Reports

Annual activity                              5,000                                    200

 

The other activity cost pool should not be assigned to jobs.

  1. Compute the OH costs assigned to the intelligence cost pool. (1st stage).
  2. Compute the activity rate for the intelligence cost pool.

 

Job X133C involved 27 intelligence-gathering hours and three reports. Compute the OH cost assigned to Job X133C for both hours and reports.

 

 

  1. Pam Poovey Farms has budgeted sales revenue for the fourth quarter of 2016:

 

                                              October               November    December

Credit sales                            $45,000                 $80,000         $57,000

 

Actual credit sales for September 2016 were $46,000.  Actual credit sales for August 2016 were $43,000.  Past experience indicates that 75% of credit sales will be collected in the month of sale, 23% of credit sales will be collected in the following month, and the remaining 2% of credit sales will be collected in the second month following the sale.

Purchases of inventory are all on credit and 60% of purchases are paid in the month of purchase and the remaining 40% is paid in the month following the purchase. Budgeted inventory purchases for the fourth quarter of 2016 are:

October                                  $60,000

November                                50,000

December                                21,000

 

Actual purchases in August 2016 were $40,000 and $45,000 in September 2016.

 

  1. Prepare a Cash Receipts (Collection) Schedule which shows expected total cash receipts for the months of October, November, and December.
  2. What is the A/R balance at the end of December?

 

  1. Cyril Figgis Accounting uses client visits as its measure of activity. During May the firm budgeted for 700 client visits, but its actual level of activity was 692 client visits.  The firm has provided the following data concerning the formulas used in its budgeting process and the actual results for May.

 

Data used in budgeting:

Revenue:  $220.00 per visit

                                                        Fixed cost        Variable cost

                                                        per month        per client visit

Expenses:

   Salaries and wages expense      $40,000                $75.00

   Office supplies                                 2,000                  20.00

   Occupancy expenses                      8,000                  10.00

   Administrative expenses                 6,000                    2.50

Total expenses                               $56,000              $107.50

 

Actual results for March:

Revenue                                       $138,000

Salaries and wages expense           91,500

Office supplies                                  18,500

Occupancy expenses                       13,213

Administrative expenses                    7,058

 

For the revenue, salary and wage expense, office supplies, occupancy expenses, and administrative expenses:

  1. Compute the amount in the planning budget.
  2. Compute the amount in the flexible budget.
  3. Compute the spending variance and indicate if the variance is favorable or unfavorable.
  4. Compute the activity variance and indicate if the variance is favorable or unfavorable.
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