Reference: 05-11
Andruschack Corporation Uses Activity-Based Costing to Determine Product

question 44

Multiple Choice

Reference: 05-11
Andruschack Corporation uses activity-based costing to determine product costs for external financial reports. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. The
company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \begin{array} { l } \text { Activity Cost Pools (and Activity } \\\text { Measures) }\end{array} & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 213,000 \\\hline \text { Batch setup (setups) } & \$ 339,000 \\\hline \text { General factory (direct labour-hours) } & \$ 193,200 \\\hline\end{array}\\\\\begin{array} { | l | l | l | l | } \hline & & { \text { Expected Activity } } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product } X & \text { Product } Y \\\hline \text { Machine related } & 10,000 & 3,000 & 7,000 \\\hline \text { Batch setup } & 10,000 & 4,000 & 6,000 \\\hline \text { General factory } & 14,000 & 7,000 & 7,000 \\\hline\end{array}\end{array}$$
-Assuming that the actual overhead costs of the three pools totalled $746,000 and actual activity was equal to expected activity, what would be the required entry to the Cost of Goods Sold account?

• A)$800 credit.
• B)$800 debit.
• C)$600 credit.
• D)$600 debit

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Definitions:

Default Probability

The likelihood that a borrower will be unable to meet debt obligations, leading to a default on the obligation.

Annual Coupon

The interest payment made by a bond issuer to the bondholders, usually annually.

Yield To Maturity (YTM)

The rate of interest earned on a bond if it is held to maturity.

Premium

Premium in finance usually refers to the extra amount paid over the standard or nominal value, as in insurance premium payments or the additional amount to purchase securities.