Part A: Answer each of the following questions. Be sure to show all of your work and calculations.

Answer all of the following questions.  Explain your answer briefly and clearly, showing any necessary calculations.  Your answer should be submitted in an Excel file, with each problem on a separate tab.

1.       Cumberland Company has had the following experience over the past five quarters:

Units produced                     Electricity cost ($)

                                  87,000                                 144,500

                                  92,000                                 151,000

                                  81,000                                 138,500

                                  90,000                                 150,000                                                 

                                  95,000                                 159,500

a)       Using the high-low method, determine an equation for electricity cost (Y) as a function of units produced (X).  Assume a linear function.

b)       Using your equation, forecast electricity cost at a volume of 88,000 units produced.

2.       County Museum is planning a fund-raising dinner.  The initial plan was to charge $75/ticket.  Catering costs would be $45/plate.  Rent of the facility would be $2,500 for the event, and all labor (not including caterer) would be volunteer.  A string quartet would provide dinner music for $1,200.  It is expected that 240 persons would attend this dinner.

A new plan has been put forward for a more deluxe event, with tickets costing $120.  Catering for the more elaborate dinner would run $70/plate.  Bigger “name” entertainment would be hired instead of the strings, costing $5,000.  Paid staff would be hired for $900 in order to provide better service.  How many tickets must be sold for the more deluxe event in order for it to yield the same profit as the original plan? [Note that the answer must be a whole number, as fractional tickets are not sold].

3.       Ram Industries produces two products in its Windsor, CO plant:  X5 and Y12.  For the coming year, budgeted production of X5 is 100,000 units and of Y12 is 80,000 units.  Expected costs and activity are as follows:

                Dir Mat                  Dir Labor               Mach Hrs              Setups                    Parts*

X5           $700,000              $1,600,000             18,000                   120                         10

Y12        $1,000,000           $2,400,000              32,000                   280                         20

* number of unique parts for this model

Factory overhead is expected to be $7,000,000. 

1. Assume that Ram uses a traditional costing system with a single plant-wide overhead pool allocated on the basis of direct labor cost.  Determine the total budgeted cost per unit of the two products.  Show your calculations.

1. Assume instead that Ram uses an ABC system with three cost drivers:  machine hours, setups, and number of unique parts.  The budgeted amounts of the three cost pools are:

Machine Hours    $4,000,000

Setups                                    $2,100,000

Parts                                       $   900,000

Determine the cost per unit under the ABC system.

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