• Budgeted level of production: 1700
• Units produced in January: 1360
• Units sold in January: 1190
• Inventory, January 1st: 0 units

Company X employs 4 designers and 6 accounts managers. Direct and indirect costs are applied on a professional labor-hour basis that includes both designers and account managers. Company X presented the following information:

• Indirect costs: $300000
• Annual salary of each designer: $90000
• Annual salary of each account manager: $60000
• Total professional hours: 15000

The following information is available for Company X, with fixed costs at $640000:

Product A:

• Units sold: 12000
• Selling price: $100 /unit
• Variable costs: $40 /unit

Product B:

• Units sold: 3000
• Selling price: $200 /unit
• Variable costs: $120 /unit

Company Ex provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours.

Required:

a. Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system.

b. What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept?

Company Ex incurred fixed manufacturing costs of $16000 during 20x4. Other information for 20x4 includes:

Company Ex produces a unique valve, and has the capacity to produce 50000 valves annually. Currently Company Ex produces 40000 valves and is thinking about increasing production to 45000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?

If the contribution margin ratio is 0.25, targeted operating income is $17222, and targeted sales volume in dollars is $250000, then total fixed costs are:

Company Ex produces hospital equipment and the setup requirements vary from product to product. Company Ex produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid?

The following information is for Company Ex: