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Qualtiy-Based Costing Systems and Related Management Accounting Techniques
Qualtiy-Based Costing Systems and Related Management Accounting Techniques
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CHAPTER 12
QUALTIY-BASED COSTING SYSTEMS AND RELATED
MANAGEMENT ACCOUNTING TECHNIQUES
[Problem 1]
1.
Incremental income from released inventory balance
P400,000 x 15%
P80,000 x 60%
8,000 x 75% x P2.50
7,500 x P5.60
3,800 x (P22 P9.50 P2.50)
P60,000
48,000
15,000
(42,000)
(38,000)
P43,000
[Problem 2}
1.
Incremental income from released inventory funds
Lost CM
Quantity lost
X UCM
USP
UVGS P10.8 M / 900,000)
UVE P900,000 / P900,000
Incremental overtime costs
Savings from rental
Rental income from released warehouse space
Savings from insurance and property tax
Net savings from JIT system
2.
a.
b.
c.
d.
P600,000 x 20%
P120,000
20,000
P12
(4.50)
(1.00)
P 6.50
(130,000)
(40,000)
60,000
13,500
14,000
P 37,500
Support of management.
Dedication to quality-based environment.
Availability of resources.
Understanding and participation of suppliers and customers in the
quality-based undertaking.
[Problem 3}
1.
Learning curve rate = 90%
Average DLC/unit (240 units) = P60,000 x 90% x 90% x 90% = P43,740
2.
DM
DL
VOH
P14,400,000
10,497,600
6,298,560
P31,196,160
DM
DL
P43,740 x 90%
VOH P39,366 x 60%
Total var mfg. costs, additional
equipment beyond the 240-unit level
x Cost + Markup rate
Unit sales price
[Problem 4]
1.
Standard DL cost for the first 8 lots
8 x 90 x P9
2.
P 60,000
39,366
23,620
122,960
125%
P153,733
P6,480
[Problem 5]
No. of bridges
1
2
4
8
It would take the company 8 bridges to attain an efficiency rate of 51.2 weeks
(eg, after less than a year) construction period each bridge.
[Problem 6]
1.
a.
OH Rates
Traditional VOH
Rates
Material-related
Labor-related
ABC VOH Rates
Material-related
Labor-related
b.
DM
OH Rates
25%
112.5%
P92,307.69
P100,000
Unit costs
P80,000 / 5,000
Absorption Costing
Alpha
Beta
P16.00
ABCosting
Alpha
Beta
P16.00
DL
VOH (DM related)
Traditional
ABC
VOH (DL-related)
Traditional
ABC
Unit variable costs
2.
P300,000 / 10,000
P40,000 / 5,000
P100,000 / 10,000
P30.00
8.00
P30.00
8.00
10.00
4.00
9.00
10.00
7.50
73.85
9.23
11.25
120.00
P37.00
P233.85
P42.75
10.00
P59.23
[Problem 7]
a.
Return per
factory hour
Cost per factory
hour
Throughput
accounting ratio
P4 per
hour
P2.50
per hour
1.6 : 1
b.
c.
[Problem 8]
Tip
Do not be carried away with the extra capacity available. Remember that the
output may be constrained by the weekly demand.
1
a
Key source
Time on key resource
Return per factory hour
Costs per factory hour
Throughput accounting
ratio
b.
40 / 30
(P2,000 P600) / 1.333
[(P13,500 +
(P450,000/48)] / 40
P1,050 / P571.88
machine Z time
1.3333 hr./unit
P1,050
P571.88
1.84
Month
J
F
M
A
M
J
J
A
S
O
N
D
Present
Machinery
Machine
F
120
120
120
120
120
120
120
120
120
120
120
120
1,440
Production
Machine
G
120
120
132
144
144
144
144
144
144
144
132
120
1,632
192
Selling price
- Materials
Value added per unit
(in thousand pesos)
Additional value added
- Additional costs
Net gain each year
120
120
132
144
156
160
160
160
160
160
132
120
1,724
284
Machine
G and
overhaul
120
120
132
144
156
176
180
180
168
160
132
120
1,788
348
P2,000
600
P1,200
Machine F
268.8
120.0
148.8
Machine G
397.6
216.0
181.6
Machine G
and overhaul
407.2
216.0
271.2
Cash flows
Discount
factor
Machine F
Machine G
Machine G
and overhaul
1
1
(330,000)
(550,000)
(550,000)
(100,000)
Year 0
Machine cost
Overhaul
Years 1-4
P148,800
P181,600
P271,200
NPV
3.170
3.170
3.170
471,096
575,672
141,696
25,6672
859,704
209,704
276.5
P387,100
P171,100
(P171,100 x 3.170) P650,000 = (P107,600)
[Problem 9]
P487,200 x 1,200/1,400
P201,600 x 3.170 P650,000
P417,600
P201,600
(P10,928)