3. a. According to my learnings in school, this allocation of overhead expenses is reasonable.

I
agree with their basis of allocation since they used the items which are closely related to the
expense to allocate the said expense. For example, the depreciation expense was divided by the
book value of equipment in that area which is the closest basis.
b. Using the labor hours to quantify the overhead may be reasonable but not always accurate.
The labor hours are sometimes fixed for a batch of production regardless of the amount of finished
goods the batch produced. Therefore, overhead is usually quantified using the units produced
rather than the labor hours. Also, our computation included the fixed costs portion of the total
overhead, it may overstate the total variable costs. Fixed costs should not be included in the
computation of manufacturing costs since it is incurred regardless or not finished goods are
produced.

4. Cost of Job No. 879:

Direct material Php 487.92
Direct labor 460.10
Overhead cost:
Machining (50*2.38) 119.00
Fabrication (40*3.39) 135.60
Assembly (20*1.59) 31.80
*Painting (20*2.39) 47.80
TOTAL COST JOB 879 Php 334.20

5. Cost of Job No. 879 using Cost-Plus-Fixed-Fee (CPFF)

Cost of Job No. 879 Php 334.20
Fixed Cost 200.00
TOTAL RECOVERABLE COST Php 534.20
 6. The company uses the direct labor hour rate method in its overhead absorption wherein
the budgeted overhead is divided by the direct labor hour used. By using this method of
cost absorption, the company takes into account the times spent by the labor in production
of each unit. To improve its current situation, the company should exclude and properly
account fixed costs which is associated in the production of each unit.

 Also, the company should up their cost accounting to monitor their production costs. I
mentioned this because the problem said that there was no cost accounting in their
company. This is because it is important for the company to know its standard costs and
actual costs for them to know if product costs are increasing or decreasing. This is called
variance costing and since this is a manufacturing company, I suggest this costing as very
important to the company.

 I also will suggest that company break down their product into segments for better
understanding of how the revenue and costs are doing for each product. Product segment
reports will show data such as, which products are sold frequently and which product costs
are high.