Answer Key to Problem 7-1 (Val Company)

a.
Machinery Assembly Total
Factory Administration (Direct Labor Hours) 2,000 1,600 3,600
Building and Grounds (Sq. Ft.) 1,900 3,200 5,100

Allocation:
Department Cost Proportion Machinery Proportion Assembly
Factory ₱129,000 2,000/3,600 ₱71,666.67 1,600/3,600 ₱57,333.33
Administratio
n
Building and ₱105,000 1,900/5,100 39,117.65 3,200/5,100 65,882.35
Grounds
₱110,784.32 ₱123,215.68

b.
Department Cost Allocated Costs
Factory Building Machinery Assembly
Administration and
Grounds
Factory ₱129,000 (129,000) 30,191.49 54,893.62 43,914.89
Administration (1,100/4,700 (2,000/4,700 (1,600/4,700
) ) )
Building and ₱105,000 (135,191.49) 50,365.46 84,826.03
Grounds (105,000+ (1,900/5,100 (3,200/5,100
30,191.49) ) )
₱105,259.08 ₱128,740.92

c.
Factory Adm % Bldg and %
Grounds
Factory - - 1,200 19%
Administration
(F)
Building and 1,100 23% - -
Grounds (B)
Machinery 2,000 43% 1,900 30%
Assembly 1,600 34% 3,200 51%

Equations:

F = 129,000 + 0.19B
B = 105,000 + 0.23B

F = 129,000 + 0.19(105,000 + 0.23B)

F = 129,000 + 19,950 + 0.0437B
0.9563F = 148,950
F = 155,757

B = 105,000 + 0.23(155,757)
B = 105,000 + 35,824
B = 140,824

Cost Allocation:

Factory Building and Machinery Assembly

Administration Grounds (B)
(F)
Cost prior to ₱129,000 ₱105,000
allocation
Allocation of F (155,757) 35,824 ₱66,976 ₱52,957
Allocation of B 26,757 (140,824) 42,247 71,820
Total 0 0 ₱109,223 ₱124,777