Name:BOTICARIO,DOMINIC E.

Course and Block:BSA-3A

ACTIVITY-BASED COSTING

Multiple Choice

1. b 6. d 11. c 16. b
2. b 7. b 12. b 17. c
3. c 8. b 13. b 18. d
4. c 9. a 14. d 19. d
5. b 10. c 15. a 20. c

Problem-Solving

A. GGG Test Laboratories

Requirements:
1. Output unit-level costs
a. Direct-labor costs, ₱146,000
b. Equipment-related costs (rent, maintenance, energy, and so
on), ₱350,000
These costs are unit-level production costs since they are
incurred for each unit of the products tested, i.e. for each hour
of testing.

Batch-level costs
c. Setup costs, ₱430,000
These costs are batch-level costs since they are incurred each
time a batch of materials is set up for either HT or ST,
regardless of the amount of hours for which the experiments are
performed afterwards.

Service-sustaining cost
d. Costs of designing tests, ₱264,000
These costs are service-sustaining costs because they are
incurred for the construction of the HT and ST experiments,
irrespective of the number of batches tested or the number of
hours of test time.

2.

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 Heat Testing (HT) Stress Testing (ST)
Per hour Per hour
Cost Total Total
2=(1)/40,00 (4)=(3)/30,00
(1) (3)
0 0
₱100,00
Direct Labor cost ₱2.50 ₱46,000 1.53
0
Test CostDesign-ing costSet-up costEquipment-related

5.00* X
200,000 5.00
40,000

5.00* X
150,000 5.00
30,000

25.00** X
340,000 8.50
13,600
25.00** X
90,000 3.00
3,600
60.00*** X
180,000 4.50
3,000

60.00*** X
84,000 2.8
1,400

₱820,00 ₱370,00
Total Cost ₱20.50 ₱12.33
0 0

*₱350,000/(40,000+30,000)=₱5.00
**₱430,000/(13,600+3,600)=₱25.00
***₱264,000/(3,000+1,400)=₱60.00

At a cost per test-hour of ₱17.00, the simple costing system

undercosts heat testing (₱20.50) and overcosts stress testing
(₱12.33). The explanation is that heat testing uses direct labor, set-
up and design resources per hour more intensively than stress testing.
The simple costing system assumes that the cost of testing per hour is
the same for heat testing and stress testing.

B. Boa company

1. Plant-wide

Trophies Plaques Total

Direct Materials
Forming ₱13,000 ₱11,250
Assembly 2,600 9,375
Total 15,600 20,625
Direct Labor

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 Forming 15,000 9,000
Assembly 7,800 10,500
Total 22,800 19,500
Total direct
₱38,400 ₱40,125 ₱78,525
costs

(12,000+10,386+23,000+10,960) =₱0.71755491881/
Budgeted overhead rate =
78,525 direct cost

Trophies Plaques Total

Direct Materials ₱15,600 ₱20,625 ₱36,225
Direct Labor 22,800 19,500 43,200
Total direct costs 38,400 40,125 78,525
Allocated overhead
cost*
27,554 28,792 56,346
Total Budgeted
cost
₱65,954 ₱68,917 ₱134,871

*Allocated overhead cost=Total direct cost  Budgeted overhead rate

(0.71755491881)

2. Department

Budgeted overhead Budgeted Forming Department overhead costs

rate Forming
Budgeted Forming Department direct labor costs
Department=

= 12,000+10,386
15,000+9,000

= 22,386
24,000

= ₱0.93275/Forming Department direct labor cost

Budgeted overhead Budgeted Assembly Department overhead costs

rate Assembly
Budgeted Assembly Department direct costs
Department=

= 23,000+10,960
2,600+9,375+7,800+10,500

= 33,960
30,275

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 = ₱1.12171758876/Assembly Department direct cost

Trophies Plaques Total

Direct Materials ₱15,600 ₱20,625 ₱36,225
Direct Labor 22,800 19,500 43,200
Total direct costs 38,400 40,125 78,525
Allocated overhead
cost
Forming
department*
13,991 8,395 22,386
Assembly
department**
11,666 22,294 33,960
Total Budgeted
cost
₱64,057 ₱70,814 ₱134,871

Trophies Plaques Total

Forming Department*
Direct Labor cost ₱15,000 ₱9,000 ₱24,000
Allocated overhead
costs
(₱0.93275*15,000;
₱13,991 ₱8,395 ₱22,386
9,000)
Assembly Department**
Total Direct cost
(2,600+7,800+9,375+10 ₱10,400 ₱19,875 ₱30,275
,500)
Allocated overhead
costs
(₱1.12171758876*10, ₱11,666 ₱22,294 ₱33,960
400; 19,875)

3. Activity-based costing

Forming department
Budgeted set-up rate ₱12,000/156 batches ₱76.923076923/batch
Budgeted supervision ₱10,386/₱24,000 ₱0.43275/direct labor
rate
Assembly department
Budgeted set-up rate ₱23,000/146 batches ₱157.534246575/batch
Budgeted supervision ₱10,960/₱18,300 ₱0.59890710382/direct
rate labor

Trophies Plaques Total

Direct Materials ₱15,600 ₱20,625 ₱36,225
Direct Labor 22,800 19,500 43,200
Total direct costs 38,400 40,125 78,525
Forming Department
overhead
Set-up 3,077 8,923 38,999

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(₱76.923076923*40;116)
Supervision
(₱0.43275*15,000; 6,491 3,895 10,386
9,000)
Assembly Department
overhead
Set-up
(₱157.534246575*43; 6,774 16,226 23,000
103)
Supervision
(₱0.59890710382*7,800 4,671 6,289 10,960
;10,500)
Total budgeted cost ₱59,413 ₱75,458 ₱134,871

C. Kalcu Company

1. Traditional full costing

Mathematical Financial
Direct materials cost ₱150,000 ₱300,000
Direct manufacturing labor 50,000 100,000
cost
Manufacturing
200,000 400,000
overhead*
Total cost 400,000 800,000
Annual production in
/50,000 units /100,000 units
units
Cost per unit ₱8.00/unit ₱8.00/unit

Manufacturing overhead rate= Total Manufacturing overhead cost/Total

direct manufacturing labor hours
=(375,000+120,000+105,000)/(2,500+5,000)
= ₱80.00/manufacturing overhead
*Manufacturing overhead=Manufacturing overhead rate X direct
manufacturing labor cost

2. Activity-based costing

Mathematical Financial
Direct materials cost ₱150,000 ₱300,000
Direct manufacturing labor 50,000 100,000
cost
Manufacturing
overhead*
Machining cost 125,000 250,000
Set up cost 60,000 60,000
Inspection cost 70,000 35,000
Total cost 455,000 745,000

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Annual production in
/50,000 units /100,000 units
units
Cost per unit ₱9.10/unit ₱7.45/unit

Activity Cost Driver Rate

Machining Machine hours ₱375,000/(25,000+50,000)
=₱5.00/machine hour
Set up Production run ₱120,000/(50+50)
=₱1,200/product run
Inspection Inspection-hours ₱105,000/(1,000+500)
=₱70.00/inspection hour

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