1. Furman Tailors has gathered information on utility costs for the past year.

The

controller has decided that utilities are a function of the hours worked during the

month. The following information is available and representative of the company’s

utility costs:

Hours worked Utility cost incurred

Low point 1,300 P 903

High point 1,680 1,074

If 1,425 hours are worked in a month, total utility cost (rounded to the nearest dollar)

using the high-low method should be

a. P947.

b. P954.

c. P959.

d. P976.

2. Reno Corporation uses a predetermined overhead application rate of P0.30 per

direct labor hour. During the year it incurred P345, 000 of actual overhead, but it

planned to incur P360, 000 of overhead. The company applied P363, 000 of overhead

during the year. How many direct labor hours did the company plan to incur?

a. 1,150,000

b. 1,190,000

c. 1,200,000

d. 1,210,000

3. Birmingham Machine Works had the following data regarding monthly power costs:

Month Machine hours Power cost

Jun 300 P680

Jul 600 720

Aug 400 695

1
Sept. 200 640

Assume that management expects 500 machine hours in October. Using the high-low

method, calculate October’s power cost using machine hours as the basis for

prediction.

a. P700

b. P705

c. P710

d. P1,320

4. Walton Corporation wishes to develop a single predetermined overhead rate. The

company's expected annual fixed overhead is P340, 000 and its variable overhead

cost per machine hour is P2. The company's relevant range is from 200,000 to

600,000 machine hours. Walton expects to operate at 425,000 machine hours for the

coming year. The plant's theoretical capacity is 850,000. The predetermined overhead

rate per machine hour should be

a. P2.40.

e. P2.57.

f. P2.80.

g. P2.85.

5. Nickel Corp. is preparing a flexible budget for 20-2 and the following maximum

capacity estimates for Carbon Department are available: At maximum

Capacity

Direct labor hours 80,000

Variable factory overhead P200,000

Fixed factory overhead P250,000

Assume that Nickel’s normal capacity is 75% of maximum capacity. What

would be the total factory overhead rate, based on direct labor hours, in a

2
flexible budget at normal capacity?

a. P5.62 b. P 6.67 c. P 7.50 d. P 5.00

6. Carla Trading has the following preliminary forecast for 20-9:

No. of units 150,000 units

Selling price per unit P15

Variable costs P1, 200,000

Fixed costs P850, 000

Advertising expense was not included in the above costs.

Based on a market study in December, 20-8, the Company estimated that it

could increase the unit selling price by 10% and increase the unit sales volume

by 20%, if P200,000 would be spent on advertising. If Carla will incorporate

these changes in its 209 forecast. What would be the operating income?

a. P480, 000 b. P 720,000 c. P680, 000 d. P420, 000

MACHINE HOURS 200

MULTIPLY 0.2

40

TOTAL 640

FIXED CONTENT 600

MACHINE HOURS 500

0.2

VARIABLE CONTENT 100

FIXED CONTETNT 600

TOTAL POWER COST 700

VARIABLE OVERHEAD RATE 2

FIXED OVERHEAD 340000

DIVIDE 425000

3
0.8

PREDETERMINED OVERHEAD RATE 2.8

VARIABLE FACTORY OVERHEAD 200000

DIVIDE 80000

VARIABLE RATE (CONSTANT) 2.5

MAXIMUM CAPACITY 80000

75%

NORMAL CAPACITY 60000

FIXED FACTORY OVERHEAD 250000

DIVIDE 60000

FIXED RATE 4.166667

TOTAL FACTORY OVERHEAD RATE 6.666667

TOTAL VARIABLE COST 1200000

DIVIDE 150000

VARIABLE RATE 8

SELLING PRICE PER UNIT 15

MULTIPLY 110%

NEW SELLING PRICE PER UNIT 16.5

NUMBER OF UNITS 150000

MULTIPLY 120%

NEW NUMBER OF UNITS 180000

FIXED COSTS 850000

ADD 200000

NEW FIXED COSTS 1050000

NEW SELLING PRICE PER UNIT 16.5

VARIABLE RATE -8

4
8.5

MULTIPLY 180000

TOTAL CONTRIBUTION MARGIN 1530000

NEW FIXED COSTS -1050000

480000