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Cost Acctg Chapter-8
Cost Acctg Chapter-8
CHAPTER 8
1. a 6. b
2. d 7. c
3. a 8. c
4. c 9. a
5. a 10. a
1. (b)
2. (c)
Product AB Product CD
Direct labor hours:
AB: 1,600/100,000 x P520,000 = P 8,320
CD: 200/100,000 x P520,000 = P 1,040
No. of Batches:
AB: 4/500 x P280,000 = 2,240
CD: 12/500 x P280,000 = 6,720
Engineering/design changes:
AB: 2/120 x P60,000 = 1,000
CD: 24/120 x P60,000 = 12,000
Totals P11,560 P19,760
3. (c)
Traditional costing:
Total hours per batch: 5,000DLH / 2,000 Volume x 100 batch size = 250 DLH
Setup cost per hour: P1,000/250 DLH = P4
Setup cost per unit: P4 x 2.5 = P10
ABC:
1,000 Set up cost per batch / 100 batch = P10
4. (c)
Number 4 (continued)
Activity-Based Costing System:
Direct materials P 55,500
Direct labor 14,760
Applied factory overhead:
Engineering design (P30 x 330) P 9,900
Machine setup (P200 x 22) 4,400
Machining (P25 x 732) 18,300
Assembly (P8 x 1,450) 11,600
Packaging and shipping (P15 x 152) 2,280
Building occupancy (P6 x 732) 4,392 50,872
Total factory cost P121,132
Unit cost (P121,132 / 150 units) P 807.55
5. (c)
Traditional Costing:
Direct materials P4.40
Direct labor 0.75
Applied overhead:
Machine hours 80
Predetermined overhead rate (P1,800,000/30,000) x P 60
Applied overhead P4,800
Divided by batch size ÷5,000 0.96
Unit cost P6.11
ABC
Direct materials P4.40
Direct labor 0.75
Applied overhead:
Materials handling: (P720,000 / 6,000,000) x 5 = P0.60
Setup cost: (P315,000 / 750) x 2 = P840 / 5,000 = 0.168
Machining cost: (P540,000/30,000)x80 =P1,440/5,000 = 0.288
Quality control: (P225,000/500) = P450/5,000 = 0.09 1.146
Unit cost P6.296
6. (b)
Product A-1 Product B-3
Materials P 20 P 45
Labor 200 400
Applied overhead:
Machine setup (P140,000/350 = P400)
A-1: P400/100 units 4
B-3: P400/2 units 200
Testing (P190,000/4,750) = P40
A-1: P40 x 0.20 hours = 8
B-3: P40 x 5.5 hours = 220
Related to labor:
A-1: 10x10,000 = 100,000 hrs.
B-3: 20x 500 = 10,000
Total 110,000 hrs
A-1: (100/110 xP330,000) ÷ 10,000 30
B-3: (10 /110 x P330,000) ÷ 5,000 60
Unit cost P262 P925
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7. (a)
Product RR Product SS
Price costs P 800,000 P150,000
Overhead: (P500,000+P850,000+P650,000)=P2,000,000
RR: 100,000/125,000 x P2,000,000 1,600,000
SS: 25,000/125,000 x P2,000,000 400,000
Total factory cost P2,400,000 P500,000
Divided by quantity ÷ 400,000 ÷100,000
Unit cost: P 6.00 P 5.50
8. (b)
Product RR Product SS
Prime cost P 800,000 P 150,000
Overhead:
Cost of operating equipment:
RR: 100/125 x P500,000 400,000
SS: 25/125 x P500,000 100,000
Material handling:
RR: 100/125 x P850,000 566,667
SS: 25/125 x P850,000 283,333
Setups:
RR: 100/125 x P650,000 433,333
SS: 15/125 x P650,000 216,667
Factory cost P2,200,000 P 750,000
Quantity ÷ 400,000 ÷ 100,000
Unit cost P 5.50 P 7.50
9. (c)
10. (a)
11. (d)
12. (a)
Product LL Product MM
Revenues P100,000 P300,000
Direct labor ( 60,000) (100,000)
Overhead (Schedule 1) ( 46,500) (133,500)
Income (loss) P (6,500) P 66,500
Schedule 1:
Product LL Product MM
Maintenance:
LL: P75,000 / 25,000 x 5,000 = P15,000
MM: P75,000 / 25,000 x 20,000 = P 60,000
Product delivery:
LL: P45,000 / 5,000 x 1,000 = 9,000
MM: P45,000 / 5,000 x 4,000 = 36,000
Supervision:
LL: P60,000 / P160,000 x P60,000 = 22,500
MM: P60,000 / P160,000 x P100,000 = 37,500
Total overhead P46,500 P133,500
13. (d)
Vacuum Floor
Cleaners Polishers
Revenue P6,500,000 P5,950,000
Manufacturing cost:
Direct materials 1,000,000 900,000
Direct labor 600,000 2,000,000
Overhead : P1,105,000/130,000 = P8.50
VC: 30,000 x P8.50 255,000
FP: 100,000 x P8.50 850,000
Total 1,855,000 3,750,000
Gross profit P4,645,000 P2,200,000
Divided by units sold ÷ 10,000 ÷ 1,000
Gross profit per unit P 465.50 P 2,200
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14. (b)
Vacuum Floor
Cleaners Polishers
Revenue P6,500,000 P5,950,000
Manufacturing cost:
Direct materials 1,000,000 900,000
Direct labor 600,000 2,000,000
Overhead:
VC: P650,000 /130,000 x 30,000 = 150,000
FP: P455,500 / 50,000 x 35,000 = 318,850
Total 1,750,000 3,218,850
Gross profit P4,750,000 P2,731,150
Divided by units sold ÷ 10,000 ÷ 1,000
Gross profit per unit P 475 P 2,731.15
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Solution to Problems
Problem 8-1
Problem 8-2
1. Product KK Product GG
Direct materials P100,000 P 310,000
Direct labor 50,000 350,000
Overhead:
KK: P1,500,000/50,000 x 3,000 = 90,000
GG: P1,500,000/50,000 x 47,000 = 1,410,000
Factory cost P240,000 P2,070,000
Divided by units produced ÷ 500 ÷ 15,500
Unit cost P 480 P 133.55
2. Product KK Product GG
Direct materials P100,000 P 310,000
Direct labor 50,000 350,000
Overhead:
Setup related :
KK: P250,000/200 x 120 = 150,000
GG: P250,000/200 x 80 = 100,000
Design related:
KK: P350,000/10,000 x 6,000 = 210,000
GG: P350,000/10,000 x 4,000 = 140,000
Other:
KK: P900,000/50,000 x 3,000 = 54,000
GG: P900,000/50,000 X 47,000 = 846,000
Factory cost P564,000 P1,746,000
Divided by units produced ÷ 500 ÷ 15,500
Unit cost P 1,128 P 112.65
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Problem 8-3
Problem 8-4
Problem 8-5
Job 2002:
Direct materials P12,000
Direct labor 2,000
Overhead: (P2,000 x 280%) 5,600
Total cost P19,600
Unit cost (P19,600 / 50) P392
Job 3003:
Direct materials P 8,000
Direct labor 4,000
Overhead: (P4,000 x 280%) 11,200
Total cost P23,200
Sales price: (P23,200 x 150%) P34,800
2. Job 1001:
Machine setup: (P20,000 / 200) = P100 x 8 = P 100
Inspection: (P130,000 / 6,500) = P20 x 22 = 400
Material handling: (P80,000 / 8,000) = P10 x 30 = 300
Engineering: (P50,000 x 1,000) = P50 x 25 = 1,250
Total overhead cost P2,050
Job 2002:
Direct materials P12,000
Direct labor 2,000
Overhead:
Machine setup: (P100 x 10) P 1,000
Inspection: (P20 x 15) 300
Material handling: (P10 x 40) 400
Engineering: (P50 x 50) 2,500 4,200
Total cost P18,200
Unit cost: (P18,200 / 50) P0.02
Job 3003:
Direct materials P 8,000
Direct labor 4,000
Overhead:
Machine setup: (P100 x 14) P1,400
Inspection: (P20 x 30) 600
Material handling: (P50 x 50) 2,500
Engineering: (P50 x 15) 750 5,250
Total cost P17,250
Sales price: (P17,250 x 150%) P25,875
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Problem 8-6
Anson:
Send/receive goods: (40,000 x P0.05) P2,000
Store goods: (3,000 x P0.10) 300
Move goods: (300 x P2) 600
Identify goods: (5 x P8) 40
Total cost P2,940
Basco:
Send/receive goods: (40,000 x P0.05) P2,000
Store goods: ( 2,000 x P0.10) 200
Move goods: ( 200 x P2) 400
Identify goods: ( 20 x P8) 160
Total P2,760
Casio:
Send/receive goods: (40,000 x P0.05) P2,000
Store goods: ( 1,000 x P0.10) 100
Move goods: ( 1,000 x P2) 2,000
Identify goods: ( 80 x P8) 640
Total P4,740
d. The current pricing plan captures only one dimension of cost causality, send/receive
goods. Accordingly, the prices charged for warehousing services are almost
independent of the causes of the costs. As indicated in a comparison of the answers
to parts (b) and (c), the existing pricing plan generates the same price for the three
customers whereas an ABC-based price results in very different prices to be charged
to the three customers.
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Problem 8-7
1. Job 456 Job 789
Direct materials P19,400 P119,800
Direct labor 1,500 22,500
Manufacturing overhead:
Job 456: P230 x P50 11,500
Job 789: P230 x P750 172,500
Total manufacturing costs P32,400 P314,800
Divided number of units ÷ 20 ÷ 400
Manufacturing cost per unit P 1,620 P 787
a. the job orders differ in the way the use each of five activity areas, and
b. the activity areas differ in their indirect cost allocation bases 9specifically,
each area does not use the direct manufacturing labor-hours indirect cost
allocation base).
Problem 8-8
c. Allocation rates:
Quality control: P400,000 / 280,000 = P1.43 per unit (rounded)
Setups: P400,000 / 2,000 = P200 per setup
Material handling: P1,200,000 / 4,000,000 = P0.30 per kilo
Equipment operation: P6,000,000 / 2,000,000 = P3.00 per MH
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d. If prices are set based on product costs, activity-based costing would generate lower
prices for umbrellas and higher prices for the other two products.
Problem 8-9
= P3,000,000
P600,000
= P5 per direct labor cost
Problem 8-10